Education

Having yet to take a finance or economics course, most high-school juniors and seniors could be forgiven for an ignorance of the principle of “return-on-investment” (ROI). However, the concept could scarcely be more practical as many young people prepare to make one of the most important investments of their lives. Decisions over where to go to college, how much to spend, and whether to take on debt will almost certainly influence their economic futures for decades to come. And the stakes have never been higher. Over the last two decades, college tuition has increased at 20 times the rate of an average graduate's wages. A typical student at a four-year public school can now expect to finish with about $28,000 in debt—a financial burden that, for many, will hinder their ability to purchase a home as a young adult. Meanwhile, pursuing higher education has never been more essential to success. For the past thirty years, virtually all job growth for people over 25 has occurred in positions that require some post-secondary education, according to the Bureau of Labor Statistics. By 2020, roughly two-thirds of all U.S. jobs will demand education past high school. So, if you're hunting for ROI, where do you look? Well, a recent report from Smart Money has a surprising answer: the state of Georgia. In a survey of the 50 top-priced schools, the magazine ranked Georgia Tech and the University of Georgia first and fourth, respectively in return-on-investment. The study calculated ROI by measuring the median income for recent grads (3 years out) and mid-career alumni (15 years out) as a percentage of tuition costs. While this is obviously great news if you're a Yellow Jacket or Bulldog, it doesn't tell the full story because the survey does not account for in-state tuition or for financial aid. Only by including these two factors, particularly the latter, can one understand just how good college students in the Peach State have it. Most U.S. students can receive substantially discounted tuition at their state's public universities, but few states sweeten the deal as much as Georgia. Celebrating its twentieth anniversary next year, Georgia's HOPE scholarship, which is funded through the state lottery, pays close to 90 percent of public university tuition costs for resident students who earn at least a 3.0 GPA in high school and maintain this level of achievement during college. Nearly 75 percent of the students attending Georgia technical schools receive HOPE (or Helping Outstanding Pupils Educationally) scholarships, and the number is about one-third for schools within the University of Georgia system. HOPE scholars can also use the award to pay for a fraction of tuition costs at private school in the state, like Emory. With this type of largesse, it should come as no surprise that Georgia ranks number one in grant dollars per population and grant dollars per undergrad enrollment, according to the National Association of State Student Grant and Aid Programs. Since its inception, HOPE has kept about 75 percent of Georgia students who score 1400 or above on the SAT in state for college, compared with less than a quarter before the program. HOPE's widely-acknowledged success has inspired similar lottery-funded, merit-based scholarships in other states such as Tennessee, Florida, and West Virginia. But the program also has its critics. Many argue that because there is no income eligibility cap, the great majority of HOPE scholars don’t actually need the aid and would have attended college regardless. Furthermore, others suggest that because the program is lottery-funded, the poor and minority populations end up subsidizing affluent families, whose children tend to win HOPE scholarships at higher rates. Many Georgia residents fear the window of HOPE, at least in its current form, may be closing. The Georgia lottery, which doled out $748.1 million in awards for 2010-2011 (compared with $21.4 million in 1993-1994), has been unable to keep pace with ballooning tuition and enrollment rates. Indeed, state lawmakers were forced to reduce HOPE's award in 2011, and official projections indicate that further, significant reductions (or other sources of funding) will likely be needed in the very near future. The ROI for many future Georgia college students may not be quite so peachy.

In the wake of the recent economic crisis, many state and local governments confront significant fiscal stress that could have national ramifications. The flow of federal stimulus funding is drying up before tax revenues fully recover and forcing many statehouse and city halls to consider tax hikes and/or spending cuts that could slow recovery and, in some cases, undermine long-term growth and global competitiveness. In particular, funding for infrastructure and education—of which states and cities are by far the primary sources—are under the budget knife. This Backgrounder examines the fiscal woes at the sub-national level and some of the troublesome budget cuts being made. In addition, it explores some innovative initiatives states and cities are taking to do more with less.

One of the more serious and lasting consequences of the Great Recession and its aftermath has been the sharp rise in the number of long-term unemployed.  Nearly 45  percent of the unemployed –or more than five million people -- have now been out of work for six months or more.  That is up from less than 20 percent in 2007. Persistent joblessness atrophies skills and discourages risk adverse employers who are unlikely to take a chance on someone out of work for so long.  Few federal programs provide help for the long-term unemployed, though the recent growth in social security disability insurance may be a response to persistent joblessness. Some interesting initiatives are under way at state and local levels, however.  In March 2012, Michigan Governor Rick Snyder announced Community Ventures (CV), a program aimed at encouraging employers to hire and retain the long term unemployed.  The program is administered by the Michigan Economic Development Corporation (MEDC), which also markets the state to expanding companies, talented workers, and tourists. MEDC President and CEO Michael A. Finney said in an interview that CV is part of the governor’s public safety program, so the initiative targets those with limited training and opportunities who are often most susceptible to crime, including ex-offenders and the teenage children of unemployed single parents.  Military veterans are also a focus. The approach starts with employers rather than with the unemployed. CV first approaches potential employers to get them to make a commitment to hire new workers from the program's pool if the state assists in preparing them for the job. Finney said that “most programs trying to get job opportunities for the least employable tend to start with getting people up to speed with high school degrees, GEDs, or other skills training.  When you do all those things and there’s not an employer that’s committed to taking them and creating a sustainable job for them, it’s a bigger lift to get it done.” Instead, the state “decided to go to employers and do a deep dive on the challenges employers have in taking on our targeted audience.” One example.  At one firm, only 10 percent of applicants from CV’s target population were able to pass a mechanical aptitude test. CV instituted job coaching and raised that to 40 to 50 percent, dramatically increasing the hiring pool. To retain hired workers, CV is also planning to assist in child care and will give generous reimbursements to those with cars who pick up fellow workers, to prevent otherwise good workers from arriving late to their jobs due to Detroit’s unreliable bus system.  Uniforms are another hidden issue that CV uncovered.  One firm requires employees to wear a simple uniform, a company t-shirt and dark slacks, but the cost is a high burden for these new workers.  CV will simply purchase a week’s worth the uniforms for new employees. Michigan’s 2013 budget allocated $10 million to CV, starting in October.  CV has discretion over the ultimate use of the funds, something that Finney recommends that federal policymakers consider: “We would love to have more block grant, fungible money, from the federal government with a primary metric being an outcome that we have to deliver. Design a program at a high level without too much detail—like CV—and allow us to get it done without a lot of restrictions.” This flexibility distinguishes CV from programs such as Georgia Works and Platform to Employment that continue to pay unemployment insurance benefits to workers while they attend company training programs for up to eight weeks.  While employers can thoroughly evaluate and train applicants, and workers learn new skills, hiring commitments are not made. There is controversy over the merits of these “bridge to work” programs, with some critics saying they are subsidies that offer employers free labor, and others saying that the federal guidelines for the program are too onerous for states  No states have accepted federal aid to try similar programs. The Community Ventures initiative, while still in its early stages, has some modest gains to show. Three months in, MEDC has already received—or is negotiating final numbers for—commitments for 600 new jobs, well along the way to a 14-month goal of 1,000 jobs.  A Detroit automotive supplier has already begun hiring local workers with CV’s help. Steven J. Markovich is a contributor to CFR.org.

Many of the things the United States needs to do to strengthen itself economically are hard. Improving education is a lengthy, complex undertaking with no obvious road map. Bringing the deficit under control involves politically perilous decisions to cut spending and raise taxes. Streamlining burdensome regulation requires difficult trade-offs between business efficiency and environmental and consumer protection. So it’s encouraging to see the Obama administration and Congress finally doing some of easy things. The White House Wednesday released a six-month progress report on its efforts to speed up visa processing, and there has been significant progress in easing the burden facing overseas travelers eager to come to the United States. Wait times are down and visits are up. And last night, by unanimous consent, the House passed the “Global Investment in American Jobs Act of 2012,” which directs the Secretary of Commerce to “develop recommendations to make the United States more competitive in attracting and retaining strong investment flows from abroad.” Senator John Kerry (D-MA) has introduced similar legislation, and Senate action is likely in the lame duck session. What these initiatives have in common is that they leverage existing American strengths. Travelers from around the world want to come to the United States to see the great cities like New York and San Francisco and explore natural wonders like the Grand Canyon (or more likely, just to shop). Foreign investors want to be on the ground in what is still the largest and most dynamic consumer market in the world. Small steps to clear away obstacles and encourage tourism and investment can pay outsized dividends. The Obama administration has made travel and tourism a top priority, with the president announcing in January a new initiative that blessed efforts already under way in the State Department and the Department of Homeland Security. Between October 2011 and July 2012, the State Department added 220 temporary consular officers in Brazil and 48 in China to help with visa adjudications, and is expanding the number of permanent positions. Similar efforts are kicking off in India. There is a new pilot project to waive visa interviews for very low-risk travelers, which has already benefited 63,000 travelers. And there has been new investment in consular facilities and streamlined procedures to speed up visa processing. Currently, 85 percent of visa applicants are being interviewed within three weeks, compared with just 57 percent a year ago. Word seems to be getting out. Overseas travel to the United States is up 8.6 percent over last year, even as the U.S. dollar remains strong, and demand for tourist visas is expected to grow by 20 percent this year. In Brazil, visa applications are up 38 percent this year; in China they are up 48 percent. This is easy money for the United States. International tourism supports about 1.2 million jobs. Foreign investment is a similar story. After a lost decade in which the U.S. share of global direct investment dropped from more than 40 percent to less than 20 percent, FDI was up 14 percent in 2011 and is growing strongly so far this year. The Commerce Department has stepped up its investment promotion campaign through what is known as SelectUSA, but most of the effort to lure foreign companies is still done at the state level. A 2009 World Bank study put the United States near the bottom of the wealthy countries in the effectiveness of its investment promotion efforts. A 2012 OECD study on openness to foreign investment put the United States 34th out of 55 countries studied, behind such countries as Brazil, South Africa and Argentina. Even small improvements in “attracting and retaining investment,” as envisioned in the House legislation, would have large payoffs. Foreign companies that invest in the United States already employ more than 5 million Americans, and including spin-off jobs the number is probably more than 20 million. Certainly the United States has no choice but to tackle the hard challenges that must be faced to create stronger future growth. But if we tackle the easy problems – and reap the benefits of more money flowing into the U.S. economy – the hard ones become much easier to solve.

In all sub-Saharan Africa, only South Africa contributes universities to the top seven hundred worldwide.   In a recent report published by Quacquarelli Symonds (QS), a leading consulting firm on higher education and careers information, the University of Cape Town (UCT) ranks 154 out of seven hundred universities. The University of the Witswaterand (Wits) ranks 364. Also within the top seven hundred--but low down--are the universities of Stellenbosh, Pretoria, and KwaZulu-Natal.  Number one is MIT, followed by the University of Cambridge.  Yale is number seven and Caltech number ten.  The University of Virginia is 123.  Just before UCT at 153 is L’Ecole Normale Superieure de Lyon and just after it at 155, the University of California at Irvine. University rankings are indicative, not definitive.  But the QS World University Rankings are usually regarded as one of the more influential and widely observed of the university ranking scales.  Its criteria is conventional:  according to its website, a score is determined 40 percent by academic reputation; 10 percent by employee reputation; 20 percent by faculty/student ratio; 20 percent by research and other citations; 5 percent by international faculty numbers; and 5 percent by international student numbers.  Nhlanhia Cele, director of strategic planning at the University of the Witwatersrand, is quoted by the South Africa Press Association as saying, "Rankings matter because they undeniably create a perception about a university.  For example, when top students, academics and researchers are looking worldwide as to where they would most like to study or work, they use the leading ranking systems as a key point of reference." All five South African universities were white only during apartheid times, but now have significant numbers of non-white students. University level education is mostly funded by the state and through tuition payments--there is little tradition of large, private endowments to educational institutions.  Nevertheless the absence from the QS list of South African universities that enroll large numbers of non-white students--University of Johannesburg, University of the Western Cape, and Ft. Hare University, etc.--highlights the persistence of apartheid patterns. Other historically white universities also failed to make the cut. University level education remains predominately a white prerogative.  Nearly 20 percent of all students enrolled in universities are white, while whites make up only 9 percent of the national population.  South Africans recognize that if their country is to compete successfully in the information-technology age, not only are more university graduates necessary, but the quality of the institutions that graduate them needs to be higher, with UCT and Wits being the exceptions.

Inequality in the United States today is substantially higher than almost any other developed nation, and even some developing countries such as Russia and India. According to the Congressional Budget Office, the average real after-tax household income for the top 1 percent of Americans rose 275 percent from 1979 to 2007, while income for the majority of the population--21st through 80th percentiles--grew just 37 percent over the same period. Complex causes--including globalization and technological change--have led to greater disparity, as it becomes increasingly less likely that an individual will reach a higher economic status than his or her parents. This Backgrounder examines the causes and impact of rising inequality, and the debate it has sparked in the United States.

I spent a fascinating day this week at the Techonomy conference in Detroit, and came away with a new appreciation for why I should get out of Washington more than I do. The conference, the brainchild of Techonomy founder David Kirkpatrick and co-hosted by the Detroit Economic Club, was a fascinating and inspiring look at some of the efforts under way to revitalize a city that has probably been hit harder than any other in the country by, among other things, international trade competition, technology that has shed workers, poor governance, and the exodus to the suburbs. The focus of the conference was the current, accelerating wave of technological change and how it can be made to work in revitalizing American cities. Here’s what I learned: Necessity is truly the mother of invention. Over the past 40 years, Detroit has lost almost two-thirds of its population, shrinking from a city of 2 million residents in the 1950s to one of just over 700,000 today, with the steepest drop in the past decade. The city government is effectively bankrupt, and the schools are some of the worst in the country. In such an environment, there is no such thing as a bad idea. Imitation is the sincerest form of flattery – at least until we figure out how to do it better. For too long many Americans have been reluctant to look outside our borders for different, maybe better, ways to compete economically. Detroit seems to have shed that sort of crippling pride. Timothy Bryan, the chief executive of GalaxE.Solutions, an IT services company that is expanding in the city, has launched a campaign called “Outsource to Detroit” to encourage other companies to follow his lead. Bryan argues that the advantages of proximity to U.S. customers who need complex services and a well-trained, English speaking U.S. workforce can offset the cost advantages of outsourcing to India. Among other initiatives, his company has been working closely with the city's community colleges to help redesign training programs to fit the company’s needs, with the promise that a job will be waiting for new graduates. He got the idea, he said, from studying how the Indian IT companies such as Wipro and Infosys work with their colleges at home. Political leaders are catching one as well. Michael Finney, president of the state’s Michigan Economic Development Corporation, said that he had recently spent some time in Germany with Michigan governor Rick Snyder, looking at the country’s “dual apprenticeship” system which mixes formal education and training with on-the-job experience. The state is set to launch a new pilot program in several community colleges. Cities, even ones that have fallen on hard times, are still cool. Richard Florida of the University of Toronto and Atlantic Cities wrote in the Wall Street Journal last month that the high-tech industry is taking “a decidedly urban turn,” with the fastest growth occurring in cities like New York, London, and Los Angeles rather than in the suburban sprawl of Silicon Valley. Detroit, which has a magnificent downtown core filled with many empty art deco era office and apartment buildings and a wonderful downtown baseball stadium, Comerica Park, offers many attractions for young, smart people looking for urban life on the cheap. Dan Gilbert, a native son and chairman of Quicken Loans who spoke at the conference, has been buying up many of these buildings and offering up cheap office space for young entrepreneurs trying to build businesses in the downtown. "People in their 20s and 30s coming out of university want to be in a vibrant, exciting urban core," he told the conference. "We're not going to be competitive in getting those folks if we're in a nice building in the suburbs. That's not where this generation wants to be." Rome wasn’t built -- or rebuilt -- in a day. Diversifying an economy like Detroit’s will take a long time. While the tech start-up scene in the city is exciting and promising, it has not created many jobs so far. Indeed, the slight brightening of the city’s economic prospects is almost entirely due to the revival of the auto industry from its near-death experience in 2008, thanks in no small measure to the Obama administration bailout. A sturdier turnaround will take time. For a policy wonk, there were plenty of eye-opening, gee-whiz moments at the conference. If you haven’t yet, check out Ben Kaufman's Quirky.com to see crowd-sourced product innovation in action, or MIT’s Senseable City Lab for the ways in which big data could transform urban living. But most of all, there was a much-needed commodity – a sense of hope and optimism that even one of the most troubled cities in America may have a much brighter future on the way.

If there’s any issue in the immigration debate on which there is a broad consensus, it is that everyone wins when immigrants come to the United States and start new businesses. Successful entrepreneurialism cuts through all the convoluted debates over whether immigrants are taking jobs that might otherwise be done by Americans. Come to America, build a business, hire employees, and everyone is happy. In the new Renewing America Working Paper, "Latino Immigrant Entrepreneurs: How to Capitalize on Their Economic Potential," Alexandra Starr – a journalist and Emerson Fellow at the New America Foundation -- looks at how Latino entrepreneurs are building big businesses that are capturing export opportunities in Latin America and smaller businesses that are serving the growing Latino consumer market in the United States. The paper is an important addition to a literature that has been dominated by research on Asian immigrant entrepreneurs, led by the excellent work of AnnaLee Saxenian and Vivek Wadhwa documenting the contributions of the immigrants in Silicon Valley. It is true that, in percentage terms, Latino immigrants to the United States generally own fewer businesses than Asian immigrants. Measured broadly, for example, just 6.5 percent of Mexican immigrants own businesses, compared with roughly 10 percent of Indians and Chinese and over 22 percent of Koreans (though immigrants from some Latin American countries, like Cuba and Colombia, have business ownership rates of more than 10 percent). But the potential for growth in business start-ups and ownership among Latino immigrants is huge, and the benefits to the United States would be enormous. Immigrants from Latin America account for just over 53 percent of the total U.S. immigrant population, and nearly half of new legal permanent residents each year come from the region. The Latino population is by far the fastest growing ethnic group in the United States, with a population expected to top 125 million by 2050. And many economies in Latin America are booming, creating new and lucrative export markets right next to the United States. Starr documents how Latino immigrant entrepreneurs in the United States are taking advantage of these trends.  Brightstar, the Miami-based cell phone distributor launched by Bolivian-born Marcelo Claure, has become dominant in several South American markets. ITS Infocom, a brain child of Peruvian-born Andres Ruzo, provides IT and customer service support for U.S. multinationals operating across Latin America. Closer to home, Mexican-Japanese entrepreneur Alfonso Tomita has built a chain of sushi  restaurants across Texas, while Jesus Sebastian moved from his avocado plantation in Mexico to San Antonio to launch the Ole Avocado brand of packaged guacamole products. Starr’s policy recommendations are a case study of what economist Tyler Cowen has called “the low hanging fruit.” There are fairly small changes that could produce big payoffs in making it easier for Latino immigrant entrepreneurs to establish and expand businesses in the United States. Among the suggestions: Visa reform. The U.S. visa system – at least for those without family connections – is set up with an eye towards employees, not entrepreneurs. That should change. Foreign students should be encouraged to stay and try their hand at starting businesses; threshold requirements for the investor visa should be lowered; and immigrants who start and run successful businesses should be able to petition for permanent residency. Open financing doors. Too many immigrant entrepreneurs are unable to access bank financing, and governments at the federal, state, and local levels should do more to encourage the availability and awareness of non-traditional financing, particularly for small, start-up businesses. Re-engage on trade with Latin America.  The U.S. Latino immigrant population offers a big advantage for the United States in opening up market opportunities in Latin America. Yet the region has largely fallen off the U.S. radar in terms of trade expansion. Small-scale initiatives like the State Department’s International Diaspora Engagement Alliance (IDEA) for Latin America are encouraging, but a broader initiative to engage U.S. business with the region is needed. Entrepreneurial immigrants have long been one of the great economic advantages enjoyed by the United States. And it is an advantage that has only begun to be tapped.

I will be traveling to Detroit this week to speak on a panel at the Techonomy conference, which is an annual event normally held in Arizona. It's a gutsy decision by the organizers to shine the spotlight on a city that Techonomy founder David Kirkpatrick noted is usually considered "a gritty, depressed, financially troubled city that seems well past its glory." The conference will highlight the transformative economic potential of modern technologies, and as Kirkpatrick writes: "If technology is the key ingredient to rejuvenating the American economy, it has to work where the problems are biggest and the task the hardest." The post below, which looks at what governments should be doing to facilitate this transformation, first appeared on the Techonomy web site. Here’s a chicken and egg problem. Are companies failing to invest in the United States because of its decaying infrastructure, schools that don’t produce enough skilled workers, and a byzantine immigration system? Or has the reluctance of companies to invest in the United States led to decaying infrastructure, failing education, and growing political fights over immigration? The question is one with enormous implications for governments at all levels looking to create conditions for stronger growth. Should they invest more heavily in education and infrastructure and hope for future payoffs (build it and they will come)? Or should they hold down spending, keep taxes low, and hope that companies will invest, creating a faster growing economy that generates new revenues for education and infrastructure? The United States clearly has an investment problem, and it’s not just a cyclical one caused by weak consumer demand coming out of the Great Recession. The U.S. share of global foreign direct investment stock, for instance, fell from over 40 percent a decade ago to less than 20 percent today. U.S. headquartered multinational companies, which created more than 4 million jobs in the United States in the 1990s, cut more than one million in the 2000s even as they continued to expand rapidly overseas. The Harvard Business School earlier this year released an important survey of its alumni working in multinational companies, asking whether their companies were moving operations overseas, and if so why. Discouragingly, far more companies were still thinking about expanding abroad than adding jobs in the United States. And nearly half of those decisions involved research, development, and engineering activities, which are critical to maintaining the U.S. lead in innovation. Many of the respondents cited lower wages as a big incentive to move abroad, but other reasons included better access to skilled labor, fewer or less expensive regulations, and lower tax rates. The most popular recommendations for making the United States a better place to invest included a simpler tax code, immigration reform, strengthening education and training, and streamlining regulations. One obvious response, and one I generally support, is to try to address these concerns and make the United States a more attractive location to invest. Bolstering the skills of the workforce seems like a no-brainer, for example, but there’s no gain in training young people for jobs that aren’t available.  There are already too many college grads working at Starbucks. Immigration reform to attract more educated and skilled workers again seems obvious, but not quite so obvious in an economy where even U.S. college graduates are struggling to find good work. Infrastructure spending makes sense, especially when long-term borrowing costs are so low. But West Virginia has spent billions building roads, and total federal, state, and local spending accounts for more than half the state’s economy, the highest percentage in the country. And yet West Virginia is still among the poorest states. Roads alone do not make an economy. So what should governments be doing? For one, they should be competing aggressively for investment. While other governments court multinational companies, the United States has long taken a hands-off approach, though states often take this on themselves. In the Council on Foreign Relations Task Force on U.S. Trade and Investment Policy, released last year, we call for a National Investment Initiative that would set a target for increasing investment in the United States, both by domestically headquartered multinationals and by foreign multinationals. We urged action on a variety of fronts including “education, development of infrastructure, encouragement of high-skilled immigration, expanded government support for R&D, and other initiatives that enhance the United States as a primary destination for the location of higher wage employment.” And the task force recommended an overhaul of the corporate tax system to encourage the location of business in the United States. The idea for a National Investment Initiative was endorsed by President Obama’s Council on Jobs and Competitiveness. At the state and local level, Roland Stephen of SRI International, in a working paper for the Renewing America initiative at the Council on Foreign Relations, looked at the experience of North Carolina. The state has rebounded quite strongly from the devastating collapse of manufacturing employment over the past two decades, which was even worse there than in Michigan and Ohio. The state’s Research Triangle is a national success story. While there was no silver bullet, Stephen argues that long-term funding of education and infrastructure “are the foundation on which other policy initiatives rest.” He calls for more targeted investments as well, particularly in building regional partnerships, technology centers, and other institutions focused on economic development. But he cautions: “Success demands patience. Economies grow slowly and payoffs come slowly. The powerful and appropriate impulse to keep score on public spending should be weighed against the need for investments of an uncertain duration with hard-to-measure payoffs.” That’s a hard one to sell to the public in a time of fiscal constraint and diminished expectations. But if the United States doesn’t build for the future, it will pass us by.

Before the Class of 2012 stepped off the dais and shed their caps and gowns, their prospects for a seamless transition into the American workforce looked poor. According to the Economic Policy Institute, the unemployment rate for recent college graduates (ages 21-24) hovered around 10 percent for the last year, while the underemployment rate (the proportion of grads that have either suspended their job search or aren't working up to their capacity) was nearly double that at 19 percent. Many 2012 grads are joining the existing ranks of jobless from the classes of 2009, 2010, and 2011. For those who do find gainful employment, their real wages are some 5 percent less than their peers who graduated in 2000. The employment woes of these young adults have not been lost on the "college admissions consultants." For the first time, The Princeton Review has included a list of rankings dedicated to "Best Career Services" in its 2013 annual big book of leading U.S. colleges. Topping out this list, which is based on thousands of student surveys, is Boston's Northeastern University. In particular, the school stands out for its strong embrace of cooperative (or "co-op") education. Northeastern's co-op program, which is one of the oldest and largest in the country, allows students, beginning in their sophomore year, to alternate semesters of academic study with semesters of full-time employment in fields relevant to their major. Roughly 100 U.S. colleges have co-op programs, including a number of technical schools, but only a few, like Northeastern, feature them prominently throughout their curricula. Other schools that do so include the University of Cincinnati, Drexel University, and the Rochester Institute of Technology. While most Northeastern students pursue co-op work in Boston, the school has opportunities with companies, including Fortune 500 firms and start-ups, in over thirty states and roughly 60 countries. Students can pursue up to three co-op semesters if they're on the school's five-year track. In this video, economics major Georgiy Kupovykh talks about his co-op experience at Brightcove, a Cambridge-based firm that produces an online video platform. The ultimate question is, of course: what are the particular merits of co-op education? A 2007 report from the Memorial University of Newfoundland cites research showing that co-op students benefited from higher starting salaries and "significantly more responsible jobs" after school. Employers also benefitted through better screening of new staff, hiring passionate employees, and increased cost savings. The report also indicates that co-op students believe their programs were both "positive and beneficial." A more limited study from Ohio State University, which compares the industry success of students from co-op programs at automotive technical schools with those from traditional auto tech programs, found higher rates of co-op grads employed in jobs related to their college program than traditional counterparts, as well as higher salaries. For its part, Northeastern reports that over 90 percent of its 2010 graduates were either employed or in grad school within nine months of graduation, and that more than half of these grads received job offers from a previous co-op employer of theirs. But more detailed research would certainly be helpful in making these assessments. General data on job-placement rates for college grads is often "fuzzy." A lack of standards means that schools' surveys can vary widely and often offer highly skewed portraits of employment prospects. As noted by the Chronicle of Higher Education, a "98 percent" job placement rate may actually account for only 22 percent of the recent graduating class, and those jobs may include the underemployed and those in jobs that don't require a college diploma. In contrast, an alternative "real-world" job experience that seems to be garnering an increasing amount of disdain from current and former college students is the internship. Unlike co-ops, many internships are unpaid and often involve unskilled "grunt" work that does little to prepare for future paid work. By U.S. fair labor standards, an unpaid intern can't substitute for regular employees, and companies can't derive an "immediate advantage" from intern labor. However, analysts say the enforcement of these standards is difficult and that there is little to prevent abuse. Many interns are of course aware of this reality, but take the jobs because the unpaid internship is at least a foot-in-the-door and prevents what would otherwise be a dreaded resume gap. "I knew this [internship] was going to be normal job and I wasn't going to be paid for it," a particularly disgruntled former intern told the New York Times. "But it started kicking around in my mind how unjust this was. It's become part of this unregulated labor market," he said. Co-ops, in contrast, are typically a joint undertaking between the school and the employer and are, therefore, closely monitored and evaluated. According to participants, the full-time positions provide students with greater responsibility and offer a real sense of progression. Perhaps equally important, co-ops give employers a more structured opportunity to recruit at an early age, and identify their staffing needs—perhaps even creating a new job in the process. "What Georgiy did in his role as a Northeastern co-op student," said Brightcove's director of recruiting, Elaine Pappas, "was to demonstrate for us that we had a legitimate business need to, now, create a position that is going to be for someone who is two or three years out to school."

My post last week on the New York Times’ Economix blog, which looked at how economists’ views are changing regarding the impact of globalization on the American jobs and wages, drew some very interesting responses. Most were of the “what took so long?” variety. Indeed, the idea that a growing global market for labor would put downward pressure on U.S. wages is rather obvious. As one commenter put it: “Doesn't economics suggest a commodity that can be purchased at different areas in the world will tend toward the same price after frictional effects such as transportation, duties and time delays are accounted for?” The most critical comments chided me for not endorsing import restrictions to respond to these trends. But as I suggested in the article, there is plenty of historical evidence that such a response only makes things worse. While targeted tariff protection can make sense for limited periods in sectors faced with a flood of low-cost imports (the scenario that WTO-legal “safeguard” measures are meant to address), or for dumped or subsidized goods (which U.S. trade laws are meant to address), broader measures are almost always counter-productive. Import protection raises costs, which makes the U.S. economy less competitive across the board, and invites retaliation that closes export markets. The challenge for the United States is to figure out how to compete more effectively in a global market, not to close itself to competition. The most interesting comment, however, was one I got from far outside the United States. It came in an email from Lincoln Faruque, a lecturer in the Department of Development Studies at the University of Dhaka in Bangladesh. He suggests that many of the negative impacts of globalization on U.S. wages and job creation are likely to prove transitional, and that as wages rise in the developing world the competitive dynamics could change quickly. With his permission, I quote it here at length. I strongly appreciate your perspective in the article. However, I felt that sharing my understanding on the subject might produce a fruitful conversation between us. A careful look in the history of trade depicts that a symbiotic trade relationship between two countries which are strikingly different in terms of per capita income and labor force availability (not size) produces three different outcomes at three time periods - short term (roughly 10-15 years), medium term (15-35 years), and long term. In the short term, the country having higher wages will start losing manufacturing jobs to the other country. This happens because sophisticated machines have made manufacturing jobs easily transferrable (only a short period of training on how to operate these machines is enough!). This does not take place in the service sector for two reasons - a) in the service sector, output is largely dependent on men not machines, and b) the service sector has a large non-tradable part. This export of manufacturing jobs accelerates for a few years and then slows down sharply as the pool of available labor become scarce. This is the end of short term impact. The findings of the studies that you have quoted in your article largely covered the short-term period and therefore have reached a similar conclusion. But as the short term ends and the medium term begins, this framework of transfer of manufacturing jobs just doesn't hold up. With labor scarce, companies soon feel the pressure of rising wages, which is also an indication of rising purchasing power in the relatively lower income country. So their decision where to create more jobs (whether in the high income country or low income country) depends on two questions: a) Where will the company enjoy lower input costs (raw material, electricity, land) and other related operating costs such as tax rates? The cost of labor drops from the equation. And b) In which country is the size of the market for the concerned product is bigger? Companies tend to locate in the larger market size country and export from there to other countries when other costs are similar. Though the shaping of this new transformation starts at a snail’s speed, it can shift quickly. You have cited the case of Caterpillar. Please be happy that Caterpillar closed one of its factories in Canada in February 2012 and shifted the jobs to the state of Indiana. They are also abandoning production of some models in Japan and have started to build a new factory in Georgia, where they will produce these models. In both cases they offered the same explanation: “being close to the customer base.” So, the transformation in the medium term depends on economies of scale, not on wage rates. As more companies focus on this proposition and act accordingly, this turns into a wave and re-industrialization take place. However, it's worthwhile to mention that in the long term, companies’ decisions on where to manufacture largely depends on a) Where they can build new technology, and b) Where they can retain the right of using the new technology exclusively or keeping the exclusiveness of the technology secret. Be assured that the United States will get highest mark in both of these cases. Only Germany and Japan can be a close competitor but they, in aggregate, will lose more than two million working age people in the next decade. This is one of the better arguments I have read for why the United States, despite its many challenges, retains enormous advantages as a location for multinational business. Sometimes these things look clearer from abroad than they do from home.

For decades, economists resisted the conclusion that trade – for all of its many benefits — has also played a significant role in job loss and the stagnation of middle-class incomes in the United States. As recently as 2008, for instance, Robert Lawrence of Harvard, one of the country’s most respected trade experts, concluded that trade explained only a small share of growing income inequality and labor market displacement in the United States. Rather than focusing on trade, economists argued that other factors – especially “skill-biased technical change,” technological innovation that puts an added premium on skilled workers – played the biggest role in holding down middle-class wages. But now economists are beginning to change their minds. Responding to The New York Times’ recent survey about the causes of income stagnation, many top economists have cited globalization as a leading cause. While the evidence is still not conclusive, it is pretty strong. Trade’s effect on jobs and income, which was probably modest through the 1990’s, now seems to be growing much larger. Among the recent studies: • In “The Evolving Structure of the American Economy and the Employment Challenge,” my CFR colleague Michael Spence looked at job growth from 1990 to 2008 in sectors of the United States economy. He found almost no net job growth in sectors, like manufacturing, in which global trade played a large role. Nearly all of the net gains occurred in sectors in which trade plays a minor role. Government and health care, in which trade plays almost no role, accounted for more than 40 percent of all new jobs. • David Autor, David Dorn, and Gordon Hanson looked at regions in the United States where companies are competing most directly with China. From 1990 to 2007, they found that regions that faced growing exposure to Chinese competition had higher unemployment, lower labor-force participation, and lower wages than might otherwise be expected. And the effects grew over that period. In 1991, just 2.9 percent of United States manufacturing imports came from low-wage countries; by 2007, that had risen to nearly 12 percent, mostly from China. • In the Council on Foreign Relations Task Force on U.S. Trade and Investment Policy, my colleague Matthew Slaughter looked at employment at multinational companies with headquarters in the United States, companies that account for roughly 60 percent of American exports and imports. From 1989 to 1999, those companies created 4.4 million jobs in the United States and 2.7 million jobs at their foreign affiliates overseas. From 1999 to 2009, however, those same companies eliminated a net of nearly 3 million jobs in the United States while adding another 2.4 million jobs abroad. The usual rebuttal to these findings is to argue that they stem mostly from manufacturing. And manufacturing, the argument goes, is facing a long-run, secular decline in employment that is largely technology-driven, not unlike the story of agriculture in the 20th century. The job losses in manufacturing may seem as if they have been caused by trade, according to this view, but they have actually been caused by technological change. Through the 1990s, that story was largely plausible. But over the last decade it is not. Manufacturing output in the United States is no longer growing as rapidly as it once was (and as you would expect if technology had simply been replacing workers in factories). Robert Atkinson and colleagues have shown convincingly that the loss of more than five million jobs in manufacturing in a decade was not primarily a technology and productivity story. Real manufacturing output grew just 15 percent in the 2000s, compared with more than 35 percent in each of the 1970s and 1980s and more than 50 percent in the 1990s. And one sector where the statistics significantly overstate output — computers and electronics – accounts for almost all of the recent gains, even though the U.S. trade deficit has actually grown sharply in this sector over the past decade. In thirteen of nineteen manufacturing sectors, real output declined over the last decade, in some industries quite sharply. There is no question that in recent years United States manufacturing has declined, taking away jobs and driving down wages for those who are still employed. The real-world evidence makes it surprising that it has taken economists so long to catch on. The recent strike in Joliet, Illinois, at Caterpillar – a true global company — ended with union workers being forced to accept an agreement that includes a six-year wage freeze, even as the company is earning record profits. Elsewhere, two-tier agreements, in which new hires earn wages and benefits roughly half as large as those in the old union contracts, have become standard in many of the manufacturing industries that remain in the United States. One reason that economists may be uncomfortable talking about trade’s impact on jobs and wages may be concern that it could set off protectionist responses. And expanded trade has certainly been good for the United States. It has brought us better and cheaper consumer goods, opened new export markets, lifted up many poor countries and strengthened American alliances around the world. But I think the fear of protectionism is overblown. One unexpected feature of the Great Recession was how little protectionism it led to, especially in the advanced economies. The lesson of the Great Depression – that protectionism is counterproductive – seems to have been learned. Instead, the evidence should produce some soul-searching about the causes of this country’s declining competitiveness. The list is discouragingly long: crumbling infrastructure, inadequate educational performance, stifling regulation, and a cumbersome tax system. But it might not take that much to tip the scales in favor of the United States. The Boston Consulting Group, which has looked at the slight uptick in the nation’s manufacturing employment over the last two years, argues that rising wages in China, high transportation costs and falling United States energy costs should bring more manufacturing back home. With the rapid growth of middle classes abroad, trade should be an opportunity for the United States to sell into growing markets, increasing opportunities and wages for many Americans here at home. But over the last decade, that has not been the story. A version of this post appeared in The New York Times Economix blog on August 29, 2012.

Emerging Voices features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is from Blair Glencorse, Founder and Executive Director of the Accountability Lab. He analyzes the challenges of integrity and accountability in Liberia’s colleges and universities, arguing that failures in higher education threaten the country’s progress toward peace and development. You can follow Glencorse on his blog and on Twitter at @blairglencorse. Under the leadership of President Ellen Johnson Sirleaf, Liberia and its international partners have focused on several governance priorities to bolster economic development and prevent a repeat of the brutal conflict of the past. Their reforms have included rooting out rampant corruption within the public sector, opening up government, streamlining business rules to attract investment, and consolidating management of natural resources. Indeed, Liberia was the first African state to comply with EITI rules governing extractive industries and the first West African country to pass a Freedom of Information Act to support more transparent government. Among these issues, Liberia’s higher education sector may not seem a priority. But chronic accountability problems in colleges and universities are putting the sustainability of Liberia’s transition under threat. The country’s human capacity is very low; it ranks 182nd out of 187 countries on the UN’s Human Development Index and literacy is less than 60 percent. It is difficult to manage a state and society without effective institutions of higher education that can generate basic administrative and management knowledge over time. Accountable universities are also important because Liberia has significant natural resources—a key driver of conflict in the past—that must be managed effectively and equitably. Beyond huge agricultural potential and large deposits of iron ore, rubber, gold, diamonds, and timber, significant amounts of oil were recently found off Liberia’s coast. Governance of the extractive sector is already weak, as documented in detail by a recent Global Witness report. There were nearly 3,000 engineering students across the country this year, but just 30 were able to pass the necessary exams to graduate. This is hardly a sign that the necessary capacity is being developed to manage the country’s resources. A failure of higher educational institutions raises the likelihood that Liberia’s wealth will turn into a curse instead of a blessing. It is also essential that current students—the next generation of leaders—understand the importance of accountable structures and behaviors, which they can then build upon and replicate at the national level. Earlier this summer, one university closed for three weeks after violent campus protests by students and a brawl with the administration when fees were increased without warning. Meanwhile, the country’s largest public institution of higher education, the University of Liberia, was racked by fierce riots between supporters of opposing political parties after student elections. Colleges and universities should be forums to learn about effective decision-making and responsible participation. Too often, though, they are not. The endemic integrity challenges of the higher education system manifest themselves both at the top—in Liberia’s government—and at the bottom—in colleges and universities and among individuals within them. The Ministry of Education has not yet developed a strategy for the future of universities and colleges, while the body tasked with oversight—the National Commission on Higher Education—largely cannot effectively accredit institutions, set clear regulations, or enforce standards. Universities and colleges themselves rarely have strategic plans and are unable to follow regular reporting regimes. Patronage and bribery by administrators, professors, and students are widely reported. Abuse of resources, teacher absenteeism, and sex for grades appear common, although data is minimal and there has been almost no systematic research into these problems. This structure endures because the corrupt dynamics have become entrenched and a “culture of silence” prevents reporting of problems and hence any constructive reform. When combined with a lack of resources, limited technology, and poor teaching quality, this produces woeful outcomes from Liberian higher education. Employers complain that some students graduate without even being able to write their names. The system, rather than generating knowledge and building integrity, actually teaches corruption and undermines capacity. The Accountability Lab, an organization I founded recently to find new answers to problems of accountability in the developing world, is working with universities and civil society stakeholders to develop innovative solutions to these challenges. Over the past four months in Liberia, we have conducted preliminary research and discussions with a wide range of individuals—from government officials to students. This work has established that a new approach is needed to strengthen rules, understand problems, set benchmarks, and ensure credible punishments for illegitimate behaviors. An approach of this type will have to be carefully integrated within wider reform efforts, and will take decades, not years. In the short term, clear rules and benchmarks could improve monitoring and generate more ethical behavior. This effort might include helping university administrations enforce codes of conduct for students and professors, and putting in place honors councils to encourage honesty and achievement among students. To overcome the “culture of silence,” universities also need trusted and anonymous tools for reporting problems, supported by reformers within university administrations who are willing to address them. This would allow leaders to enforce rules based on evidence, firing professors who engage in corruption, for example. Fortunately, higher education is garnering greater attention. Public university professors are receiving higher salaries, and a new education law provides for student loans. Liberia’s government is working with the World Bank and USAID to develop a strategy for higher education and provide trained professors. Moreover, some administrators, professors, and students understand the need for reform and want to change the status quo. Liberia’s international partners and friends should work to support and encourage these reformers in order to build a higher education system that can prepare Liberians to successfully rebuild and develop their country.

In this Policy Initiative Spotlight, Renewing America contributor Steven J. Markovich looks at recent efforts undertaken by Baltimore and other cities to attract immigrants. He argues that while efforts like these could be crucial in combating near-term population decline, the central challenge for local leaders lies in laying the groundwork for economic growth. Baltimore is hoping new outreach programs and legal protections will encourage more immigrants to make the Charm City their new home in the United States. Mayor Stephanie Rawlings-Blake hopes to attract 10,000 new families over the next ten years, and expects many to be immigrants. In March, Rawlings-Blake prohibited police and social agencies from asking about immigration status, and asked federal immigration officials to explicitly tell people they arrest that they are not agents of the city. The city’s outreach to Latinos is particularly notable with city-run classes in Spanish. While more immigrant-specific initiatives are still under development, the mayor has launched a variety of programs to make Baltimore a more welcoming place, with goals of improving schools, lowering crime, lowering property taxes, and increasing jobs. The mayor’s push to make Latinos feel welcome in Baltimore appears to be working. One twenty-four year old woman born in Mexico told the Washington Post "I like living here. They don’t look at you weird because you don’t speak English." She utilizes the city’s Spanish-language nutrition and exercise classes, and even takes her two young children to the local library for a storytelling hour in Spanish. In a NPR interview, Rawlings-Blake contrasted Baltimore’s approach to immigrants with other areas that have passed stricter immigration laws, such as Arizona: "I think it sends a clear message to immigrants that Baltimore is a welcoming city…too many cities, too many states are basically putting up a do-not-enter sign." Regarding the city’s particular outreach to Latinos, and their impact on economic growth, she offered: "We've actively recruited Latino immigrants to Baltimore, and when they come here, they're thriving. Many have opened businesses, employed individuals. The Latino members of our community that are in our public school system are thriving. I think it's a win-win." That win-win from immigration could be crucial to helping Baltimore and many other northern cities combat population decline as young people move to pursue job opportunities elsewhere. As a city’s population declines, it faces the challenge of spreading its infrastructure and service costs over a smaller base. Cities that face ballooning deficits can try to raise taxes, or cut services and investment, but both approaches will make them less attractive to citizens and businesses alike. Similar efforts are underway across the nation. Global Detroit hopes to power up the Motor City by making it a more international place, encouraging immigration, foreign investment, and trade. The non-profit has funded over $4 million of initiatives since 2010, including everything from social programs to encouraging the expansion of global firms in Detroit and nearby Windsor, Ontario, which has less restrictive visa laws. Canada has also used immigration to revitalize moribund cities. Since the late 1990s, local leaders across Manitoba have used innovative immigration initiatives to combat the loss of youth to Winnipeg and Calgary. Canadian civic leaders have benefited from visa policies that encourage economic based immigration. Canada issues more employment-based visas than the United States, despite being one tenth the size. In the United States, economic criteria determine only 7 percent of green cards. Efforts to make cities more inviting to immigrants will have some benefit, but they should not be viewed as a panacea. Immigration policy is largely a federal issue, and immigrants often move for the same reason many young Americans do, to pursue opportunities. Setting the stage for economic growth by providing robust infrastructure, safe neighborhoods and good schools—all while keeping taxes manageable--remains the major challenge for cities. Still, increased outreach can help a city grow by making it more competitive in its fight to attract people and jobs.

The following is a guest post written by Curtis Valentine, a CFR term member and education reform advocate in Maryland. Follow him on Twitter at @curtiseveryday. In a recent meeting of the National Governors Association, Education Secretary Arne Duncan proclaimed that "with over 2 million high skilled jobs currently unfilled [America] doesn’t have a job crisis, we have a skills crisis.” Duncan’s remarks are important in view of a recent Education Department report that only 39.3 percent of adults ages twenty-five to thirty-four held an associate, bachelors, or graduate degree in 2010. At this pace, America will never meet the goal set by President Obama for the United States to have the highest college attainment rate in the world by 2020. While the four-year degree has traditionally been seen as the standard, a growing number of Americans are relying on community colleges for post-secondary education. The number of Americans attending a two-year college rose from 5.5 million in 2000 to 8 million in 2010. Can the growth in community college students be the key to America closing its skills gap and again truly leading the world in college graduates? To do so will take sustained leadership by those at the top, but more importantly by those closest to the issue. Though President Obama has been supportive of community colleges, he could build greater support by framing college education not only as an economics issue but as a national security issue as well. According to a 2011 Report by the Center on Education and the Workforce at Georgetown University, by 2018 some 92 percent of science, technology, engineering and math (STEM) workers will need post-secondary education. The unique ability of community colleges to respond to America’s ever-changing workforce needs reinforces the importance of investing in STEM education partnerships. For example, public-private partnerships with the National Security Agency and the Department of Homeland Security have resulted in 36 percent of community colleges creating programs focusing on cyber-security. For those already working full time, community colleges are a way to move from underemployment to full employment. While the U.S. unemployment rate has remained steady in recent months, the number of America’s underemployed grew from 8 million to 9.3 million in the final six months of 2011.  Community colleges have long been a haven not only for those seeking career readiness but also those seeking continuing education programs. The relationship between cost and college completion demands that we keep tuition costs down and financial aid up for all Americans, especially for the underemployed looking to return to college. While tuition at community colleges averages 64 percent less than at four-year institutions, these students still struggle with financing their education. The Obama administration and Congress coming together on a temporary measure to keep federal student loans low was good step in the right direction because it gave millions of college students the certainty they need to continue. The administration's idea of investing $1 billion into a Race to the Top for Higher Education could help create the innovation we need to control costs. Using grant funding, this would give incentives to colleges to find innovative ways to lower costs while also aligning entrance and exit standards with the K-12 education system. The Obama administration should make the proposed Race to the Top for Higher Education a priority while highlighting the strong relationship between the cost of college and graduation rates. Community colleges can also be an incubator for how we address the shortfall created by our K-12 system. Currently, 34 percent of all new entering college students require at least one remedial class. The relationship between a student needing remediation and their graduating is startling. According to Complete College America, only one quarter of community college students who take at least one remedial course earn a certificate or degree. Colleges are already filling voids left by our current school system’s inability to respond to the needs of a global society. They are not only partnering with established institutions like the Gates Foundation, but are also looking for locally-based solutions to increase the number of America’s college and career-ready graduates. Prince George’s Community College in suburban Maryland, for example, has partnered with the local school system to implement the "Middle College" model. While in high school, students earn up to two years of college credit towards an associates degree. Federal grants to support innovative solutions like the Middle College concept can make all the difference in the race to out-educate the world and close America’s skills gap. Closing America’s skills gap can be just what the country needs to regain its position as the world’s leader in higher education. The ability of community colleges to meet their student population where they are socially, academically, geographically, and financially make them an invaluable leader in America’s plan to take back our position as the world’s largest producer of high skilled workers.