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Education

Globalization, Jobs, and Wages: Some Additional Perspectives

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.

by Edward Alden September 4, 2012 Renewing America
Education

Globalization, Job Loss, and Stagnant Wages: The Evidence Is Changing

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.

by Edward Alden August 29, 2012 Renewing America
Wars and Conflict

Emerging Voices: Glencorse on Higher Education in Liberia

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.

by Guest Blogger for Isobel Coleman August 20, 2012 Development Channel

Education

Policy Initiative Spotlight: Seeking an Immigration Infusion

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.

by Edward Alden August 17, 2012 Renewing America
Education

Guest Post: Community Colleges and America's Skills Gap

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.

by Guest Blogger for Edward Alden August 7, 2012 Renewing America
Education

PBS's "Homeland": A Must-Watch on Immigration Policy

In a presidential election year, it’s almost impossible to find any balanced and nuanced analysis on an issue as volatile as immigration. So it’s tremendously refreshing to watch the new, three-hour PBS documentary series, “Homeland: Immigration in America,” which begins airing across much of the country this week. The episodes will also be available on a website created for the program, at www.explorehomeland.org. Wonderfully narrated by Ray Suarez of the PBS News Hour, the series does a superb job of tackling most of the big immigration challenges – such as enforcement, jobs, and refugees. But what is unique and fascinating about the series is that it locates these issues in an unlikely place – the state of Missouri. Missouri is not exactly the first state that comes to mind when thinking about the immigration challenges facing the United States. According to the Migration Policy Institute’s authoritative MPI Data Hub, Missouri ranks 41st out of the 50 states in the immigrant percentage of the total population – just 3.9 per cent. In first place California, over 27 percent of the population is immigrant. But the local PBS affiliate that produced the program – Nine Network of Public Media in St. Louis – started with the hunch that the whole story could indeed be told without leaving the state. And they were right. While the total numbers are still small, the immigrant population in Missouri has nearly tripled since 1990. An episode on refugees looks at survivors from conflicts in Africa and the Middle East struggling to remake their lives in St. Louis. The episode on enforcement profiles Kris Kobach, a Kansas City lawyer and radio host who has played a key role in the harsh enforcement legislation passed by states like Arizona, Alabama, and Georgia. But it also looks at migrants fighting deportation (including some unprecedented footage of the deportation flights overseen by the Department of Homeland Security), and at local police trying to win trust in immigrant communities where some fear arrest and deportation. For the segment on jobs, the producers looked in depth at the town of Monett, Missouri, which is a big employer of immigrants in the local Tyson Foods chicken slaughtering plant, and at the farms in the region trying to fill seasonal jobs through the H-2A temporary worker program. Immigrants there have revitalized the town, but also caused a fair bit of trepidation among older residents and raised new challenges for the local schools. And the documentary also follows the story of a local Taiwanese student who is working for a PhD in immunology at Washington University in St. Louis, and trying to navigate complex U.S. immigration laws to figure out whether she will be able to stay in the United States after she graduates. The stories are interspersed with analysis from a range of immigration experts that sets the local issues in a broader context. Full disclosure – I am one of the talking heads quoted at times in the episodes. But don’t watch it for that. The people in the show – the immigrants themselves and the local citizens who are wrestling with how to react to their growing numbers – speak for themselves. In an election year, where the complexities of an issue like immigration are inevitably bludgeoned out of the debates, that is a great service.

by Edward Alden July 26, 2012 Renewing America

Education

Caterpillar, Unions, and the Falling Middle Class

Why is Caterpillar, a company that made a record profit of $4.9 billion last year, demanding that unionized workers in its Joliet, Illinois factory agree to a six-year wage and pension benefits freeze? Quite simply, because it can. That underscores the enormous challenge facing those who are trying to figure out how, as Francis Fukuyama put it in last Friday’s Financial Times, to “stem the loss of rich-world middle class jobs and incomes through forms of redistribution that do not undermine economic growth or long-term fiscal health.” Caterpillar, General Electric, and others are among the big multinational companies that are currently expanding employment in the United States, which is a good thing. But the new jobs they are creating are usually modestly paid (often in the range of $12 to $15 an hour), and the companies are determined to keep a tight lid on future wages and benefits. For much of the 20th century, redistribution in the United States happened largely through the private sector. Employees, many of them organized by labor unions though many not, were able to demand higher wages and benefits because corporations had few alternative sources of labor and were usually able to pass some of the higher costs on to their customers. Government played a role through the tax system, but the big redistribution programs – such as Social Security, Medicare, and Medicaid – largely benefited those not in the labor force. Globalization changed that dynamic. First, the lowering of trade barriers created intense new competition for U.S. corporations. Those saddled with overly expensive labor contracts, such as the Big Three auto companies, found themselves unable to compete with overseas rivals. Secondly, an expanding global market for investment allowed U.S. companies to set up operations overseas and then export back to the United States or to other markets. The new trade competition forced American companies to cut costs; the new investment openness gave them an effective means for doing so. The result was a huge shift in the balance of power that strengthened global corporations like Caterpillar and weakened the bargaining leverage of their employees. Since the 1970s, corporate after-tax profits as a share of GDP have risen, with several wide swings depending on economic cycles, from an average of about 5 per cent to more than 10 per cent in 2010, the highest since records began in 1929. Wage and salary income, in contrast, has fallen steadily from close to 55 per cent of GDP in the early 1970s to less than 45 per cent today. It has been more or less impossible for even the most powerful and well-organized unions, like the International Association of Machinists currently on strike against Caterpillar in Joliet, to resist these trends. The companies have too many options – from bringing in temporary workers to simply shutting down and moving the work somewhere else. Often the threat of relocation is enough to persuade unions to accept concessions. The effects of this reverberate through the broader economy. U.S. multinational companies have historically paid some of the highest wages in the country, 25 percent above the overall average. If wages at the biggest and best companies are fixed or falling, wages will be tamped down at smaller companies as well. And of course the general weakness of the economy and high unemployment are also suppressing wages, exacerbating trends that existed long before the 2008 financial crisis and its aftermath. At the moment, it is hard to see how the dynamic will change in ways that are more favorable to employees. Mostly what we have seen is rhetoric, such as the feckless presidential campaign “debate” over outsourcing. Even serious and important initiatives like the Harvard Business School’s Competitiveness Project are relying primarily on moral suasion to persuade companies to be better corporate citizens and undertake initiatives to strengthen the U.S. workforce and the broader economy. The medium-term answers all involved some combination of rising employee skills and productivity that make the United States a more attractive location for high-wage work. But as long as companies hold all the bargaining cards, most of those gains will go to shareholders and management rather than to higher wages and benefits. And the problem of how to create and sustain middle-class jobs will remain unsolved.

by Edward Alden July 23, 2012 Renewing America
Education

Foreign Languages and U.S. Economic Competitiveness

Americans are lousy at learning foreign languages. We all know the historical reasons – the United States was long a big, largely monolingual country with a fairly self-sufficient economy. U.S. economic and military might (and that of the British Empire before) spread the English language across the world, so that English became the global second language and the de facto language of international business. But in the latest Renewing America Policy Innovation Memorandum, A Languages For Jobs Initiative, scholars from the Center for Applied Linguistics argue that Americans in the future are unlikely to get by so well on English alone. Nearly 30 percent of the U.S. economy is now wrapped up in international trade, and half of U.S. growth since the official end of the recession in 2009 has come from exports. The fastest-growing economies in the world are not English speaking. And as Brad Jensen of Georgetown University has shown, the most promising export sector for the United States is business services, which often requires face-to-face interactions with foreign customers. As the authors write: “[F]uture U.S. growth will increasingly depend on selling U.S. goods and services to foreign consumers who do not necessarily speak English.” Yet American students are woefully unprepared to do that. Foreign language education is actually on the decline in the United States. Only 15 percent of primary schools teach foreign languages, even though it is much easier to learn one by starting very young. Even in middle and high schools, foreign languages are generally optional and not required for graduation. Not surprisingly, just one in five public school students currently studies a foreign language. The authors argue that the priority of foreign language instruction in education must be increased. This includes proper assessment and accountability, and the development of more immersion programs, which have been shown to be the most effective form of language instruction. The United States should take advantage of its large immigrant population of foreign language speakers to expand and strengthen immersion programs. Some states are catching on, following Utah which has long been a leader in immersion education. Last year, Delaware Governor Jack Markell launched the Governor’s World Language Expansion Initiative, which will create new immersion education opportunities. Governor Markell argues that multinational companies in his state – of which there are many thanks to business-friendly laws and regulations –can’t find the foreign language speakers they need. Three Delaware school districts will launch Chinese and Spanish programs next year, and state has set a goal of 20 immersion programs with over 2,500 students by 2015 and over 6,000 students by 2020. Increasing overseas tourism to the United States – which has been an Obama administration priority – has also underscored the importance of language skills. With many more Chinese and Brazilian tourists, for instance, hotels and retailers will pay a premium for staff with the language skills to communicate with those visitors. While much of the competitiveness discussion concerns the performance of the U.S. economy, the real issue at stake is the competitiveness of future generations of Americans. U.S. companies will find the personnel they need to compete in export markets, and are perfectly happy to hire English-speaking foreigners rather than foreign language-speaking Americans. Americans who speak English alone will increasingly face a disadvantage in competing for some of the best jobs in business. Certainly language is only one part of the set of skills that U.S. students will need to thrive in an increasingly global economy. Study abroad, foreign travel where possible and familiarity with other cultures are all important parts of the mix. But the ability to communicate in one or more foreign languages is clearly key. Foreign language instruction needs to stop being an afterthought in the K-12 curriculum and instead become a top priority alongside math, science and the humanities.

by Edward Alden June 26, 2012 Renewing America
Education

A "Languages for Jobs" Initiative

See CFR Senior Fellow and Renewing America Director Edward Alden's accompanying blog post here. The promotion of foreign language instruction should be a national priority. In an increasingly competitive international economy, a workforce with more market-relevant foreign language skills is a strategic economic asset for the United States. Yet foreign language education is on the decline, particularly at the primary level when foreign languages are best learned. Federal policy is not stepping up. Recent federal efforts to promote foreign language instruction are not designed to have a broad-based impact and have been focused almost exclusively on achieving national security goals. U.S. economic competitiveness goals are equally important, but there are no comprehensive efforts to promote the instruction of languages, including Mandarin Chinese, Portuguese, German, and Hindi, in local school districts where foreign language education must occur to improve proficiency more broadly. The federal government should launch an interagency "Languages for Jobs" initiative, with funding levels at least equal to security language programs. As part of the initiative, the Department of Education would develop foreign language education accountability metrics and primary-level immersion programming that leverages the country's existing multilingual population. The Economic Case for Foreign Language Skills The global economy is shifting away from the English-speaking world. Since 1975, the English-speaking share of global GDP has fallen significantly and will continue to fall. The Chinese economy will surpass the U.S. economy in size soon after 2030. Latin America (Spanish- and Portuguese-speaking) and South Asia (Hindi- and Urdu-speaking) are growing strongly as well. Exports have accounted for half of postrecession U.S. economic growth, and future U.S. growth will increasingly depend on selling U.S. goods and services to foreign consumers who do not necessarily speak English. In a competitive global export market, there will be a premium on foreign language skills and international competency. It is an old adage that you can buy in any language, but you must sell in the language of your customer. Business services such as banking, insurance, and architecture are the fastest-growing U.S. export sectors, and selling these services requires employees able to work effectively in non-English-speaking countries. In a survey of large U.S. corporations conducted ten years ago—when exports were less critical for the U.S. economy—30 percent responded that personnel with insufficient international skills prevented their companies from fully exploiting business opportunities. Eighty percent believed their sales would increase if they had more internationally competent staff. The widespread use of English as the leading global second language, especially in business, does not offset the disadvantage faced by monolingual Americans. A 2011 survey of more than one hundred executives in large U.S. businesses found foreign nationals have an advantage in competing for international jobs. Three-quarters agreed that language skills made it easier for foreign nationals to work in the United States than for U.S. nationals to work overseas, leaving Americans at a significant disadvantage at a time when U.S.-based multinational companies are growing faster abroad than at home. The Foreign Language Education Deficit The U.S. education system is not producing workers with sufficient broad-based foreign language proficiency. Foreign language instruction is often delayed until age fourteen and is optional. Unlike nearly every other content area, there are no national assessments in place for measuring foreign language proficiency. A smaller percentage of primary (15 percent) and middle (58 percent) schools offer foreign language courses compared to ten years ago—which is particularly worrying since foreign languages are often best learned at younger ages. The share of high schools offering foreign language courses fortunately remained relatively steady at over 90 percent. But still, as of 2008, just one in five public school students was studying a foreign language. Compare this to U.S. economic competitors: For the vast majority of developed countries, foreign language education begins between the ages of five and ten, is mandatory, and is systematically tested along with core subjects. In Brazil, mandatory English instruction begins at eleven, in China and Korea at eight. Even English-speaking countries like the United Kingdom and Australia are lowering the age at which foreign language instruction begins and bolstering proficiency requirements. The foreign languages offered in U.S. schools are also not well matched to the fastest-growing foreign markets. Spanish instruction is by far the most common, constituting 72 percent of all K-12 foreign language enrollment. Spanish-speaking Latin America's global market share is indeed growing. But an economic case can be made for more diverse language instruction. Brazil's economy is and will continue to be larger than Mexico's, yet fewer than fourteen hundred public school students a year are enrolled in Portuguese courses. India's economy will rival that of all of Latin America in coming decades, but even fewer (less than one hundred) public school students are learning Hindi. Mandarin Chinese, the language of what will be world's largest economy, is still only offered at 4 percent of high schools. The federal government is failing to address U.S. market-relevant foreign language capacities. Non-security-related language programs have been budget casualties. Funding for the Foreign Language Assistance Program (FLAP), the only Department of Education program devoted to primary and secondary foreign language education, was terminated when its small budget of $26 million was zeroed-out in budget cuts after the 2011 debt ceiling agreement. Meanwhile, federal accountability pressure to test core subjects (e.g., the No Child Left Behind Act) has pushed state and local governments to funnel resources away from untested foreign language education. To the extent that state and local governments receive any outside help for foreign language education or programming, it tends to come not from the federal government, but from foreign entities, such as Germany's Goethe Institute or China's Hanban Confucius Institute. Yet there are clear signals that the American public wants new investments in foreign language programming. Seventy-five percent of Americans believe all students should know a second language. A majority supports foreign language graduation requirements for high school. In a positive trend, the number of immersion schools—which are highly effective at producing foreign language proficiency—has steadily increased over the past forty years as other forms of foreign language education have fallen off. Recommendations Given the need to increase the foreign language capacity of the U.S. workforce, the federal government must reverse cuts to existing foreign language programs. Beyond that, the federal government should develop a comprehensive national strategy for assessing and improving foreign language instruction. The National Security Language Initiative (NSLI) of 2006 continues to support foreign language education for national security purposes through the Departments of State and Defense and the Office of the Director of National Intelligence. But NSLI programs, many of which are limited to summer sessions, are not designed to support or coordinate foreign language education in local school districts. A broader approach to strategic foreign language instruction should be developed and should focus on languages that are critical for U.S. economic competitiveness, including Mandarin Chinese, Portuguese, German, and Hindi. The federal government should lead a broad-based national Languages for Jobs initiative, spearheaded by the Department of Education and supported by an economic competitiveness rationale to invest in the foreign language skills of young Americans. Specifically, the initiative should be funded at levels at least on par with what has been spent on the National Security Language Initiative, or roughly $100 million annually, which would support a combined effort across federal departments, including Education, Commerce, Labor, State, and Defense. Positive results in foreign language education outcomes will most likely be achieved through an interagency effort that combines funding opportunities, resources, and staff around shared goals, outreach, and implementation. develop and promote the use of common accountability measures for foreign language teaching and programs. Once the assessments are in place, all foreign language programs receiving federal funding should be focused on demonstrating adequate levels of progress in students' language skills. Teaching quality and learning progress in foreign languages should be evaluated with the same rigor as math, reading, and the sciences. develop and promote a foreign language immersion program that is integrated into core content learning and begins at the primary level. After initial startup costs, immersion programs are no more costly than other language instruction programs. Support for teacher training should be included, since immersion language instruction is a more demanding skill. promote the use of untapped heritage language speakers in foreign language immersion programs. Approximately one-fifth of American children live in homes where languages other than English are also spoken, but heritage language retention is so limited that proficiency is regularly lost between the second and third generations. Foreign language immersion programs can leverage heritage speakers in the classroom while also helping them retain their language skills. Conclusion Facing a global economic challenge, the United States must build a multilingual workforce prepared to thrive in today's world market. Doing so requires that the federal government engage in a comprehensive, interagency national initiative to improve foreign language education in the United States.

Policy Innovation Memorandum by Terrence G. Wiley, Sarah Catherine Moore and Margaret S. Fee June 26, 2012 Renewing America
Education

Obama, Romney, and Immigration: The Indefensible Status Quo

No one expects any congressional action this year, or probably anytime soon after that, to end the enormous waste of the current immigration system. But it is becoming increasingly obvious that the leaders of both parties are in a morally indefensible position. And that makes positive change more likely than it’s been in a long time. Let’s take the Democrats first. The Washington Post had a fascinating piece of in-depth reporting last weekend on how President Obama during his first term dealt with the political pressure from two big liberal constituencies – gay rights activists and immigration reformers. On immigration, the article showed the president at his worst – defensive, short-tempered, quick to blame others, and reflexively backing positions quite at odds with his own stated values. He came into office promising in his first year to pass reform legislation that would legalize many of the 11 million or so undocumented immigrants; instead he has presided over the highest number of deportations, at roughly 400,000 per year, of any president. How indefensible is this? Well, the next day the Post ran another big story, this one on a Guatemalan-born girl in Virginia named Heydi Mejia, who had been brought here illegally by her parents when she was just five years old. Like her peers at Meadowbrook High School in Chesterfield, she was supposed to be celebrating graduation from school; she had ended the year with awards from the National Honor Society and the school’s AP program. But unlike her peers, she was set not to go on to college but instead was scheduled in a few days to be deported along with her mother. The Obama administration’s “prosecutorial discretion” policy makes it quite clear that young people like Heydi should not be deported. But as the reformers have repeatedly told the administration, such people are still being removed from the country regularly. Unless, that is, somebody shines a big light on the case. In this case, the Post did, and the next day the Department of Homeland Security suspended Heydi and her mother’s deportation for a year. Here’s a rule of thumb: if you can’t defend a policy when its consequences are made public, it’s not a good policy. How about the Republicans? Presidential candidate Mitt Romney campaigned hard on the issue in the primaries, accusing the Obama administration of being too lax on enforcement, and calling for still harsher measures that would persuade illegal migrants to “self-deport.” But on Monday, former Florida governor Jeb Bush rebuked Romney’s stance, calling for Republicans to adopt a “broader approach” that does not rely solely on enforcement. A Bush protégé and potential vice-presidential nominee, Senator Marco Rubio, is expected to introduce shortly a new version of the DREAM Act which would permit many young people like Heydi Mejia to remain in the United States Bush's interjection was followed by a strong statement Tuesday from a broad coalition of conservative evangelical groups, including Focus on the Family, calling for a policy that allows illegal migrants living in the United States “to come out of the shadows” and “begin the process of restitution.” They explicitly rejected the Romney policy of “self-deportation.” Rev. Samuel Rodriguez, president of the National Hispanic Christian Leadership Conference, was quoted as saying: "This is the tipping point to finally convince Republican operatives that they must redeem the narrative on immigration reform in order to be a viable party in America's political landscape in the 21st century.” The Romney campaign response was interesting. Instead of defending self-deportation, a campaign spokesman said: “Governor Romney believes that legal immigration is a source of strength for America and that to protect legal immigration we must address illegal immigration in a civil but resolute manner. As president, Governor Romney would work with any groups on a reform that strengthens legal immigration, secures our borders, respects those who are waiting patiently to enter legally and ensures that we do not encourage further illegal immigration." Perhaps it’s a coincidence, but that sounds an awful lot like the position that Republicans like Jeb Bush have long been advocating. I served as project director for the 2009 CFR Independent Task Force on U.S. Immigration Policy, which was co-chaired by Gov. Bush and former Clinton chief of staff Mack McLarty. Rev. Richard Land, president of the Ethics and Religious Liberty Commission of the Southern Baptist Convention, was also a member of the Task Force. We called for legislation that: • Reforms the legal immigration system so that it operates more efficiently, responds more accurately to labor market needs, and enhances U.S. competitiveness; • Restores the integrity of immigration laws through an enforcement regime that strongly discourages employers and employees from operating outside that legal system, secures America's borders, and levies significant penalties against those who violate the rules; • Offers a fair, humane, and orderly way to allow many of the roughly twelve million migrants currently living illegally in the United States to earn the right to remain legally. Those three pillars are still the basics of any sensible immigration reform. Certainly, none of this is likely in the near term. But the discussion in both parties marks a growing recognition that the status quo on immigration is indefensible, which makes long overdue change a real possibility.

by Edward Alden June 13, 2012 Renewing America
Education

A Long-Term Fix for Long-Term Unemployment

The gaps in the U.S. social safety net are about to become very large holes. For the past several years, lawmakers have repeatedly voted to extend unemployment insurance benefits, most recently in February. But in many states those benefits are running out, leaving the long-term unemployed with choices that range from bad to awful. This moment was inevitable, and should compel Washington to re-think how it supports jobless workers. As my colleague Matthew Slaughter, a former member of the White House Council of Economic Advisers, has explained, the current unemployment insurance system was designed in the 1930s and has remained largely unchanged. It is premised on the idea that unemployment is the consequence of cyclical downturns, and that government’s role is to provide short-term support during recessions for workers who will likely be rehired in the same industries (and usually by the same employer) when the economy recovers. That system has been inadequate for some time in the face of more intense global competition and faster technological change that has left more workers without the skills they need to find new jobs. The Pew Fiscal Analysis Initiative recently charted historical long-term unemployment (those out of work a year or more). The chart below shows that the problem had already become somewhat bigger over the past thirty years, with the numbers of long-term unemployed remaining higher for longer after each recession. But it really spiked following the recession in 2008-2009, sending the numbers up to record levels of more than 30 percent of all unemployed. Even that huge figure is understated. The number of workers collecting Social Security disability payments has jumped 22 percent, or some 1.6 million workers, since the start of the recession, taking them out of the workforce or off the unemployment rolls. Nearly all of those will never return to work. The biggest problem for the unemployed remains sluggish growth and lack of demand. For every available job, there are still more than four unemployed workers, and that gap will not shrink unless the economy grows faster. But the current system does very little to help the long-term unemployed prepare for those positions that are open. There are currently some 3.7 million jobs openings in the United States, a number that has increased steadily since the official end of the recession in 2009. Both critics and supporters of unemployment insurance are in agreement that the program should do more to retrain workers for those jobs. Slaughter and Harvard University economist Robert Lawrence have argued for replacing the current unemployment insurance scheme with an “American Adjustment Program” that would bring together the current unemployment insurance program with elements of the Trade Adjustment Assistance program and current job training programs. Their scheme, which was laid out in greater detail in work done with former Bush trade official Grant Aldonas, has four main components: • A “training stipend” that would be available to every unemployed worker to help cover the cost of retraining. • Tax deductibility both for companies and individuals that invest in retraining. • Continued health insurance for all unemployed workers. • A “wage loss insurance” program that would encourage older workers to find new jobs at lower wages by replacing up to 50 percent of their lost wage income for two years. The obvious objection to such a program is the cost, but by any reasonable measure it is surprisingly affordable. They estimate the annual additional cost at $22 billion; spending on the current unemployment insurance program is expected to be $99 billion in FY2012, and hit $159 billion in FY2010. The additional proposed spending is small, and looks smaller still if we take into account the big losses to the economy from long-term unemployment, losses felt through reduced incomes, lower productivity, and shrunken output. Further, they propose a simple, logical way to fund the scheme – replace the current regressive payroll tax in which lower paid workers proportionately bear a much greater burden with a flat assessment of roughly 1.3 percent on all wages. That would be a fairer payroll tax that would actually reduce taxes for lower-wage workers. With the possible exception of wage loss insurance, which remains controversial, none of this should be all that difficult politically. Liberals would welcome the additional support for unemployed workers, and the scheme would address conservative worries that unemployment insurance discourages people from returning to work. With the political appetite for another short-term fix waning, it is time for a longer term solution.

by Edward Alden May 29, 2012 Renewing America
Education

Peter Thiel and the Great College Debate

Should more Americans go to college? I would have thought the answer is an unequivocal yes. The evidence is overwhelming that college graduates have lower unemployment rates, earn far more money, and are generally healthier and happier than those with a high school education or less. And young people seem persuaded. College enrollment rates for high school grads have risen from 44 percent in 1989 to nearly 60 percent last year. Peter Thiel, the billionaire co-founder of Paypal, disagrees. And his willingness to spend millions of his own fortune to pay bright young people to drop out and start businesses earned him a national audience Sunday night on 60 Minutes, the country's most-watched news program. My first reaction was to agree with entrepreneur-scholar Vivek Wadhwa, who has lambasted Thiel for selling young people on the fantasy of hitting the entrepreneurial jackpot without an advanced education. “If you don't even have a bachelor's degree, if you don't even have basic education, basically you are beyond hope,” Wadhwa told CBS. After listening to Thiel’s argument, however, I think he has a point. While he's utterly wrong on the virtues of dropping out (the fortunate few like Mark Zuckerman excepted), he's right that the compact between what college promises and what society is delivering is increasingly frayed. Here's what the deal is supposed to be: parents sacrifice to help their kids through college because that is the surest road to advancement. But over the past two decades, the road has become a lot bumpier. Numbers compiled earlier this month by the Economic Policy Institute (EPI) show that the hourly wage of recent college graduates, after rising sharply at the end of the 1990s, has fallen back. Starting wages for college grads today are only slightly higher than in 1990, or just under $17 an hour in 2011 dollars. Unemployment is near 10 percent and underemployment nearly 20 percent. And new graduates are entering the job market with much greater debt burdens. As tuition continues to rise, two-thirds of students are borrowing to earn bachelor's degrees, up from 45 percent in the early 1990s. Wadhwa rightly points out that the average debt load on graduation -- $23,300 – is not excessive, but that may only begin to count the costs. A Washington Post piece Tuesday, provocatively titled "Is College Too Easy?" noted that the time students spend studying has dropped steadily over the years. But the main reason seems to be that more and more students are holding down part-time jobs to finance their education, reducing the time available for classwork. In short, students are paying more, borrowing more, and getting less. Thiel's response to these trends is to give up on higher education and encourage young people to take up plumbing or roll the dice on launching a business. That's the wrong response. If the EPI numbers for recent college grads are depressing, the picture for those with less education is positively Dickensian. Recent high school grads entering the workforce have an unemployment rate over 30 percent and an underemployment rate over 50 percent, and those lucky enough to find jobs are earning less than $10 an hour. As I know from playing the board game Life's Twists and Turns with my kids, with some luck you can make it big as an actor or an athlete. But the odds of winning the game go way up with a college degree. Neither am I persuaded, however, that the right response is just to rally around the colleges as they are currently doing business. Sure, the elite institutions can keep raising tuition, confident that student demand far exceeds supply, the brand value of a Harvard or Stanford justifies the expense, and their large endowments will open doors for some who would otherwise be turned away. But state universities cannot play their traditional role as ladders of opportunity if funding continues to be slashed. California, which has the nation’s flagship public system, has seen state funding cut precipitously; it is now at the same level as 1997-1998, when there were 73,000 fewer students. And both state schools and smaller private colleges need to get creative at doing more with less. This could include expanded online learning, greater specialization (not every school can and should be offering the full range of courses in all subjects) and new faculty hiring models that mix superstar professors with hands-on instructors. There are some fascinating initiatives under way, though the biggest ones such as EdX and MITx are led by the elite universities. Peter Thiel clearly struck a chord when he said on 60 Minutes that college education is a “bubble.” Too many young people are overpaying for a product whose returns are increasingly uncertain. But the product is one that both individuals and American society badly need. The challenge is to make it much better, and more affordable, than it is currently.

by Edward Alden May 22, 2012 Renewing America
Education

Visas, the Economy, and 9/11: Will Evidence Trump Fear?

Will Congress finally act to solve some of the problems with visa issuance that have plagued the United States over the past decade?

by Edward Alden May 18, 2012 Renewing America
Education

Business, Immigration, and Political Dysfunction

I had not intended it this way, but this will be my second item in just a week on political dysfunction in Washington. I participated yesterday in a superb forum on the prospects for immigration reform, hosted by former Treasury Secretary Bob Rubin and organized by the Hamilton Project at the Brookings Institution. The presentation featured an extremely thoughtful presentation by economist Giovanni Peri proposing a pilot project for a scheme to auction visas, which has the potential to regulate more effectively demand and supply for new immigrant workers, and to raise extra revenue from the companies that benefit. It deserves serious attention. I moderated a panel that featured former Senator Chuck Hagel, National Council of La Raza President Janet Murguia, UNITE HERE President John Wilhelm, and Glenn Hutchins, the co-founder of Silver Lake, a big private equity investor in technology companies. I wanted to come away encouraged. While immigration reform is a poster child for political dysfunction, Wilhelm was optimistic about the political winds gradually shifting in favor of some action. Murguia was far less dismissive than I thought she would be of Senator Marco Rubio’s recent proposal for a DREAM Act that did not provide an automatic path to citizenship for undocumented young people brought here illegally as children. Instead, while criticizing some aspects, she welcomed it as a proposal worthy of discussion. But what stuck with me were comments made by Glenn Hutchins of Silver Lake, who works closely with the technology companies that are scouring the world for talented engineers. Wilhelm, who played a key role in bringing the union movement around to support immigration reform, commented that one of the reasons immigration has been stuck in Congress is that business has simply not made it a high enough priority. “The business community has got to put its political muscle where its economic interests lie,” he said. Hutchins response was both witty and inciteful, and worth quoting at length: “The vast majority of business people have this quaint notion that their role is to run their business and the politicians’ role is to run government. And coming to Washington and being told the reason why government is not running well is because business is not involved is, well….. an interesting set of insights. We do come. The typical business person comes to Washington with the notion that this is something we ought to do. They are then treated sort of like the bright eighth grader on the school trip – what a cute little kid, tap him on the head – ‘don’t you realize that nothing gets done it this town. Just go away and let us wallow in dysfunction, and by the way leave a campaign check at the door.’" “There is a very broad and growing view in the world of people who get things done,” he continued, “that nothing gets done here, and it’s largely not worth your time. “ If Hutchins is right, and I think he is, there should be alarm bells going off everywhere. The issue is not whether business has enough influence in Washington – compared with any other organized group, it probably has too much. The problem is that even business, with all its political muscle, can’t get Washington to move on whole range of issues. Even where business and unions have come together -- in supporting expanded infrastructure investment, for instance -- nothing happens. And the reality is that many U.S. businesses need the United States less and less. Marschall Smith, general counsel at 3M who spoke on an earlier panel, said the company has simply been unable to attract the number of advanced scientists and engineers and skilled technicians it needs in the United States. “The result is we’re being forced to export R&D to China and India, notably, and elsewhere around the world because we can get the scientists there. And of course if the scientists and the labs are there, the low-skilled jobs spring up when we open a factory. We’re an American company being forced overseas when we could do a better and more efficient job in the United States, because we simply can’t get the people.” It is comforting to hope that political stasis in Washington has few costs because, after all, the private sector has always been the more dynamic part of American society. Comforting, but wrong. Business can now go and be dynamic somewhere else while Washington “wallows in dysfunction.”

by Edward Alden May 16, 2012 Renewing America
Education

Policy Initiative Spotlight: Can Elite Education Be Free?

Congress this week has been debating the growing debt burden faced by American college students. Today’s “Policy Initiative Spotlight” examines the recent expansion of free, online university education led by several elite institutions. Renewing America contributor Steven J. Markovich examines some of the newest endeavors, which could multiply the impact of America’s universities and help to control costs for students. Despite an underperforming K-12 education system—the subject of the CFR Independent Task Force on U.S. Education Reform and National Security—U.S. universities continue to lead world rankings; in 2011, fifteen American universities placed in the top twenty-five according to U.S. News and World Report. High performing universities improve U.S. competitiveness by strengthening the workforce and anchoring innovation clusters. Several premier institutions have launched initiatives to use online education to spread their lessons far beyond campus. In May 2012, Harvard and MIT debuted edX, an open source non-profit joint venture. EdX will offer free online classes and advance research on how technology can help on-campus and online students learn. Each university will contribute $30 million and course materials. While the coursework is free, the universities are contemplating charging for certificates of course completion. EdX is based on the technology of MITx, MIT’s online education platform launched in December 2011. MITx was designed to enrich the education of full-time students, and allow millions more to learn online. EdX built upon this approach to create student-paced learning through video lectures, collaborative online labs, and online testing with real-time feedback and student ranked Q&A’s. The edX platform is open-source and other institutions are invited to join. The universities say they believe that online education will “never replace the traditional residential model of undergraduate education.” They don’t perceive a significant brand and market cannibalization risk, which is understandable given their single digit acceptance rates. But EdX already faces competition from for-profit startups backed by Silicon Valley venture capitalists. Udacity has its roots in Stanford’s 2011 experiment to put its introductory computer science course online; 160,000 students signed up and 23,000 students passed. In-class attendance dwindled from 200 to around 30 students as on-campus students opted to learn online. Sebastian Thurn, who co-taught this course, left Stanford to co-found Udacity. Thurn’s intent is for Udacity to become a free premier online university: “The biggest problem [in higher education] is cost. Student loans are going up 6 percent a year whereas the return on that education is going down. We’re clearly in a bubble.” Regarding Udacity’s potential impact, he said: “You could get an entire computer science education for free right now,” he said. “You could take your tablet with you, you learn on the bus, and take these minutes and learn how to learn for a lifetime.” Another for-profit startup is Coursera, which offers free access to course content from affiliated universities: Stanford, Princeton, University of Pennsylvania, and University of Michigan. Coursera raised $16 million in venture capital investment in April 2012. Co-Founder Andrew Ng explained that “[Raising capital] “allows us to focus for a while on building an exceptional platform without having to worry about revenue.” While both Coursera and Udacity offer free course materials, neither has explained their ultimate revenue model. Observers have speculated that they could charge for access to supplemental learning materials or to provide certification of achievement. While these efforts will improve access to college and graduate level learning, there are also similar efforts to improve K-12 education. Since 2006, the non-profit Khan Academy has provided free online videos covering a wide range of topics, from algebra to the French Revolution. In March 2012, TED launched its educational initiative, TED-Ed, with original educational videos designed to spark curiosity. The initiative entered its second phase with a website that allows teachers to create customized online lessons. Using the free “Flip this Lesson” service, teachers create can custom lessons for any video on TED or YouTube. Teachers can track the performance of individual students through multiple choice quizzes and free response questions, and target classroom instruction to reinforce difficult concepts.

by Edward Alden May 11, 2012 Renewing America