Enough with the education olympics

Wendy Kopp, CEO of Teach for All, suggests in the Wall Street Journal that we call off the education arms race.

I agree. She’s referring to viewing education system effectiveness, as measured by standardized test scores across countries as a competition.

We should be happy that other countries are doing so well. Isn’t that good for us to live in a more educated world? Perhaps we might even be able to learn something from them, if we care to.

Or maybe we’ll just discover that they’re really good test takers.

The Wall Street Journal also offers this piece today about the education arms race, which says:

Since 1998, the Program for International Student Assessment, or Pisa, has ranked 15-year-old kids around the world on common reading, math and science tests. The U.S. brings up the middle—again—among 65 education systems that make up fourth-fifths of the global economy.

I have a few other thoughts to consider.

How well do PISA scores on reading, math and science correlate with prosperity now and in the future? Perhaps there’s a threshold that is good enough and, for whatever reason, the other countries are, to their own detriment, are far surpassing that.

For years I’ve heard that U.S. doesn’t have government health care and it results in sub par medical care performance vs. countries that do.

We do have government education, yet that still seems to result in sub par performance. So, maybe whether the government provides something isn’t the key to success. Maybe there are other factors.

Though, I must say that I do see as one bad outcome of our education system our inability to be able to put such results in proper perspective.

The road to hell is paved with…what again?

The Wall Street Journal gave us a timely reminder last week of Friedrich A. Hayek’s legendary Nobel acceptance speech.

An ungated version of the entire speech can be found here.

Here’s a portion of what the WSJ quoted:

To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm. In the physical sciences there may be little objection to trying to do the impossible; one might even feel that one ought not to discourage the overconfident because their experiments may after all produce some new insights.

But in the social field, the erroneous belief that the exercise of some power would have beneficial consequences is likely to lead to a new power to coerce other men being conferred on some authority.

Even if such power is not in itself bad, its exercise is likely to impede the functioning of those spontaneous-ordering forces by which, without understanding them, man is in fact so largely assisted in the pursuit of his aims.

The whole thing is worth a read.

Inconsistency of the Day

A thought occurred to me while I read this Wall Street Journal opinion piece that explains that taxes are high on American corporations. This is despite an earlier GOA report that showed a 12.6% effective tax rate.

It turns out there were two problems with that report. First, it had a small sample size. It was based on one year, 2010. That year saw heavy write-downs (i.e. tax deductions) from the financial crisis, so it was an anomaly. Second, it didn’t include taxes paid to foreign countries.

Another study, with a longer period or 2004 through 2010, showed the total tax rate exceeded 35%.

The thought that occurred to me was this: I wonder how those who tell us that ‘corporations are not people’ feel about corporate taxes. 

My guess is that they don’t want corporations to have a voice in the political arena, but they want to tax the heck out them, which I find inconsistent.

They should realize that corporations are made up of people. Shareholders and employees are people.

While I sort of agree that corporations in the political arena are usually out to use government’s power against us, I think the proper place to fix this is by reducing the power government has, rather than trying to keep the 16 year-old-girl away from the proverbial bad-boy.

I also think that the proper place to tax corporations is at the individual level. Taxing corporations just reduces the transparency of the taxes government is imposing on individuals.

Incentives matter: Work and welfare edition

The Wall Street Journal has a must-read interview with Bob Funk, CEO of Express Employment Services — a $2.5 billion employment services agency. There’s also a good companion piece, Won’t Work for Food Stamps.

Funks covers some key points from a report his company plans to publish on Monday called, The Great Shift.

Here are snippets:

[Funk believes] “anyone who really wants a job in this country can have one.” With 20 million Americans unemployed or underemployed, how can that be?

To land and keep a job isn’t hard, he says, but you have to meet three conditions: “First you need integrity; second, a strong work ethic; and, third, you have to be able to pass a drug test.” If an applicant can meet those minimal qualifications, he says, “I guarantee I can find employers tomorrow who will hire you.”

He thinks the notion of the “dead-end job” is poisonous because it shuts down all sense of possibility and ambition. One of his lifelong themes, Mr. Funk says, is that “a job—any job—is by far the best social program in America and the ladder to success.”

The primary jobs problem today, Mr. Funk says, is that too many workers are functionally unemployable because of attitude, behavior or lack of the most basic work skills. One discouraging statistic is that only about one of six workers who comes to Express seeking employment makes the cut. He recites a company statistic that about one in four applicants can’t even pass a drug test.

“In my 40-some years in this business, the biggest change I’ve witnessed is the erosion of the American work ethic. It just isn’t there today like it used to be,” Mr. Funk says. Asked to define “work ethic,” he replies that it’s fairly simple but vital on-the-job behavior, such as showing up on time, being conscientious and productive in every task, showing a willingness to get your hands dirty and at times working extra hours.

He fears that too many of the young millennials who come knocking on his door view a paycheck as a kind of entitlement, not something to be earned. He is also concerned that the trendy concept of “life-balancing” is putting work second behind leisure.

Funk admits to a prejudice (emphasis added):

“I guess I’m a little prejudiced to the immigrants and especially Hispanics,” he says. “They have an amazing work ethic. They don’t want handouts and are grateful to have a job. Our company has a great success rate with these workers.” This focus on work effort is seldom, if ever, discussed by policy makers or labor economists when they ponder what to do about unemployment. To most liberals, the very topic is taboo and is disparaged as blaming the economy’s victims.

The author of the WSJ piece includes some eye-opening stats to back Funk’s claims. There are 47 million people receiving food stamps, 14 million people collect disability benefits and with unemployment insurance extended to 90 weeks, Funk calls these:

…[the] vast social welfare state programs that have become a substitute for work. There’s a prevalent attitude of a lot of this generation of workers that the government will always be there to take care of them. It’s hard to get people to take entry-level jobs when they can get unemployment benefits, health care, food stamps and the rest.

The companion piece shows the sharp rises in such social welfare programs. The cost of food stamps has more than doubled since 2008 to $83 billion and one in seven Americans receive food stamps. The government spends ‘roughly $40 million a year…to convince to enroll’ in food stamps.

“I’m from the government and I’m here to help”

The Wall Street Journal had two good commentaries on Obama’s latest pitch to use more government to fix problems caused by government — that is, his recent speeches on college education.

1. From Obama State University, this one is a page out of Hugo Chavez’s playbook:

 “We’ve got a crisis in terms of college affordability and student debt,” said Mr. Obama, without a trace of irony at the State University of New York at Buffalo. The same man who three years ago forced through a plan to add $1 trillion in student loans to the federal balance sheet over a decade said on Thursday, “Our economy can’t afford the trillion dollars in outstanding student loan debt, much of which may not get repaid because students don’t have the capacity to pay it.”

Naturally, the President blamed somebody else and demanded more authority over higher education.

Mr. Obama specifically blamed colleges and universities for charging too much. “Not enough colleges have been working to figure out how do we control costs, how do we cut back on costs,” he said. His solution is for the federal government to rate colleges on their effectiveness and efficiency, and then to allocate federal subsidies to the schools that Washington believes are providing the best education at the lowest cost.

Chavez and Obama don’t understand (or admit to understanding) that incentives matter. They distort incentives then blame the problems that result from those distorted incentives the folks who respond to them.

It’s not that colleges haven’t been working to figure out how to control costs (actually, some are, but we haven’t widely accepted the for-profits just yet), it’s that they have no incentive to do so.

Well, Obama is now proposing incentives, I can imagine some will say. To them, I respond, imagine how much credence you would put into a Federal government’s rating system for restaurants. My guess is that no matter what those ratings say, you’re still going to trust your gut and what you hear your family and friends say.

This is also from the article:

Mr. Obama is trodding a well-worn political path. Politicians subsidize the purchase of a good or service, prices inevitably rise in response to this pumped-up demand, and then the pols blame the provider of the good or service for responding to the incentives the politicians created. Think housing finance and medical care. Now President Obama is attacking colleges for rationally raising tuitions and padding their payrolls in response to a subsidy machine that began in 1965.

That’s when the feds launched a program to make college “affordable” by offering a taxpayer guarantee on student loans. Federal grants and loans have been expanding ever since and it’s no coincidence that tuition prices have been rising faster than inflation for decades. This week the White House noted that since the academic year ending in 1983 tuition and fees at four-year public colleges have risen by 257%, while typical family incomes have advanced 16%.

2. Richard Vedder: The Real Reason Colleges Cost So Much

Here’s something I’ve noticed when visiting my own alma mater:

Many colleges, he notes, are using federal largess to finance Hilton-like dorms and Club Med amenities. Stanford offers more classes in yoga than Shakespeare. A warning to parents whose kids sign up for “Core Training”: The course isn’t a rigorous study of the classics, but rather involves rigorous exercise to strengthen the gluts and abs.

Or consider Princeton, which recently built a resplendent $136 million student residence with leaded glass windows and a cavernous oak dining hall (paid for in part with a $30 million tax-deductible donation by Hewlett-Packard CEO Meg Whitman). The dorm’s cost approached $300,000 per bed.

Universities, Mr. Vedder says, “are in the housing business, the entertainment business; they’re in the lodging business; they’re in the food business. Hell, my university runs a travel agency which ordinary people off the street can use.”

My alma mater has a fantastic turf field complex for its students. It has an indoor/outdoor mini water park resort. The dorms look like alpine ski lodges. It has an arena for women’s basketball and one for men’s. The commons area rivals high-end shopping mall experiences. And, yet, they still have the nerve to call me weekly asking for money. No thanks. 

 

Twofer

We get two good opinion pieces in the Wall Street Journal today.

1. Student Loan backfire: Default rates don’t lie.

Whereas credit scores used to be similar for young people with or without student-loan debt, New York Fed economists find a divergence after 2008. “By 2012, the average score for twenty-five-year-old nonborrowers is 15 points above that for student borrowers, and the average score for thirty-year-old nonborrowers is 24 points above that for student borrowers,” they note in a recent report.

If I were running for office, I would promise to give student loan borrowers more loans to help pay off their loans.

2. Michael Saltzman gives an economics lesson to VP Joe Biden.

Advocates of a higher minimum wage arbitrarily selected 1968 as the historical reference point. It’s no wonder: That’s when federal minimum wage hit its inflation-adjusted high point.

How about picking other arbitrary years to track the minimum wage and inflation? If you used 1948 instead of 1968, the minimum wage’s inflation-adjusted value would only be $3.81 an hour. If you chose 1988, the adjusted minimum wage would be $6.50 an hour.

And, if we pick a time before the minimum wage existed, it would be $0. What a distraction. I wish I lived in a world where when someone suggested raising the minimum wage to ‘help’ someone (get votes), everyone just laughed at them.

Jobs Report and Sequester Cuts

I watched the opening of SNL last night, which must have aired originally in February or March, because the first sketch was a President Obama impersonator explaining what will have to be cut from the budget due to the sequester.

My favorite mock cut was the astronaut who said they will no longer have visors in their space suits, so they’ll just have to hold their breath when they do space walks.

That also reminded me of a Wall Street Journal article (though I’m not sure is the original article that I read) this week that made a good point that the jobs report is pretty good a few months after the gloom and doom that was supposed to follow the sequester spending cuts.

(As a side note to WSJ.com editors, it is extremely tough to find an article that is more than day or two old. It’d be nice, especially for the opinion section, if you just had a calendar archive that listed links to the articles that ran on certain days.)

 

Higher-than-inflation challenge

Glenn Reynolds had a nice piece about student loans in the Wall Street Journal yesterday. These two paragraphs reminded me of an observation (that I will turn into a challenge) I’ve had for a while:

Why do students have so much debt? According to a recent study by Mark Perry, a professor of economics and finance at the University of Michigan at Flint, between 1978 and 2011 college tuition in the U.S. increased at an annual rate of 7.45%, vastly exceeding the rate of inflation and the almost-stagnant rate of growth in family incomes.

The difference has been made up by more and more debt. With costs above $60,000 a year for many private schools, and out-of-state costs at many state schools exceeding $40,000, some young people are graduating with student loan debts of $100,000 or more, sometimes much more. A study released last month by Fidelity Investments found that 70% of the class of 2013 is graduating with college-related debt—averaging $35,200.

Yep.

Here’s the observation/challenge:

Name a sector of the economy where prices have consistently grown at rates higher than overall inflation and that does not have government involved to a heavy extent. 

Education (K-12 and college) and health care are two common examples where cost increases have consistently outpaced inflation and both have government — Federal, State and Local — heavily involved.

In sectors of the economy without a great deal of government involvement, we generally enjoy more innovation and lower costs, or at least costs that do not rise faster than inflation consistently.

Unintended Consequences of Work Space Design

Is your office making you unproductive? According the Wall Street Journal and the study they reference, yes.

I’ve lived through this lub-dub cycle a couple of times in my career. More “open” and “collaborative” workspaces is one of the mythic magic potions managers believe will spur a company’s culture into producing stellar growth.

The problem is…it doesn’t work.

In my experience, people will find ways to get some privacy and these days, there are a lot more options to do that. They’ll camp out in a meeting room or go find a quiet corner at the local coffee shop. 

They get less done at work since open spaces create more opportunities for interruptions. I use to sit with two work mates in a tight space. We noticed that when two of us were there, we talked much less than when all three was there. Like Metcalfe’s Network Law, the third person in the network increased the odds that we’d happen upon conversations one or the other would find interesting. 

Often a conversation might start between A and B, then C would find something said to be interesting and jump in. A might even drop out because he found the subject uninteresting. But, having C there, made it more likely that the conversation would continue. 

Beliefs in office layout schemes does produce growth for office furniture makers and moving companies, though.

Additionally, the guests in the Harvard Business Review podcast from April even say that group brainstorming may not be as good or any better than individual concentration.

This, too, is something I have confirmed with my experience where I’ve seen group brainstorming sessions used as domains for folks who like the sound of their own voice. I have, however, seen group brainstorming sessions work well when everyone in the group felt comfortable with each other.

I’m not sure if this would work any better, but what I would like to see work groups within a company have more say in how their space is laid out. There is a lot of resistance to this at most firms, where it is someone’s job to order office furniture and move it. They will argue for efficiency and economies of scale for making larger purchases and never will the benefits of more productivity be weighed against the costs of less efficiency.

Examples of how one company deals with the mountain of policy disincentives

Speaking of the mountain of disincentives we face from policy-makers past and present, this weekend’s Wall Street Journal features an interview with Carl’s Jr/Hardee’s CEO Andy Puzder.

Policy-makers act as if business managers will not respond to their disincentives and end up hurting the very people they are trying to help. Puzder illustrates one such action:

Mr. Puzder also expects fast-food restaurants to deal with ObamaCare by replacing workers with kiosks. “You’re going to go into a fast-food restaurant and order on an iPad or tablet instead of talking to a person because we don’t have to pay benefits for any of those things.”

While Mr. Puzder supports technological progress and the efficiency of tools like the iPad, he laments that “there’s a personal element that you don’t get from machines, and I think you’re going to lose that.” It’s also unfortunate, he says, because fast food is a “great level of job for people to enter the labor force.

The sci-fi geek in me wonders when they’ll come out with RoboCashiers. I’ve seen RoboBlackjack Dealers in Vegas. They are 3D animated ladies on big screen TVs that sense your movement and interact with you. Max Headroom, SIRI and Watson, for $500, can you run a cash register and make small talk? You could probably even program it so that the 3D image that appears would be one that the customer prefers.

I enjoyed Mr. Puzder’s comment on price strategy:

Mr. Puzder’s Journal visit comes while he’s in New York scoping out sites for new restaurants in the city. I ask him how he plans to deal with New York’s sky-high rents, a recent minimum-wage hike and labyrinth of regulations. “I went into a McDonald’s yesterday and a Big Mac combo cost $7.19 for a Big Mac, fries and a drink,” he says. “That’s how you deal with it.”

Here’s Puzder on why he doesn’t prefer building in California:

These days, California is one of the few states where the company isn’t looking to expand. “Like many businesses, we love California and would love to build more restaurants,” he says. But “California is not interested in having businesses grow,”

Consider how long it takes for one of his restaurants to get a building permit after signing a lease. It takes 60 days in Texas, 63 in Shanghai, and 125 in Novosibirsk, Russia. In Los Angeles, it’s 285. “I can open up a restaurant faster on Karl Marx Prospect in Siberia than on Carl Karcher Boulevard in California,” he says.

Mr. Puzder’s favorite California-bites-business story is a law that requires employers to pay general managers overtime if they spend 50% of their time on non-managerial tasks like working the register if they’re short-staffed, “which is what we pay and bonus them to do in just about every other state.” Since managers were filing class-action lawsuits against the company for not being paid overtime, “every retailer in the state basically has now taken their general managers and made them hourly employees.”

The managers hated the change “because they worked all their careers to get off the base to become managers…