The Price of Civilization: Reawakening American Virtue and Prosperity (26 page)

The crisis is the worst for youth, especially minority youth, aged sixteen to nineteen in the labor force. The key
long-term
jobs strategy must therefore be educational attainment and skill formation. In general, this should entail the goal of universal high school completion, a 90 percent or higher continuation rate to college or vocational school, and a 50 percent or higher continuation rate to a bachelor’s
degree. By 2020, at least half of nineteen- to twenty-three-year-olds should be on their way to a bachelor’s degree. We can agree with a recent congressional advisory panel that “America’s global competitiveness depends on the ability of our high school graduates to earn at least a bachelor’s degree.”
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For students who have already dropped out, the goal should be a targeted effort to bring such youth up to at least a high school equivalency diploma and then on to a community college or vocational school. A tight labor market will not suffice: those kids lack the skills they will need to function for the next forty years in the labor market, not just the next business cycle.

Bolstering the skills of the U.S. labor force is the core long-term solution, but the jobs crisis is pressing in the short term. What can be done about the 9 percent unemployment rate? Business recovery will make a modest dent, perhaps lowering the rate to 7–8 percent, or 10–12 million workers, with almost 10 million more suffering from hidden unemployment (having withdrawn from the labor force or working very few hours per month).
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For those workers, the solutions depend on circumstances. Millions of young people currently unemployed should not be in the labor force at all. They should be finishing high school, vocational school, community college, or a bachelor’s degree. Their problem is lack of financing for education and the pressing need to keep food on the table right now. A short-run measure, therefore, would be to increase public subsidies for a return to school of at least 1 million to 2 million of today’s unemployed young people under age twenty-five, cutting the unemployment rate by around 1 percentage point as a result. The budgetary cost would be on the order of $15,000 per student per year, or $15 billion to $30 billion in total. Remembering that the gross domestic product is $15 trillion per annum, we see that the added outlays would be on the order of 0.1 to 0.2 percent of GDP.

Another part of the short-term solution, which can actually blend with the longer-term benefits, would be increased job sharing with shorter working hours. Today’s full-time workers in America spend around 1,700 hours per year at work, roughly 200 hours or five
weeks more per year than most of their European counterparts. If work hours were diminished by 5 percent, for example, the same total work hours could be parceled among 5 percent more workers. This is not merely a short-term remedy, though it could serve as that; it is also part of a long-term reform to help Americans rebalance work and leisure.

The sharing of work through reduced work hours and more employment has been under way, highly successfully, in Germany. The German government rearranged various social benefits (e.g., unemployment compensation) to promote a downward adjustment of work hours rather than number of workers during the latest downturn. The German unemployment rate was held down by around 1 percentage point or more through job sharing. This approach has not been explored in the United States, where adjustments are left wholly to firms and the brunt of the downturn has been felt not in work hours but in number of workers.

European countries’ active labor market policies also include much greater outlays than in the United States on job retraining and career services to match workers and jobs. Given the amount of flux in the world economy and technology, old jobs are not coming back. Middle-aged workers are often bereft of the information communications technology (ICT) skills they need for the new economy, and job training is needed to restore their employability. Yet such efforts are costly. Many European countries spend on the order of 1.0 percent of GDP on active labor market policies programs, compared to just 0.2 percent of GDP in the United States. All these measures—youth subsidies to return to school, retraining of older workers, and job matching services—would require another 0.5 percent of GDP per year.
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Macroeconomic measures to boost aggregate demand, including more fiscal stimulus and quantitative easing by the Fed, should be put aside. They are no solution for America’s job crisis and threaten to destabilize the financial markets and undermine the country’s long-term budget solvency. Yet increased public spending on infrastructure,
properly financed, will have a kind of “stimulus” effect, not through aggregate demand per se but through the increased employment of relatively low-skilled construction workers. The challenge vis-à-vis infrastructure, described below, is to recognize that the necessary projects are not shovel-ready; they will come on line in the course of a decade, not a year.

Breaking the Poverty/Education Trap

I’ve repeatedly emphasized a dismal reality of America’s education system: the failure of low-income and even middle-income kids to find a successful path to a bachelor’s degree.
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Many poor kids drop out of high school. Others finish high school but can’t surmount the financial barriers to begin college. Many others start college but can’t finish, dropping out because of rising debts and the need to work. All along the path from preschool to the bachelor’s degree, a stark income gradient prevails: poor kids are left behind in a society in which individual households and local communities, rather than the society as a whole, bear the brunt of educational costs.

As a result of the local financing of education, the variation in spending per pupil between richer and poorer communities is vast. When public school districts within a state are arrayed according to outlays per student, the per student outlays of districts at the 95th percentile of spending are often twice the outlays per student at the 5th percentile of spending and a full 50 percent higher than the median outlays. In my home state of New York, for example, the median school district spends $16,000 per student, while the district at the 95th percentile spending level provides $29,000 per student.
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Poor children in many cases will need even greater than average outlays to help overcome the severe liabilities of growing up in poor neighborhoods, late starts in learning, and fewer opportunities to learn at home from parents with low educational attainments (and often single-head households).

A major federal function in education should be to help supplement the financing per student in lower-income districts and then to spend the money in effective ways, including on innovative educational programs. Currently, federal financing of primary education accounts for roughly 8 percent of total financing of primary and secondary education, $50 billion of $584 billion in the 2006–2007 school year.
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There are roughly 10 million school-aged kids living in poverty. Suppose as a very rough illustration that their education is supplemented—through vouchers, support for charter schools, extracurricular activities, and other means—on the order of $5,000 per pupil per year to improve their school, home, and neighborhood conditions. That would require a total budget of roughly $50 billion per year, doubling the current federal outlays for primary and secondary schools and adding roughly 0.3 percent of GDP to the budget. This is only the roughest of guesses of what is needed, but it does offer a sense of the scale of additional education funding that might be sought at the primary and secondary level.

Various estimates have been made for the incremental financing of higher education needed to raise the share of young people completing a bachelor’s degree. Currently, around 30 to 35 percent of all young people complete a bachelor’s degree. With an annual age cohort of around 4 million per year, that means roughly 1.2 million to 1.5 million bachelor’s degrees per year. Suppose we aim for an additional 1 million degrees per year, enough to ensure that 50 to 60 percent of each cohort achieves a bachelor’s degree. McKinsey has recently estimated that at the current cost of higher education per student, federal funding of tuition would need to rise by roughly $50 billion per year, or 0.3 percent of GDP, above the current outlay of $300 billion per year.
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In the initial years, part of this funding should be used to help 1 million to 2 million of today’s unemployed youths under twenty-five to return to school for a bachelor’s degree.

Even with more overall education funding, of perhaps 0.5 to 1.0 percent of GDP per year, the exact pathways to educational improvement remain fraught with uncertainty and will require experimentation,
innovation, and lots of learning from best practices. One current fad is to put the lion’s share of the blame on poor teachers and then to attack teachers’ unions as coddling bad teachers. This is yet another example of a naive yet alluring “magic bullet,” when the problems are more complex and require several types of interventions. Attacking teachers’ unions is simple and inexpensive, but something doesn’t quite fit. The evidence is overwhelming that many kids on their way to dropping out before a high school diploma are already off track by fourth grade. Their problems in that case are not particular teachers but the overall circumstances of their lives. As a recent report summarizes:

Most future dropouts begin to disengage from school during early adolescence, and during the middle grades achievement gaps often begin to grow. By the time students enter high school, they have one foot out the door and are not prepared to succeed in a rigorous college- and career-readiness high school curriculum. We should start with the feeder middle grade schools to low graduation rate high schools and ensure all students not only stay on track to graduation during the middle grades, but also are engaged in meaningful learning activities that leave them well prepared for high school.
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The reason for the long, slow fuse on high school dropouts seems to be the following:

Dropping out is a process that begins long before a student enters high school. Research shows that a student’s decision to drop out stems from loss of interest and motivation in middle school, often triggered by academic difficulties and resulting grade retention. Research also shows that a major cause of retention is failure to master content needed to progress on time, which in many cases, is the result of not being able to read proficiently as early as the 4th grade.
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The hard charge against teachers’ unions seems misplaced for other reasons as well. Teachers’ unions are not major hindrances in high-income suburbs, only in low-income schools. The unions have become a convenient scapegoat in urban areas because they divert attention from the real ills of urban poverty. Moreover, busting the unions seems on the surface to promise lower costs and higher quality. This is just one more magic bullet that distracts us from the hard, consistent work that we need to do to raise the quality of education for all children, and especially poor children.

Yes, we certainly need innovation in educational delivery and in ways to promote and ensure teacher competence. The best charter schools are providing new and innovative models (though charter schools overall have a mixed track record).
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It seems clear, though, that innovation will be best achieved through a high level of trust among school administrators, teachers, and the community, a kind of trust that can be achieved whether the teachers are in unionized public schools or nonunionized charter schools. Teachers’ unions will participate in this renovation and upgrading of education when they are partners of reform, not its victims.

Investing in Early Childhood

Even before first grade, however, we must also attend to the needs of the youngest and most vulnerable members of society, children ages zero to six. America is failing millions of young children every step of the way. Trying to make up for those failures starting after age six is far more expensive and less successful than starting at birth. As the Nobel laureate James Heckman and many of his colleagues have shown, the highest returns to human capital come from investing early, at the start of life.
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Yet instead of investing, we are leaving a large proportion of our kids to suffer a lifetime of adversity caused by growing up in poverty.

Our kids are the most vulnerable and poverty-ridden group today.
It wasn’t always like this. A half century ago, the elderly were the social group with the highest rate of poverty, with 35.2 percent of those above sixty-five living below the poverty line in 1959. Then came the expansion of Social Security and the introduction of Medicare. The poverty rate of the elderly plummeted to 25.3 percent in 1969, 15.2 percent in 1979, 11.4 percent in 1989, and 9.7 percent in 2008. The pattern for children, however, has been a different story. In 1959, the poverty rate for children under eighteen was 27.3 percent. The rate fell to 14 percent in 1969 but then began a long-term climb to 16.4 percent in 1979, 19.6 percent in 1989, and 19.0 percent in 2008. One in five of America’s children now grows up in poverty.
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Most of us don’t appreciate the horrendous costs of early childhood poverty; they are beyond our intuition, unless we become far more mindful of the poor. The biggest scientific finding of recent years in human development is the vital role of the earliest years of life, from pregnancy through age six, the period known as early childhood development (ECD). The early childhood years are the foundation for all that follows. When mothers are healthy and properly nourished during pregnancy, when childbirth is safe, and when the young child is properly nourished, provided with quality health care, raised in a safe and nurturing environment, and afforded the chance to learn and socialize in preschool, the child is likely to reap lifetime benefits of better health, higher school attainment, and higher labor-market earnings. When, on the other hand, the child is born underweight; raised in a dangerous and stressful environment; subjected to environmental hazards of pollution, noise, and other threats; and precluded by poverty from preschool and quality child care, the consequences can be disastrous, not just in childhood but for decades onward. Early childhood undernourishment, for example, can lead to chronic poor health in adulthood and greatly reduced productivity at work.