Don't Send Your Kids to College

Everyone from Occupy Wall Street to those who occupy the White House have noticed the widening of the gap between rich and poor.  It has fueled resentment throughout the country beginning with the TARP bailout of the Too Big To Fail banks and the tone-deaf tendency among its recipients to continue to pay multi-million dollar bonuses to their executives.

There will always be people who get rich on Wall Street. The problem isn’t that bankers make too much money and the solution is not for the government to redistribute wealth. 

The greater challenge is the economic prospects of the middle class.  A new study by the Organization for Economic Cooperation and Development (OECD) concludes, “with manufacturing and certain low-skill tasks increasingly becoming automated… the demand for information-processing and other high-level cognitive and interpersonal skills is growing”.  Throughout the 23 industrialized economies included in the study, “literacy, numeracy and problem solving skills” are lacking.  By now, we shouldn’t be surprised that the United States ranked 21 out of 23 in these critical skills. 

A few weeks ago, I wrote about manufacturing in the United States (The Ford Fusion and How the Media Got It Wrong (Again)).  I cited a study by the Boston Consulting Group (BCG) that projects that the US will again be a global center for manufacturing due to lower costs of labor, energy and transportation.  But, it’s not a bed of roses.  Among the risks cited by BCG is the skills gap among American workers. 

But, what skills are we talking about?  Yes, it’s true that our primary and secondary schools are failing us.  But, would fixing that problem solve the larger problem of a skills gap?

Don’t look to the government, the school board or the teachers’ union for the solution.  If you’re the parent of a school aged kid, the place to look for a solution is the mirror.  Start by second guessing an ingrained assumption.  Sending your kid to a four-year college will not guarantee him or her a good job.  College grads now handle our customer service complaints, check us in at the Marriott and help us setup our iPhones in the Apple Store.  None of those jobs are high paying nor are they the first step on the corporate ladder to the executive suite.  And, they don’t pay enough to raise a family or pay off student loans.

To solve the skills gap, we need to expand our idea of what constitutes an education.

Corporate executives can find all the engineers, financial analysts and marketing professionals they need by sending their recruiters to the top universities.  And, they do.  There is a well-established process by which this type of recruiting has been taking place for the last 60 or 70 years.  So, if your kid is an A student, by all means, send them to the best university you can afford. 

But, finding employees with the skills to support computer networks, assist on a medical research project or operate a CNC machine is a greater challenge.  None of these professions truly require a four-year degree.  They require technical skills coupled with a work ethic and personal habits valued by employers. 

The answer to this challenge will spring bottoms up from companies working with local governments and institutions like community colleges. 

In Texas, Houston Community College provides training and certification to work on oilrigs to satisfy growing demand in the energy industry.  In Minnesota, Anoka-Ramsey Community College works with local manufacturers to provide the specific training needed to work in a modern factory -- geometric dimensioning, process control and measuring tolerances.  A non-profit institution, Corporate Voices for Working Families has developed a set of best practices – a blueprint, if you will – for employers to work with local colleges and community colleges with a goal of increasing employment among graduates.

College tuition is increasing 8% per year, well more than inflation and certainly more than real wages, which have remained flat for more than a decade.  Parents are right to question the value of a degree that leaves them or their children saddled with debt.  But, we shouldn’t expect the solutions to come from Washington or the state capital.  Industry will drive the demand for training and education to close the gap.  Competitive enterprises will develop the programs to satisfy their needs.

It all starts with the students, the job seekers.  They must take responsibility for demanding the skills necessary to get a good job with strong career prospects.  They must have the support of those who pay most of the bills for their education – their parents. 

Blaming institutions of government for their failures will not get your kid a good job.  Taking responsibility for the outcome, discovering what employers want and getting the training and education you need, will.

WHO WILL LEAD?

Hey, Congress! You Are Asking the Wrong Question!

The brinksmanship in Washington has a lot of people upset (including me).  But the reasons differ depending upon where you sit and what relationships you have with the federal government.  Indeed, not everyone is upset.  A client told me he was in the middle of an IRS audit when the government shut down.  He wasn’t upset when the auditors vanished. 

A conservative friend of mine is upset with the direction of the Republican Party.  He quoted Napoleon over lunch.  In his view, Obamacare will collapse of its own weight and Republicans would be wise to let it.  “Never interrupt your enemy while he's making a mistake. That's bad manners,” quipped Napoleon.

However, Wall Street Journal economics editor David Wessel extols the virtues of Obamacare in an Op-Ed piece called “Obamacare – A Game Changer in the Making?” 

The Economist tries to elevate the debate a bit, pointing out “when you are brawling on the edge of a cliff the big question is not ‘Who is right?’ but ‘What the hell are you doing on the edge of a cliff?’ ” 

Meanwhile, Joshua Green asserts that “Republicans Are No Longer the Party of Business” in Bloomberg Businessweek.  Green starts with an anecdote about a Tennessee businessman whose company makes furniture.  He says, “It’s as if House Republicans are playing suicide bomber with the U.S. economy.”  People who make furniture are affected by a slow down in government-funded mortgages. 

None of them are asking the right question. 

Why is the government in the mortgage business?  For that matter, why are they in any business?

One could challenge a lot of things our government does.  The government is the largest landowner in the nation.  By some estimates it owns approximately $128 Trillion of real estate and mineral rights. 

Sell 10% of it and our debt problem vanishes.  Sell another 10% and no one pays taxes for the next three years.

The federal government also distributes between $10 Billion and $30 Billion in farm subsidies each year.  Originally intended to provide support to poor farmers who might again suffer the trials of the Great Depression and the Dustbowl, it now provides support to absentee landowners who are millionaires many times over.  The bottom 80% of recipients gets an average of $587 per year. 

Try to eliminate the subsidies and you’ll run into a buzz saw of mostly Republican congressmen who fight to protect the economic interests who send them back to Washington every two years.

Changing this paradigm doesn’t help to resolve the current budget and debt ceiling crisis.  However, it does go to the core of some foundational principles.

Americans take a lot for granted.  We expect the water from our faucets to be potable, the electric power grid to be reliable and the transportation systems to be safe.  We expect our military to be strong, our economy to be prosperous and our institutions to protect us from ourselves.

We have the luxury of those expectations because of the last 150 years of prosperity.  Yet, we have lost track of what got us here. 

The principles of economic freedom – predictable policy, rule of law, strong incentives, reliance on markets, limited role of government – are no longer on the minds of those who govern.  So, corporate interests have adapted.  In a world where lobbying for favorable tax and regulatory treatment can have a dramatic effect on your bottom line, big businesses benefit by focusing on Washington.  Interrupt that activity and the muddle that is the media somehow draws the conclusion that “Republicans Are No Longer the Party of Business”.

In the lingua franca of today’s political environment, the term economic freedom sounds conservative and Republican.  However, since WW II, the violators have come from both parties.  Starting in the 1960s, Presidents Kennedy, Johnson, Nixon, Ford and Carter approved a succession of laws, regulations and restrictions that violated the core values of the economic system that underpins our economic strength.  Perhaps no violation was more egregious than Nixon’s imposition of wage and price controls in 1971. 

An America that transforms itself from a free market juggernaut to a government that funds its favored interests will not maintain its economic leadership.  Instead, we will continue to be mired in the current slog of low economic growth rates and expansionist monetary policy. 

A reversal of that course will tread on the entrenched interests of big corporations who have benefited from the results of their influence on electoral outcomes.  Yet, that is what’s necessary to restore economic growth, the strength of the middle class and continued American hegemony.  The only question is…

WHO WILL LEAD?