Building On Sand

The editors of the New York Times have finally recognized that the economic policies of the last three administrations, founded as they were on increased higher education as the key to economic security, have been built on sand:

Research by three economists — Paul Beaudry, David Green and Benjamin Sand — goes beyond familiar explanations for wage stagnation like global competition and labor-saving technology. Examining the demand for college-educated workers, they found that businesses increased hiring of college graduates in the 1980s and 1990s in adapting to technological changes. But as the information technology revolution matured, employer demand waned for the “cognitive skills” associated with a college education.

As a result, since 2000, many college graduates have taken jobs that do not require college degrees and, in the process, have displaced less-educated lower-skilled workers. “In this maturity stage,” the report says, “having a B.A. is less about obtaining access to high paying managerial and technology jobs and more about beating out less-educated workers for the barista or clerical job.”

The problem with that as a strategy is that the cost of higher education and the way we finance higher education have burdened the new college grads, employed in jobs that don’t actually require college educations and paid commensurately, with high levels of debt which reduces their spending on other things, further slowing the economy. I have some difficuly, however, relating their prescription to their diagnosis:

Increasing the number of high-paying jobs also depends on strategies like enhancing public spending to fix roads and bridges and to hire more teachers, as well as developing new energy and technology industries through government-financed research. Otherwise, the norm may very well be an economy where even college-educated workers cannot thrive.

I, on the other hand, think that fixing roads and building bridges primarily produces jobs that don’t require college educations and hiring more teachers? Please. We’re back to the story of the cat and rat farm.

Mort Zuckerman on the other hand sees things a little differently:

Job losses in the low-wage and minimum-wage category is the critical issue of our day: Too many of the poor are not working full time or at all. Income inequality isn’t so much the problem as income inadequacy. A more robust economy, stoked by growth-oriented policies from Washington, would help produce the jobs and opportunities that millions of Americans need to climb the economic ladder.

A landmark new study by Harvard economics professor Raj Chetty asserts that advances in opportunity provided by expanded social programs have been offset by increased global trade and advanced technology that in turn have limited the traditional sources of middle-income jobs. But there is a simpler reason that the country remains mired in the weakest recovery from a recession since World War II: Government has diminished animal spirits by displaying a hostile attitude toward business.

That attitude is evident in everything from excessive corporate taxes to the incompetence and dishonesty of the ObamaCare rollout. Government is perpetually establishing economic policies and rules that business perceives as overregulation, dampening the willingness to invest—as witnessed by the slowest rate of capital investment in decades on corporate plant equipment and machinery.

but his solution, too, is more education.

I think the solution is more economic activity and that the problem with the present administration’s economic policy is not a “hostile attitude toward business” but a systematic preference for policies that don’t increase economic activity. That includes everything from energy policy to trade policy to tax policy to healthcare policy. It’s not that the administration is opposed to more economic activity but that they want other things more.