Thursday, June 19, 2008

It's An "Educated-Take-All" Economy

In an interview with The Wall Street Journal, Barack Obama said that he was trying to put together tax and spending policies that dealt with two challenges. One is the competition from rapidly growing developing countries, like India and China. The other: the U.S. becoming what he called a "winner-take-all" economy, where the gains from economic growth skew heavily toward the wealthy.

MP: Sen. Obama should take note of the chart above (click to enlarge), from the Brookings Institution study "Education and Income Mobility," showing the Median Family Income (adjusted for inflation) of Adults Ages 30–39, with Various Levels of Educational Achievement from 1964–2005.

In 1964 the median income of households with a college degree or greater was about 1.67 times higher than households with less than a high school degree ($50,000 vs. $30,000). By 2005, that ratio almost doubled to 3.21 for households with a professional degree - their median income was $90,000 compared to only $28,000 for high school dropout families. That is, the real median income of households with a professional degree increased by 80% between 1964 and 2005, and the real median household income of households with less than a high school degree decreased by almost 7%!

For households with a college degree, median income increased by almost 60% between 1964 and 2005 to about $58,000, increasing the ratio of college-educated income to high school dropout income to almost 3:1 in 2005 (from 1.67 in 1964).

In other words, it would be more accurate to say that the U.S. has become an "educated-take-all" economy, where the gains from economic growth are heavily skewed toward the educated. Wouldn't one way for Obama to solve this "problem" be to have the government shut down all American colleges and universities, eliminate all federal funding for higher education, or have the government put limits on the number of students attending college?

There is rising income inequality, but the inequality is due to the increasing gains to education over time. It's not so much that the "rich are getting richer and the poor are getting poorer," as much as it's "the college-educated are getting richer in an Information Age Global Economy, and the high school dropouts are staying the same or getting poorer."

19 Comments:

At 6/19/2008 8:35 AM, Anonymous Anonymous said...

Unfortunately, Senator Obama seems to have Lou Dobbs, Michael Moore and Alan Blinder as his economic advisors. His outlook seems to be largely coloured by ideological bias rather than an objective review of data. He sees what he wishes to see.

The truly scary part is that this man might become the leader of the most powerful nation on earth. His direction appears to be a retreat from engagement in the global economy, trade restrictions, increased taxation, and massive government expenditure.

On the foreign policy front, Obama favors imposing conditions on negotiations with Canada but not on Iran or Syria. Withdrawl of troops from Iraq would create a power vacuum and spurring terrorism in the middle east.

He calls this change. Looks more like catastrophe.

 
At 6/19/2008 8:50 AM, Blogger Walt G. said...

I agree with everything here, but would like to add that trade school is a viable alternative for those less who feel that college is not in their future plans. Who is to say that you can’t do both? I did.

Research your future educational or training options thoroughly. Regardless of personal choices, additional training after high school is necessary for those who hope to thrive in this era of globalization—it’s a pay-for-knowledge world nowadays. Get some.

 
At 6/19/2008 9:22 AM, Anonymous Machiavelli999 said...

anon,

Although I agree that Obama's views and speeches are disturbing, one must always remember when listening to him that he is a presidential candidate in the middle of a heated race. He must say things that appeal to his base and the mood of the nation.

I will calm you all down. His economic team is actually full of very smart, free market capitalist types. Read this nice article for more on his economic team:

http://www.economist.com/world/na/displaystory.cfm?story_id=11551686

But he is a politician. Me, you, Mark and walt g understand how great capitalism. But no matter how much we talk we will never eliminate those of the socialist mold. I actually think Obama's presidency could turn out great. I believe that he is all for globalization and free market capitalims but he can't come out and just say it. He has to qualify it with statements such as the one Mark put up to please his base.

His general strategy is to keep free market capitalism in America but give some handouts to the losers so they will keep quite and get out of the way of people who are actually doing things.

 
At 6/19/2008 9:43 AM, Blogger Marko said...

"x take-all" is a code word for Marxist economic theory. The idea that there is a set amount of resources and that the rich get rich by taking it from the poor. This has long ago been discredited, but we should be sounding the alarm about Obama, who seems to be a Crypto-Marxist. Maybe this is just rank populism, but I still think it is a bad sign.

 
At 6/19/2008 9:51 AM, Blogger Marko said...

To add a bit, this kind of anti-capitalist thinking seems to pervade his speeches. He seems to have a very different view of the role of government than I do, and I don't think it is just to please his base, although all I have to go on are his speeches and his voting record. For example, even in his "great" speech on race, it all came down to the government not doing enough for the poor. Every speech ends up with that message - the government needs to do more to help the poor. I think that the best thing the government can do to help the poor is to get out of the way and increase our (economic) freedom. In our current system, I think the only thing the government should be directly doing for the poor is educating them well, and as usual, of the few things the government should be doing, it is not doing very well. Of course I would prefer to scrap government run education, or at least add vouchers, since the government doesn't run anything very well.

It is a shame that it takes so much effort as an adult to learn these simple things that should be learned by every school child. Just each the federalist papers in elementary school, rather than the green manifesto please!!

 
At 6/19/2008 9:52 AM, Anonymous Eric said...

though i agree witht he edcucation thesis about who shows greater gains in income, one has to understand another factor imbedded in your chart. The size of the mexdian family has been shrinking over the years, both because of a slower birth rate and because as sociaty becomes more wealthy, more elderly are living ont heir own and more young people are living ont heir own. If you adjust that chart for median income per family member, you will see signifigantly larger gains in income over the years across all of the educational elevels. Higher education will still show a greater growth rate, but all levels will have grown more then what your chart shows.

 
At 6/19/2008 10:25 AM, Blogger bobble said...

of course you're correct, the better educated make more money.

it currently costs $100,000 to get a university of california undergraduate degree. who do you think is getting more of these degrees, rich kids or poor kids?

if you guys ever expect globalization to be embraced by the majority here in the US, you ought to be thinking of a way that some of the wealth it generates here is used to get everybody who wants it a first class college education.

it's still (just barely) a democracy here. you need to get the majority on board. free or low cost college education would help a lot.

 
At 6/19/2008 11:48 AM, Blogger OBloodyHell said...

> Unfortunately, Senator Obama seems to have Lou Dobbs, Michael Moore and Alan Blinder as his economic advisors

... along with the ghost of Karl Marx and Al Sharpton and A certain Reverend Wright...

> I agree with everything here, but would like to add that trade school is a viable alternative for those less who feel that college is not in their future plans. Who is to say that you can’t do both? I did.

Walt, not to denigrate your accomplishments, but I strongly suspect that the market for a college-education can only go up in the coming century. Growth in the non-college sector will be stagnant, while that in the new IP&S economy will expand with the new wealth inherent in that sector.

> He must say things that appeal to his base and the mood of the nation.

You know, I hear this said all the time. "The Base" can be ignored now. Completely. What, are they going to vote for McCain? Don't be ridiculous -- Kerry openly supporting Gay Marriage is probably what cost him the election!! What, a gay is going to vote for Bush, who wasn't going to vote for him all along (there are conservative gays, but not a lot)?? Don't be ridiculous. And by emphasizing Gay Marriage, he both energized his opponents and alienated the religious portion of his own base. So he manage to pull defeat from the jaws of victory.

Obama needs to forget the rhetorical crap designed to appeal to his base and start trying to fool the middle into thinking he's NOT the most liberal twit in the entire Senate.

That base is NOT going to vote GOP. Those loons are too far around the bend to even think of it. There's a reason it's called a yellow-dog Democrat.

> I will calm you all down. His economic team is actually full of very smart, free market capitalist types.

Yeahhhh, sure. If anyone here thinks that's right, then ... Wanna buy some land? I can promise -- PROMISE!!! -- a 500% return on it in only 1 year!! Really, really, really!! I've got a land speculator who is determined to buy it from me, but due to financial hardships, I need the money nooooooow, and he doesn't plan to but it from me it for a year. I'll even give you an e-mail address for him, so you can COFIRMMMmmmm it!!!. Uh-huh!!
:-/

I'll go with Obama's voting history, thanks. Anyone left of Teddy Kennedy isn't going to promote rationally conservative policies no matter who he's "hired" solely to make it look like he's a rational conservative.

And to swallow such an obvious crock suggests one meets the classic definition of a "Mark". (sorry, Doc!)

> I actually think Obama's presidency could turn out great.

If he gets elected, in four years it will be a widely acknowledged fact that he is the worst PotUS in all of US History. Worse, even, than Jimmy Carter. The economy will be completely in the toilet, a full-scale depression will likely be in place (certainly the worst recession since the 1930s, worse than the whole of the 1970s). There will have been multiple additional instances of Anti-US terrorism, Iraq will be a shambles (because I will guarantee you that Iran will act with absolute impunity in backing any and every force available to destabilize the fledgeling government there).

If he's lucky someone won't assassinate him before he gets tossed out on his ass with great force in 2012.

Frankly, I truly hope I don't get the chance to say "I told you so".

> although all I have to go on are his speeches and his voting record.

You mean, other than the fact that his mother was an absolute open communist, and his sociopolitical mentors (who introduced him into his current political circles) is an unrequited violent leftist professor and his equally violent leftist wife?

No, not conclusive proof by any means, but... that's damned sure the way to bet.

> it currently costs $100,000 to get a university of california undergraduate degree.

Then don't go to UC (If Cali doesn't have a program like that of Florida, I'd be rather surprised). In Florida, there is the Bright Futures scholarship program, which pretty much all college students can qualify for it (if they can't qualify for some other, better scholarship). It is pretty much a "go to school free" program. Your college-related expenses are cut in half or far less. The worst thing that can happen is you have to pay for your own housing. Not trivial, but that makes it a "how much to work, how much to make a loan for?" question. Even minimum wage work for 10 hours a week can usually pay housing expenses -- FL does not have a state income tax.

Yes, you must graduate from a high school in Florida. This is not hard to arrange, even if the parents don't want to move here for their child's benefit a couple years in advance of graduation.

> you ought to be thinking of a way that some of the wealth it generates here is used to get everybody who wants it a first class college education.

Florida came up with a better solution. We placed a tax on stupidity. We call it The Florida Lottery. It's amazing, there appears to be no shortage of statistically challenged idiots to fund it.

They keep playing it, too -- year after year.

The mind just... boggles.


.

 
At 6/19/2008 12:04 PM, Anonymous Fred said...

Yet somehow Obama and wife are blind to their own economic situation.

 
At 6/19/2008 12:06 PM, Blogger bobble said...

OBH:"Then don't go to UC (If Cali doesn't have a program like that of Florida, I'd be rather surprised). In Florida, there is the Bright Futures scholarship program, which pretty much all college students can qualify for it (if they can't qualify for some other, better scholarship). It is pretty much a "go to school free" program. Your college-related expenses are cut in half or far less. "

i took a quick look at this. what a great program!

this needs to be implemented on a national basis (remember, kids have little control over what state they reside in) so that we can have a whole nation of educated kids.

 
At 6/19/2008 12:55 PM, Anonymous Anonymous said...

What many assume that Obama will turn into Bill Clinton tacking to the centre now that he has secured his base.

This is a very comforting idea but it underestimates Bill Clinton who remains one of the most pragmatic presidents of the last 30 years.

Lifting ideas out of someone's playbook to win an election is standard, but Bill Clinton was willing to assimilate conservative ideas into his mantra like free trade and balancing the budget. He was a horse trader with no fixed convictions.

Many democrats are uncomfortable with the Clintons for this reason. Quite simply, the Clintons are not true believers. "You do what you gotta do" - Bill Clinton

By contrast, we presently have a president with strong personal convictions and beliefs. Everyone enjoying this experience? Everyone enjoying the increased partisanship, ideological rigidity and complete gridlock?

Obama has displayed a strong collectivist ideology which is consistent with his background with Acorn and community activism. The racial anger of Rev. Wright was perfectly acceptable to Senator Obama until his comments were publicly broadcast. Why did it take him 4 weeks to even address the issue and why did he sit in that congregation for 20 years?

While Bill Clinton was far from perfect and certainly made mistakes, he did look outside the ideological box for good ideas.

 
At 6/19/2008 1:16 PM, Anonymous Anonymous said...

I think Senator Obama wants to level the playing field by providing an opportunity for the have-nots (or less educated or poor or whatever) to better themselves.

He reflects the aspirations of today rather than the politics of the past.

I am rather tired of the same old labels being thrown around: James Carville and Karl Rove can hang out on CSPAN and wax poetic.

 
At 6/19/2008 1:46 PM, Anonymous Straw man alert said...

MP you are the master of straw man setups.

 
At 6/19/2008 1:50 PM, Blogger Walt G. said...

obloodyhell,

We have techs making over $100,000 a year in my trade, which is plumbing, steamfitting, heating, air conditioning, and refrigeration. The BLS projects further growth in this field and others like it (electrical, welding . . .).

We may as well face it, some kids are not college material—I’m sorry, but it’s true. All is not lost for them. Diligent research will uncover occupations that will enable these people to thrive in the globalized labor marketplace.

It doesn't matter what you call it, it all boils down to having a skill set that others are willing pay for. You have to work smarter, but not always harder.

 
At 6/19/2008 2:29 PM, Anonymous Eric said...

I agree with walt. Its not necessarily college that is required but rather that you have a skill that is valuable in the knowledge based/ globalized economy. I went to a public tech high school and worked as an electronics technician in a factory for a couple of years before going to college and made $17 bucks an hour right out of high school (probably more like $20 today). Many of my classmates, carpenters, heating techs, computer networking techs, electricians, medical assistants, web designers and so on were all making $15 plus an hour right out of hs. One of my friends ive kept in touch with now makes $25-$30 an hour without a college degree. We need a more wholistic approach to education. Its not just the false dichotomy of college vs hs drop-out. Theres a lot in between that this economy needs... but the key point is you need SOME skill or SOME education that makes your labor valuable. The head of the RI Manufactures Association told me a few years back that the biggest problem they had was finding skilled labor. His words were "We no longer need crate lifters and button pushers. We need skilled labor that we can pay $20 plus per hour." He went on how he personally couldnt find a skilled plastic welder for his business.

 
At 6/19/2008 3:48 PM, Anonymous Anonymous said...

Walt G & Eric,

Agree that there is a shortage of high skilled trades. I doubt that you can look at the Classified without seeing jobs for tool and die. The average age of a welder in the U.S. is 55 years.

Universities tend to use testing that rewards graphoria, ideaphoria and abstract thinking rather than abilities such as 3D visualization and memory for design. These abilities are essential for many skilled trades.

 
At 6/19/2008 7:26 PM, Blogger Jack McHugh said...

Charles Murray has been pointing this out for years; the reality of it was the inspiration for his latest book, "In our hands: A plan to replace the welfare state."

Having denied or shied-away from the truth for years, conservatives and libertarians now must deal with a slick candidate using this new reality to promote highly destructive policies. Sow and ye shall reap . . . That cuts both ways, Senator.

 
At 6/19/2008 7:49 PM, Blogger K T Cat said...

Since educational achievement is correlated strongly with the family structure the child comes from, this graph could also show marital status vs. income.

Whoops! I'm sorry. Did I just bring up morality? My bad. Let's ignore this and just go on to talk about increasing the budget for education.

 
At 6/19/2008 9:40 PM, Anonymous Anonymous said...

Having come from a family of left wing, economic illiterates, I have to agree with you KT cat. Family can be a bit of a setback but it does not predetermine our choices. I say that as a fiscal conservative. One recognizes the logic of the better argument.

Ultimately, it is the individual who chooses to either move beyond the limitations of their family and childhood experiences or chooses to assign blame on others for their shortcomings.

"The fault lies not in our stars but in ourselves" - William Shakespeare

The one of the most remarkable features of humanity appears to be its capacity for resilience. How can one not marvel at Holocaust survivors who chose to fall in love, marry and have families?

 

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