The whole area of work and family is different. There is a brewing explosion that will put this area of reform at the center of a Democratic president’s agenda.
The public is ready for America to finally address one of the building contradictions of the new economy: women are now fully in the labor force and are the sole or primary breadwinner in four in ten households with children, yet they continue to carry most household and child-rearing responsibilities and they get little help from businesses or the government. And that is a building scandal that may bring a new Fair Labor Standards Act. The Fair Labor Standards Act of 1938 finally got rid of child labor, established legal working hours, and created a federal minimum wage. This one will have to deal with paid sick days, paid family and medical leave, the right to ask for workplace flexibility without retaliation, protections against discrimination for pregnant workers, and equal pay for women.
Heather Boushey, head of the Washington Center for Equitable Growth, is one of the few economists who understands what is possible. She writes, “Together, this collection of new policies can lay the foundation for a new strategy for economic growth as well as a new broadly progressive political coalition that can be as transformative and as durable as FDR’s New Deal.”91
The reform agenda would have to include a national effort to achieve universal access to child care. A new Child Care Act like the one Nixon proposed would create federally supported child care centers for lower-income families and subsidies and tax credits for the middle class. President Obama and congressional Democrats have already proposed tripling the child care tax credit to help working families.92
Some of the new proposals have financing arrangements that try to minimize the burden on employers or to share the costs. Under the proposed Healthy Families Act, for paid sick days employers and employees pay into a fund, just like unemployment insurance. In one study cited by Boushey, nine out of ten employers said the requirements for employees having paid family leave had no effect or had a positive one. However, with the major business organizations so opposed to paid family leave and so successful in stopping any new reforms for two decades, a Democratic president may try something radical and more akin to Europe. He or she could propose a Working Family Fund, financed from general or dedicated revenue. That may actually be the game changer that pushes business to come on board.93
The agenda would also include the Paycheck Fairness Act sponsored by Congresswomen Rosa DeLauro that ensures equal pay for men and women, which came within two votes of becoming law. It puts discrimination against women on the same level as discrimination based on race, with the same remedies.
At some point that might include affirmative action policies that begin to break the huge predominance of men in the big technology companies, tenured university positions, and CEOs. Companies such as Google, Facebook, and Apple, The New York Times editorial board points out, seem to mainly employ white and Asian men, and the paper calls for much more affirmative action. With women holding only 16.9 percent of corporate board positions, two dozen American companies, including Bloomberg, DuPont, and DeLoitte committed in 2014 to appoint boards that are 30 percent women. Unfortunately, in studies in Norway, where this became the law, there was no increase in female CEOs, no decrease in the gender gap, and no expansion of family-friendly policies. At some point very soon, America will be contemplating a more comprehensive approach to affirmative action.94
Equal pay and equal opportunity have to be the entry points, though other aspects of the new economy have discriminatory effects. Women dominate in jobs that pay well under the medium income and women are more likely to work part-time because of family demands, just to name two. Much of the agenda for working women and working men is focused on providing more support and protections on those jobs.
Finally, Democratic presidents will remind people of the absolute centrality of the Affordable Care Act that barred charging women more than men for insurance, got rid of preexisting conditions, provided free health preventive services, and created a marketplace where individuals can buy subsidized insurance. With almost a third of Americans employed in consultancy, freelance, and small businesses, with women more likely to be working part-time, the new subsidized marketplace allows them to carry their insurance with them, independent of any particular company. It is a huge change that is part of the new agenda for working women and working men.
National commitment to renew American education
The next president will need to mobilize the country behind a fundamental change in how America educates its next generation and how it changes access to higher education. The reforms will be very big and opposition will be great, though as with new tax policies, we have a pretty good idea what the toolbox looks like to make a big difference. It is critical that the president rally the country around the need to renew a country that has periodically done radically new things with education.
I think what is happening with education rises to the level of “crisis,” though I am aware that talk of the “American education crisis” has been en vogue for more than half a century. Josef Joffe’s The Myth of America’s Decline recalls the 1950s “Johnny can’t read” campaign. A simple Google search for “American crisis in education” produces 378 million entries.
Joffe is right to point out that America is more vast and diverse and is home to huge immigrant and minority populations and that first- and second-generation immigrants score lower than their native-born counterparts for reasons that have nothing to do with the quality or resources at that school. If you control for these kinds of demographic and cultural differences, the United States rises to number seven on the Program for International Student Assessment (PISA) rankings.95
But to say that America’s ranking is understandable does not change the fact that America with all its demographic and cultural changes is falling off the educational charts with real consequences for people and the growth and competitiveness of the economy. These shortcomings begin at the earliest grades, and faltering college education and graduation rates are undermining social mobility and pushing down working-class incomes.
America used to lead the world with its most educated population, though that is a distant memory now according to McKinsey’s Global Institute Report—and that needs to become part of the public consciousness. Among America’s preretirement population, 41 percent had a college or tertiary education, and that put America on the level with Israel and Russia and in third place in the global ranking. That is twice the level of college penetration for that age group in all the OECD countries. But our Millennials, those now twenty-four to thirty-five years old, have the same level of college education as the baby boomers. There have been no gains. The 41 percent with college education is just above the OECD average today for that age group. Great Britain has reached 45 percent with that level of education; Japan is at 56 percent and South Korea at 63 percent.96
With tuition averaging $8,655 at public universities and $29,000 at private colleges, college has become part of the problem rather than the solution. For people from families in the top fifth of earners, the cost of college has gone up from 6 to 9 percent of family income from 1971 to 2011. That is significant, though for those in the bottom fifth, it has jumped from 42 percent to 114 percent of family income.97
The cost has stalled American’s progress into college, and that has only widened the gap between the top and the bottom. Between 1979 and 2012, the gap between a family with two college graduates and a family of two high school graduates has grown to $30,000 a year. Less than a third of American adults now achieve a higher level of education than their parents, and in that measure of mobility, we trail the aspiring world. And of course, those who get to college have built up $1 trillion in student debt that saps them as consumers and delays them marrying and forming households.98
Those widening gaps alone warrant the term “crisis.”
U.S. students scored 487 on PISA, and that is at the center of the discussion. That is
below the OECD average and well below Canada at 527 and Germany at 513. I will not tell you what Shanghai, Singapore, and Hong Kong scored, because they were special cases, but South Korea? Its score was 546.99
But I do not think that it should take the Shanghai comparison to mobilize for this crisis. That score is kind of a marker for everything that could be done differently.
A plan for renewing American education has to start at the earliest age based on the convincing material in chapter 5. That means a huge increase in support for the WIC (women, infants, and children) programs and for any of the effective early-childhood education programs, as well as support for universal pre-K education. These policies were in the liberal economists’ agenda because all the research confirms we must invest at as early an age as possible.
When it comes to K-12 education, America is not without a lot of guidance on how to make major improvements, according to the McKinsey Institute. Between 2003 and 2011, education reforms in Massachusetts, New Jersey, Texas, and Maryland produced huge gains, and their students’ test scores were right up there with Germany’s. But Arkansas, Hawaii, and New Mexico also made big gains, as well as Washington, D.C., though from a much lower base.100
The next president would be well served to set aside all the built-up conventional wisdom and demand empirical results from the reformers, and as a start, embrace what has worked. Common Core has so much promise and the teachers helped create it, so the states and foundations should be committing big resources to getting it implemented right. Student testing is out of control, and as Marc S. Tucker, author of a report on education accountability, wrote on teacher evaluation, “There is no evidence that it is contributing anything to improved student performance.” The regime of testing, however, comes with a price: teachers feeling less professional, contributing to high teacher turnover.101
The same goes with charter schools. Some, such as Knowledge Is Power Program (KIPP) schools, are achieving results. New Orleans’s charter schools seem to be successful in the aftermath of Katrina. But there are plenty that are underperforming. In Chicago, impressively, it is the public schools rather than the charter schools that have produced the striking gains in the past two years.
If one looks at the McKinsey Global Institute recommendations or The New York Times editorial board’s exploration on effective teaching, you start with paying teachers much more and treating them as well-trained serious professionals, including moving away from teachers’ colleges and raising standards at universities. That is the lesson from Finland that has had the best results and from McKinsey’s global comparison. In the United States, a high school teacher gets paid 72 percent as much as all college graduates, putting American teachers on a par with Italy and the Czech Republic. In all OECD countries, it is 90 percent—meaning teachers’ salaries nearly match those of other college graduates. German teachers earn slightly more. But teachers in South Korea are making 130 percent and earn a lot of respect, along with their students’ impressive performance.102
McKinsey recommends further that America expand apprenticeships and make its nondegree programs more effective for meeting the skill needs of companies. Probably the most important goal though would be to make students more successful in the existing two- and four-year programs, where graduation rates are pathetic. It would help if many more of those graduates were in STEM specialties. And it would help if more cities followed Chicago’s example and abolished college tuition for graduating high school students with at least a C+ average.103
That should be a model for other cities as leaders think through the role of metropolitan areas in building the momentum for change.
To get abrupt changes in education, the federal government needs to take up President Obama’s plan to make the first two years of college free across the country. His plan has the potential to help some 9 million students, though they have to maintain a C+ average, be in school half-time, at least, and make “steady progress” toward a degree.104
Obama’s proposal is just a wedge into the huge issue of college affordability that is undermining Americans’ presumptive access to higher education and stalling America’s presumed social mobility. Between 2008 and 2012, state funding for public colleges was cut by 5 percent or more in 26 states. Over the last decade, tuition costs at public schools have surged almost 80 percent, and unpaid student debt has doubled since 2007. That has left 40 million Americans with student debt, averaging $32,500 per student. Senator Elizabeth Warren described student debt as an “economic emergency that threatens the financial futures of Americans and the stability of our economy.”105
Bold reforms have to include the cancellation or refinancing of student debt to free a generation to get on with its life choices as well as the reform of college costs so America can get back on track as a country of opportunity.
America is not without guidance from our own experience and globally on how to address its education crisis. It is waiting for leaders to make it their cause.
A national commitment to a fuller economy and full employment
The United States is formally committed to achieving full employment, as well as price stability, and that is embedded in U.S. law. Founding the U.S. Federal Reserve was one of the major achievements of the progressive era, and the Fed was given the dual mandate to minimize inflation and maximize employment. President Harry Truman introduced the Employment Act of 1946 with the purpose of revising the mandate to include “full employment,” though conservatives successfully weakened the law. In 1977, however, President Jimmy Carter and a Democratic Congress passed the Full Employment Act that made that goal the law of the land.
In fact, the country has only achieved acceptable gains in income and reduction in poverty when the country was at full employment in the late 1990s. While the American economy is growing at a rate that impresses the world, it could operate at a higher level that pushes companies to operate at fuller capacity, brings many more people into the labor force, reduces unemployment, and raises wages.
Larry Summers and Paul Krugman point out that we only got close to these goals when aided by banking, stock, and housing bubbles. There is growing recognition across ideological perspectives that the financial crisis wiped out a huge amount of economic value comparable to the amount of spending in the world wars, and economic output is falling endemically short of projections and capacity. The economy is on a trajectory 14 percent short of the precrisis trend and the IMF has warned countries globally that potential output in the developed countries will slow to 1.6 percent between 2015 and 2020. While demographic trends could play some role explaining this slowdown, the dominant factors are rising inequality, stagnant wages, and unemployment that produces insufficient demand, as Martin West confirms.106
The result may indeed be the “secular stagnation” that the Commission on Inclusive Prosperity now treats as settled science. Larry Summers co-chaired the commission with Ed Balls who led the British Labour Party’s fight against austerity. Highlighting the dramatic decrease in public investment over the last five years, the commission presses leaders to show “political courage” and “increase how much we are investing in infrastructure to raise potential and actual gross domestic product.” They recommend $100 billion a year of public investment over ten years, surprising Robert Kuttner, editor of the liberal journal The American Prospect, who described their proposal as “some surprisingly strong medicine.” The commission also accepts Martin West’s conclusion about currency that “the global market for the US dollar is rigged.” The weaker dollar means less employment and a downward pressure on wages, and that is why the commission concludes that the WTO needs to be amended because it has proved so ineffective in limiting currency manipulation.107
A broad range of economists and the IMF have settled on the need for large increases in investment spending for research and development, education, banking that supports small and medium-size businesses, and above all, investment in infrastructure. With reforms that limit politica
l blockages and distortions, they urge the creation of public-private partnerships to finance the modernization of America’s infrastructure to promote greater economic growth and employment.108
Are the country’s elected leaders ready to make the turn from austerity to a much higher level of investment?
Democratic presidents will have to reclaim and revitalize the goal of full employment that tilts the playing field to the advantage of employees. That the last time America really achieved that goal was under President Bill Clinton is good reason to reclaim it. That does send signals about openness to higher inflation targets to the Federal Reserve and Europe. It is also a signal to America’s global companies and Asian powers that America will be energy rich and will dramatically increase investment in education and infrastructure to renew the country. It would incentivize American companies to build and create American jobs. And most important, it would push up income gains from the bottom and middle to give the American middle class the purchasing power to get the engines moving.109
13 THE STATE OF THE UNION
The era of radical, progressive reforms at the turn of the twentieth century made possible America’s ascent and claim on exceptionalism. It disrupted the Industrial Revolution, which was just that. The steam engine and portable power produced a surge in human productivity and economic growth not seen since the beginning of time. Waves of immigrant families left impoverished parts of Europe, as well as Mexico and Asia, to work in America’s mines, railroads, and factories. They moved increasingly to the burgeoning cities and tenements, where living and working conditions were scandalous. With industrialists pushing for longer hours and lower wages, families figured out new ways to survive, and unions led strikes that were mostly crushed by the police and the army.
The frontier and immigrant experience produced an individualistic and egalitarian ethos, yet the new industrialists ruthlessly drove out competition and created legal monopolies that enabled them to fix higher prices. They bought off government officials at every level. The industrialists won high protective tariffs that pushed out foreign competition. All of this came at the expense of farmers and workers, who made the industrialists fabulously wealthy. This was rightly called a Gilded Age.
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