PPI submitted two excerpts from a forthcoming paper, “Taking Competition Policy Seriously: Macro Indicators for Regulators.” Here is a summary of the first excerpt, theintroduction:
Recent work has linked increased concentration to poor macroeconomic outcomes. In this spirit, this paper describes a set of quantitative market and labor indicators that can help competition regulators identify those sectors that are showing signs of impeding growth, overcharging customers, or underpaying workers. Conversely, these same indicators can be used to identify sectors that are exerting a positive influence on growth, benefiting customers, and providing jobs and higher pay to workers.
The paper finds that the tech/telecom/ecommerce (TTE) sector—also known as the digital economy–has outperformed the rest of the private sector on every macroeconomic indicator. Indeed, the evidence suggests that to the degree that there are competition problems in the US economy, they are more likely to be found outside the TTE sector.
The lack of real wage growth has raised the suspicion that corporations are using their market power to artificially hold down employment, pay, and labor share. In particular, the tech/telecom/ecommerce (TTE) sector has received sustained criticism for its “bigness”.
However, we find that the TTE sector has generated significantly faster hours growth and bigger real pay increases since 2007 than the rest of the private sector. We also find that labor share in the TTE sector has risen significantly since 2007, while falling in the rest of the private sector.
These results are consistent with strong competition in the labor markets associated with TTE industries. Competition regulators concerned with labor market monopsony should be looking outside the TTE sector, at industries where employment and real wage growth are weak and the labor share is falling.
The links to the comments on the FTC site can be foundhereandhere.
Over the past 15 years, cities across the country have experienced rapid growth in the number of public charter schools serving their students. In states with strong charter laws and equally strong authorizers, charter schools have produced impressive students gains, especially in schools with high-minority, high-poverty populations.
According to theCenter for Research on Education Outcomes (CREDO) 2015 study on 41 urban regions, the academic gains made by students in charter schools increase with each year students spend at the school. Those who have spent four or more years at a charter gain the equivalent of 108 more days of learning in math and 72 more days in reading each year than their traditional public school peers. In other words, they learn about 50 percent more every year than those with similar demographics and past test scores who stayed in a district school.
Urban districts have spent a lot of time and money trying to compete with the charter sector’s formula for success — autonomy, choice, diversity of school designs, and real accountability. Recently, however, many districts have attempted to replicate parts of it instead. Districts from Boston to Denver to Los Angeles have tried to spur charter-like innovation and increase student achievement by granting school leaders more autonomy.
Over the past 15 years, cities across the country have experienced rapid growth in the number of public charter schools serving their students. When implemented with fidelity, the charter formula – autonomy, choice, diversity of school designs, and real accountability –produces continuous improvements in school quality, with impressive student gains in charter schools serving high-minority, high-poverty populations.
Facing competition from public charters, urban school districts from Boston to Denver to Los Angeles began to look for ways to increase student achievement in their schools. Some attempted to spur charter-like innovation by granting traditional public school leaders more autonomy. District-run “autonomous” schools are a hybrid model – a halfway point between charters and traditional public schools. They’re still operated and supported by district employees, but they can opt out of many district policies and, in some models, union contracts.
The theory behind school-level autonomy is that students can achieve more if those who understand their needs best – namely, principals and teachers, not the central office – make the decisions that affect their learning. While the amount of autonomy afforded district run autonomous schools differs from district to district, quite a few have invested in this strategy. In this report – which is based on analysis of test scores from 2015 and 2016 and interviews with participants in Boston, Memphis, Denver, and Los Angeles – we will examine different models, look at their results, and draw out lessons for other districts considering an autonomy strategy.
This week, Sen. Elizabeth Warren (D-MA) unveiled new legislation aimed at turning American’s largest companies into better corporate citizens.
Under Warren’s “Accountable Capitalism Act,” companies earning more than $1 billion a year in revenues would be required to obtain a new federal corporate charter her legislation would create. Among other things, this charter would mandate directors to “consider the interests of all major corporate stakeholders—not only shareholders—in company decisions,” as Warren wrote in a companion Wall Street Journal op-ed.
There is much to like about Sen. Warren’s approach.
For one thing, she rightly attacks the culture of “shareholder primacy” that has dictated corporate behavior in recent decades. As Warren points out, companies once spent a much greater share of their earnings on workers’ wages and long-term investment. “But between 2007 and 2016,” she writes, “large American companies dedicated 93% of their earnings to shareholders.” Recent evidence of this shift has been the spate of disgracefully large share buybacks in the wake of last year’s corporate tax cuts, which one analysis estimates could exceed $800 billion in 2018. Meanwhile, the modest gains in wages workers have seen have already been wiped out by inflation. Workers would likely indeed be better off if their employers spent more money on wages and less on fattening shareholders’ wallets.
A second appealing aspect of Warren’s approach is her adoption of the “benefit corporation” as a model for corporate reform. As I explain in this PPI policy brief, companies that choose to charter themselves as “benefit corporations” legally commit themselves to corporate purposes other than the sheer pursuit of profit.
Since 2010, 32 states and the District of Columbia have passed benefit corporation statutes, including the corporate powerhouse state of Delaware. Thousands of “double bottom line” companies are chartered as benefit corporations, including such well-known brands as Etsy and Warby Parker. Many further choose to become “certified B Corps,” adhering to the strict standards for corporate responsibility promoted by the nonprofit B Lab.
By organizing as benefit corporations, these companies are directly refusing to kowtow to the tyranny of shareholder primacy. In return, they are legally shielded from shareholder liability for decisions that don’t maximize profit. They also send a signal to consumers and investors looking for socially responsible firms.
Benefit corporations are a relatively new invention, but the already significant growth in these firms and the ready adoption by states of benefit corporation statutes shows the enormous potential of this model as well as the interest and capacity of companies to reform themselves.
It would be a pity if Sen. Warren’s legislation were to wreck this potential.
Set aside what the creation of a federal corporate charter would mean to the states, which have traditionally been the arbiters of corporate governance. From a sheer practical standpoint, corporate culture is not something that can be easily dictated by fiat, and Warren’s legislation will be difficult to enforce. Companies seeking to evade their new obligations will no doubt litigate what the new federal charter means, as will stakeholders – not necessarily workers – who see an opening to claim a stake in corporate spoils. Meanwhile, the workers intended as the legislation’s beneficiaries will still end up holding the bag.
Second, by requiring all companies of a certain size to become benefit corporations, Warren goes too far in dictating how companies should govern themselves. One of the most important principles in corporate law is the so-called “business judgment rule,” under which courts restrain themselves from second-guessing the business decisions a company makes, so long as the board of directors can show it acted in good faith on an informed basis and in the honest belief it was acting in the best interests of the company.
Companies that choose to become benefit corporations are exercising a business judgment that this is the right corporate status for them. Warren’s legislation essentially substitutes the federal government’s business judgment for that of individual companies in deciding how to run themselves. Government has traditionally had a poor track of interfering in the markets this way. Among the unintended potential results are that companies either keep themselves small enough not to trigger the $1 billion threshold (not a good thing when we want companies to grow) or that they leave the country once they reach a certain size.
There are, however, potentially effective ways to tip companies’ business judgment in favor of behaving like benefit corporations, which is the approach we propose in this brief. Rather than mandating companies to behave as we’d like them to see, government should offer an incentive attractive enough that they’ll do so on their own. In particular, we propose a preferred corporate tax rate for benefit corporations, provided they also supply sufficient evidence of their commitment to other aims besides shareholder profit.
A voluntary embrace of corporate responsibility is more likely to be an authentic one. This approach also builds on and accelerates a reform that is already happening, which means more room for innovation and less likelihood of litigation.
Sen. Warren deserves applause for beginning an important conversation about the rights and responsibilities of the nation’s most powerful “citizens.” The introduction of this bill could also serve as welcome wake-up call to the nation’s CEOs – if they do not work soon to reform themselves, reforms will be thrust upon them, and perhaps in ways they will not like.
Summary: Based on new “digital economy” data from a recent BEA working paper, we calculate that the labor share of the digital sector has risen since 2007, while gross margin of the digital sector has fallen over the same period. This result is consistent with strong competition in the digital product and labor markets (see the research note here).
In March 2018, the Bureau of Economic Analysis (BEA) released a working paper called “Defining and Measuring the Digital Economy.”[1] The working paper presented BEA’s initial work “to lay the foundation for a digital economy satellite account.”
The BEA authors focus on outlining their definition of the digital economy, and calculating its real growth and share of GDP. However, their data allows us to calculate two other policy-relevant measures of the digital economy: Labor share and gross margin.
Labor share is a measure of how much of the income of an industry is going to workers. For the purposes of this paper, we define the labor share as compensation (COMP) divided by value-added (VA), expressed as a percentage. [2]
Gross margin is a measure of the profitability of an industry per unit of sales. In the business literature, gross margin is a company’s total sales revenue minus its cost of goods sold, divided by total sales revenue, expressed as a percentage.[3]
For our purposes, we define gross margin as an industry’s total gross output (GO), minus the cost of intermediate inputs (II) and labor compensation (COMP), divided by total gross output, expressed as a percentage.[4]
Based on this definition, labor share in the private sector has trended down since at least 1990 (Table 1). Similarly, private sector gross margin have trended up since at least 1990. Since 2007, private sector labor share has fallen by 0.8 percentage points, and private sector gross margin has risen by 1.9 percentage points.[5]
Table 2: Digital Sector: Rising Labor Share, Falling Gross Margin
2007
2016
Labor Share
53.4%
55.4%
Gross Margin
28.4%
27.2%
Private sector industries only. Data: BEA working paper
The digital economy data from the BEA allows us to calculate the labor share and gross margin for the digital sector of the economy (Table 2). We see that labor share for private industries in the digital sector rose by 2 percentage points in the post-2007 “tech boom” period. Gross margin fell by 1.2 percentage points.
Figures 1 and 2 show the change in the labor share over time. Please note that this data was released prior to the July 2018 benchmark revision.
These results suggest that benefits of productivity growth in the digital sector since 2007 are being shared with workers and customers. This is consistent with strong competition in the digital product and labor markets. By contrast, companies in the broader private sector are benefitting from lower labor share and higher gross margin, which suggest that market power is rising outside of the digital sector.
The PDF version of this research note are found here. The results in this note are drawn from a forthcoming PPI policy paper, “Taking Competition Policy Seriously.”
Definition of Measures
Labor share = COMP/VA
Gross margin = (VA-COMP)/GO = (GO- II-COMP)/GO
VA = value-added
COMP = labor compensation
GO = Gross output
II= Intermediate inputs
[1] Kevin Barefoot, Dave Curtis, William Jolliff, Jessica R. Nicholson, Robert Omohundro. “Defining and Measuring the Digital Economy,” March 2018. https://www.bea.gov/digital-economy/_pdf/defining-and-measuring-the-digital-economy.pdf
[2] Several alternative measures of the labor share all have the same general trend.
[4] The numerator includes profit-type income, such as profits, rents, and interest. It also includes taxes on production and imports that are chargeable to business expenses, such as state and local sales and property taxes, and a hodgepodge of state, local, and federal excise taxes.
[5] All data in this note is prior to the July 2018 benchmark revision. We focus only on private industries.
When the non-partisan Congressional Budget Office published its Long-term Budget Outlook in June, itestimatedthat the national debt relative to the size of the economy would nearly double over the next 30 years – from 78 percent of gross domestic product today to 152 percent of GDP in 2048. Yesterday, a new report from CBO warned that legislation passed within the past year by Donald Trump and the Republican-controlled Congress has the potential to make the problem far worse.
When Washington Republicans enacted a nearly$2 trillion tax cut last year, they included arbitrary expiration dates that minimized the projected cost after 2025. Congress took a similar approach in February, when it passed abipartisan budget agreementthat increased spending by almost $300 billion over just two years. Because CBO is required to make budget projections based on the laws as they are written (the “current-law baseline”), neither of these ostensibly temporary policies had a material impact on the long-term budget picture.
But what if policymakers extended or made these changes permanent? CBO’s models show debt would hit 210 percent of GDP by 2048 under this scenario – 58 percentage points higher than the baseline projection and nearly triple today’s level. CBO also scored two other scenarios: one in which policymakers prevent tax revenue from rising as a percent of GDP after 2028 and one in which policymakers keep taxes at 2018 levels in perpetuity. In these scenarios, CBO projects debt would rise to 230 percent and 260 percent of GDP respectively. However, these projections come with an important caveat. The report states:
“Assessing the economic effects of such large and rising debt would probably require reevaluating the economic relationships in CBO’s current models. In particular, in CBO’s models, the responses of private saving, capital inflows, and interest rates to fiscal policy are based on the nation’s historical experience with federal borrowing. But in these alternative scenarios, debt as a percentage of GDP grows to levels well outside that experience.
Nevertheless, to provide some sense of the possible outcomes, CBO employed its usual models to produce longer-term projections of deficits and debt under the three scenarios—but the actual outcomes would probably be worse than the range of estimates that those models indicate.”
Essentially, these policy scenarios would drive the national debt to unprecedented levels so high that CBO can’t be confident in the precision of its models at that point. These estimates, grim as they are, are thus likely to be overly optimistic.
Yet even under those “optimistic” projections, CBO estimates that the added debt burden from each of the measured scenarios would significantly hurt our economy. By 2038, CBO projects annual national income would be reduced by upwards of $1,000 per person relative to what it would be under current law – and the damage would only get worse as time goes on.
Despite the harm it would cause, Washington Republicans appear committed to pursuing even more unaffordable tax cuts if they retain control of Congress after the midterm elections. House Ways and Means Chairman Kevin Brady (R-TX) has been preparing a “Tax Cuts 2.0” package that would make permanent most expiring provisions of the 2017 tax law. At the direction of President Trump, the Treasury Department alsorecently explored a moveto unilaterally cut capital gains taxes by $100 billion, with 97 percent of the benefit going to the richest tenth of Americans.
Yesterday’s CBO report should be a warning to both them and the American people that we cannot afford to keep piling these irresponsible tax cuts onto our large-and-growing national debt. If Republicans insist on continuing down this reckless fiscal path, Democrats should hold them accountable and offer an alternative approach that pairs responsible fiscal policy with public investments to promote long-term economic growth.
On July 17, 2018, the European Union and Japan formally signed a landmark agreement on trade. This watershed agreement underscores the strong desire of the EU and Japan to benefit their citizens and economies by aggressively pursuing open, rules-based trade.
When ratified by their respective legislatures, the Economic Partnership Agreement (EPA) signed in Tokyo by European Commission President Jean-Claude Juncker and Japanese Prime Minister Shinzo Abe will create a largely free-trade zone, covering a third of global GDP. The EPA is the largest ever signed by both parties, and reflects shared values that they agree should govern their future trade and economic relations.
The Agreement also sends a clear and forceful message that the parties reject the protectionist policies pursued by the United States under Donald Trump. Negotiation of the deal started long ago (in 2013) and were delayed and extended for political and other reasons, including deadly floods in Japan. Trump’s election—and his growing attacks on open trade—provided new momentum for the negotiations and helped to push them over the finish line.
The EPA’s many benefits come not only from the wide variety of issues that it includes, but also from the creation of an almost completely tariff-free zone[1]. The deal’s extensive reforms will boost import-export trade in a massive market covering more than 600 million people.
The EPA’s starting point is the removal of trade barriers to promote market access for EU goods and services to Japan. Japan is the EU’s second biggest trading partner in the Asian region after China, and boosting EU trade further will support economic growth and jobs. Japan, which already sends 10 percent of its trade to the European zone[2], will similarly benefit from the EPA’s reforms.
Eliminating tariffs is not the only means the EPA uses to achieve its comprehensive objectives. The parties also agreed to pare down the costs of compliance with Japanese rules and standards[3], and to remove Japanese barriers that keep foreign firms from bidding for government contracts in certain sectors. Those two reforms alone will eliminate major obstacles to selling more EU goods and services in the Asian area.
The EPA promotes greater competition[4] for European products in Japan and easier access to Japan’s market, especially for EU agricultural goods, pharmaceuticals, medical devices and motor vehicles. The Agreement’s benefits also extend the service sector, particularly financial services, e-commerce and communications. As a whole, the EPA is forecast to increase EU exports to Japan by some 13,5 billion euros annually.
The accord also makes important changes in the field of data protection. It recognizes the two parties’ data protection systems as “equivalent,” and thereby creates the biggest jointly secured data flow in the world.
This strategic development is the latest in growing foreign opposition to Trump’s nationalism and protectionism, which have sparked a movement by many countries towards negotiating new market-opening agreements. As a result of these new agreements, American companies will increasingly be excluded from favorable trade treatment, illustrating how neglecting open trade and reneging on longstanding policies can be economically damaging on a global level.
Trump’s recent actions have only made things worse for the United States. Two major examples are his recent aluminum and steel taxes, which the international community has widely condemned, and the refusal of the U.S. government to cooperate in re-appointing judges to the Appellate Body in the World Trade Organization[5]––mostly because its members’ decisions did not seem to comply with the U.S. perspectives. These and other actions by the Trump Administration illustrate the perils of limiting trade, closing borders and refusing to cooperate in the multi-lateral system, embodied by the WTO.
While the overall impact of the EU-Japan Agreement may not be immediately visible, its political weight is. Both parties are, most importantly, emphasizing a strong message of shared democratic values and respect for the rule of law at an especially precarious moment in global affairs. In particular, they are underlining the substantial importance of cooperation in trade. By contrast, Trump’s zero-sum protectionism is blinding him to the economic damage his misguided policies are causing for the United States, which is careening toward isolation while the rest of the world is heading steadily towards shared prosperity.
[1] Starting from 90% at the beginning of the implementation of the Agreement, and gradually increasing up to 97%.
[2] According to the European Commission data, EU firms export roughly over €58 billion of goods and €28 billion of services to Japan exclusively every year.
[3] These obstacles make it 10-30% more expensive to export to Japan.
[4] For example, there will be zero tariffs on processed pork, and an elimination of the ones on cheese (currently 29.8%) and on wine (currently 15%).
[5] The WTO system provides a legal forum in Geneva for states in order to file complaints against other members, for alleged violations of WTO law. A three-member arbitration panel can hear each appeal and issues its decision, with the possibility of appeal to the WTO’s Appellate Body, a seven-member independent court that makes the final decision on the meaning of WTO law and its application.
In 2011, Sly James won election to his first term as mayor of Kansas City, Mo. Within roughly 48 hours of his victory, he was swept into a meeting room to close a long anticipated deal: the approval of an agreement to make the City of Fountains the site of the first Google Fiber ultra-highspeed broadband network.
But, while the award of Google Fiber represented a unique civic opportunity, it could not change a basic fact: Kansas City was an aging Midwestern metropolis with a lot of very typical urban challenges, including worn-out infrastructure and tightly constrained public budgets.
Last week, the Centers for Medicare and Medicaid Services (CMS) announced that it had approved a reinsurance proposal inWisconsinandMainein an effort to keep health premiums down. Reinsurance is essentially insurance for insurers: The government helps pay for the cost of exceptionally high-cost claims.
It’s no wonder states have been working on innovative ways to keep premiums affordable for their residents. It seems each day we hear of yet another state announcing double digit premium increases for health insurance:11 percentin Kentucky,19 percentin Washington, and a whopping 24 percent in New York. These are just the proposed rates; increases won’t be made final until immediately before the midterm elections.
Sixty-five percent of Americans reported in a recentReuters/Ipsos pollthat they are “very concerned” about the overall cost of health care — particularly insurance premiums, deductibles, and copays. Rising health care costs affects all Americans: A majority of millennials and baby boomers, whites and minorities, and Democrats and Republicans all reported concerns about increasing costs.
Charlotte is one of the high- growth “winner metros” of the Sun Belt – a banking capital with a sparkling downtown (the locals actually call it Uptown); major-league sports; and an expanding, increasingly diverse population. While that growth has brought significant benefits, it has also presented challenges.
Denver has emerged as one of the most dynamic American metro areas of the 21st century, with a steady stream of well-educated workers drawn to its extraordinary natural beauty and friendly, wide-open vibe. It drew the world’s attention in 2008 with a boldly staged Democratic convention that launched a candidate who seemed to mirror many of the host city’s own qualities: youthful, tech-savvy, optimistic, forward-looking, environmentally conscious, and just hip enough to stand out from the crowd.
Last week, the Centers for Medicare and Medicaid Services (CMS) announced that it had approved a reinsurance proposal inWisconsinandMaine in an effort to keep health premiums down. Reinsurance is essentially insurance for insurers: The government helps pay for the cost of exceptionally high-cost claims.
It’s no wonder states have been working on innovative ways to keep premiums affordable for their residents. It seems each day we hear of yet another state announcing double digit premium increases for health insurance:11 percentin Kentucky,19 percentin Washington, and a whopping 24 percent in New York. These are just the proposed rates; increases won’t be made final until immediately before the midterm elections.
Sixty-five percent of Americans reported in a recentReuters/Ipsos pollthat they are “very concerned” about the overall cost of health care — particularly insurance premiums, deductibles, and copays. Rising health care costs affects all Americans: A majority of millennials and baby boomers, whites and minorities, and Democrats and Republicans all reported concerns about increasing costs.
For people who don’t get health insurance from their employers, the cost of health insurance is soaring out of reach. The reason? A relentless campaign by President Trump and Republicans to sabotage the Affordable Care Act (ACA).
WASHINGTON—Manufacturing productivity, on the decline for two decades, could be on the upswing and the sector could be on the verge of a significant transformation, according to a new report authored by PPI Chief Economic Strategist Dr. Michael Mandel. This shift hinges on an alternative digital future for manufacturers – one built around innovations in other sectors such as distribution and communications. Mandel terms such a digital transformation in manufacturing “The Internet of Goods.”
“The future of manufacturing, having come more slowly than expected, may now be on the verge of happening all at once,” Mandel writes. “The ability to digitize the actual manufacturing and distribution process is rapidly approaching the point where new business models and new markets will emerge. Digitization of production and digitization of distribution will lead to a renewed emphasis on local manufacturers, which will provide rapid response customization and distribution that foreign competitors cannot. Moreover, we are entering a new era of manufacturing platforms, both open and proprietary, which may boost global productivity and innovation in manufacturing.”
“The result: anticipate a thickening network of small-batch and custom factories taking hold around the country. The new business models will give a sustained competitive advantage against foreign competitors, because who wants to buy a custom item from a supplier 10,000 miles away that will take two months to arrive? This will enable the U.S. to rebuild its industrial networks in areas like the Midwest and upstate New York.”
“As this fascinating preview of the coming ‘Internet of Goods’ shows, America is on the cusp of an exciting new era of manufacturing start-ups and jobs enabled by digital innovation,” said PPI President Will Marshall. “Technology – not Donald Trump’s retrograde tariffs – is the right tool for growing manufacturing jobs across the country.”
—The rise of ecommerce fulfillment centers and the digitization of distribution; —The dramatic expansion of robots and 3D printing for quick and cheap delivery that will allow for more localized production of goods; and —Cloud-based manufacturing platforms that enable design, production, sales, and distribution to run as separate services on a packet-switched network.
As the Internet of Goods takes hold, state and local policy will play a powerful role in determining which areas are the big winners, according to Mandel. The gains will depend on whether the local workforce is prepared for tech-enabled physical industries; the availability of capital for local entrepreneurs to start new businesses or expand existing ones; and the regulatory environment.
The data on women graduating with computer science degrees is depressing. In 2006, 9800 women graduated with computer science degrees. Ten years later, despite the technology boom’s rapid job creation, only 12000 women graduated with computer science degrees. Since 2000, women have made up only around or under 25% of a broader range of STEM graduates as well, when accounting for a broader range of STEM degrees (computer science, engineering and mathematics). The latest data at the collegiate level shows that women make up less than 20% of the CIS graduates with technical skills, while women make up around 75% of graduates with degrees in biology and biology-related sciences. The rate of women in science is growing, but the growth is concentrated in biology and other healthcare related sciences. However, despite the nationwide numbers, individual schools have found success in closing the gender gaps in their computer science departments. By dividing introductory classes based on experience levels, making projects more relevant to real life applications, and giving women communities within the computer science department, programs like those offered at Harvey Mudd and Columbia University successfully closed the gender gaps in computer science at their respective universities.
Even as the percentage of women graduating with healthcare and biology degrees sees a steep increase, the percentage of women graduating with computer and information science degrees remains stagnant. This means that more women overall are graduating with STEM degrees, but the number of these women graduating with computer and information science degrees remains low.
This problem exists when looking outside of computer science as well, with the percentage of degrees conferred to women in engineering, mathematics, and computer science remaining around or below 25% since 2005. These trends show that women’s participation in certain STEM fields – not just computer science – are struggling. Women are missing out on some of the highest paying jobs available today, and companies are missing out on the innovation that diverse teams can bring them. Companies should evaluate their current gender compositions and workplace cultures in order to attract more diverse hires in the future. A study by McKinsey found that diverse companies think of more innovative solutions and are more profitable than companies that are not diverse.
Scholars suggest that girls miss out on careers in tech starting in high school. Dr. Sapna Cheryan at the University of Washington argues that early exposure has a large influence on a girl’s decision to pursue a degree – and therefore a career – in STEM. Cheryan points to early exposure as a partial explanation of why gender parity has been reached (or nearly reached) in mathematics, biology, and chemistry degrees, but is far from the horizon for physics, engineering, and computer science. High school curriculums across the United States always mandate some level of mathematics, and often require some level of biology or chemistry as well. In comparison, Virginia is the only state that lists computer science as a graduation requirement. Cheryan’s research indicates that when girls are required to take certain classes, rather than choosing into them, they are less likely to have low self efficacy later on in their lives, when they’re deciding what to study in college, especially because they are likely to perform just as well as the boys in their classes.
Cheryan’s research shows that accessibility is important in closing the gender gap in computer science, but research conducted by Accenture and Girls Who Code suggests that accessibility is not enough. A recent study by the nonprofit, which aims to increase middle and high school girls’ interests in computer science through after school programs and summer camps, indicates that increasing access to computer science without also actively making it more gender balanced may reinforce stereotypes within the field rather than break them down. Factors like having a woman computer science teacher, being assigned projects that have real life applications, and having coding experience, are all likely to make a positive impact on girls’ decisions to study computer science, while having no negative impact on boys’ decisions.
Girls Who Code itself exemplifies a program making a potentially groundbreaking impact on women in computer science. Girls Who Code, along with many other nonprofit and local and state government programs, is trying to close the gender gap in computer science. Girls Who Code identifies around 90% of their program graduates as intended computer science majors. However, there is at least a four year gap from the time a student completes their time with Girls Who Code and the time they graduate. While it is possible (and likely), that Girls Who Code and many programs like it are simply too young to show the impacts they’ve made, thus far, the evidence that programs like Girls Who Code are increasing the number of women graduating with computer science degrees is scarce. Whether these programs, most of which are under a decade old, are making the impact they want to, will become clear in the next few years as the cohorts of the programs graduate college.
It is also possible that these programs simply aren’t working, and that despite the good they do in teaching computer science to girls in ways that girls enjoy, the masculine culture and fear of discrimination overpower a woman’s desire to enter the computer science industry. The popular perception inside Silicon Valley is that the technology industry operates on meritocracy – that those who advance do so because of their hard work and intelligence, not their connections. However, many people in the industry earn their clout through friendships and who they know – in many startups, hiring processes are conducted primarily through “interviewing” friends and past coworkers. It makes sense that if women don’t already exist in these spaces, they have a hard time breaking in.
Additionally, according to a report by the National Center for Women in Technology, 56% of women left their careers at mid-level points in 2008. The quit rate for women is now twice that of men in computing related jobs. The lack of retention in the field may serve as an indicator of an unwelcoming, if not hostile, workplace environment for college students choosing degrees, especially considering that 80% of these women continue working and are not pulled away by family responsibilities. Women choosing degrees in STEM may believe that the discrimination they may face in their careers is not worth the benefits that come from entering the field.
Studies indicate that when choosing degrees, women have more prosocial motivations than men, who are more career- oriented. Specifically, a study by Anya Skatova and Eamonn Ferguson found that “Helping” motivates women the most, while “Career” is the top motivator for men. Programs like Girls Who Code find that their students are likely to work on projects that involve real life applications or educational opportunities. Projects that girls have coded since the program’s start include Tampon Run, a game intended to destigmatize menstruation, and an algorithm that helps detect whether a cancer is benign or malignant. While Girls Who Code and other initiatives intentionally focusing on girls may show the social impact of coding, the popular perception of computer scientists remains as a nerdy man with little social skills, much like the group of men in Silicon Valley, a popular TV show about the tech industry.
These perceptions and motivations inherently work against each other. If women do not perceive computer science as a field where they can have some social impact, they may be less likely to major in computer science. And because the industry requires some level of technical knowledge for most jobs, the likelihood of a woman entering computer science without having taken classes in it is low.
When schools implement programs that are more tailored to women’s interests and leanings, the gender balance narrows significantly. At Columbia University, the percentage of women majoring in computer science reached 47% in only a few years, after the university added three components to the department. One, a class called Computing in Context, taught students coding in a way that is relevant outside of pure technology. The class has projects in Python, an easier language to learn than the other introductory class that is offered in Java. In addition, the department added a one hour class for students who have no coding experience (intended primarily for students from marginalized communities) to talk about applications of computer science, think through logic problems, and gain a greater understanding of the role of computer science going into the future. Finally, the department started offering a combined track major, that allowed students to major in computer science with another major of their choice. These changes made computer science more accessible, but also taught students how to apply the skills they were learning outside of the popular conception of what jobs in tech look like.
At UCLA, Professor Linda Sax’s BRAID Initiative looks at how to attract and retain women in computer science, starting from middle school. At beacon schools like Harvey Mudd, the gender gap in computer science has made significant improvements. Harvey Mudd now has more women graduating with computer science degrees than men, after making a few changes similar to those that Columbia’s computer science department made. They changed their introductory programming language to Python and restructured their introductory class into three tracks, including a class for students with absolutely no background in computer science. In addition, students who always have the answer and ask more complex questions than the material mandates are encouraged to come in after class during office hours rather than taking up class time. After their introductory classes, students are connected to internships and research projects which keep them interested, leading to more women graduating with computer science degrees.
The payoff from the efforts made at schools like Harvey Mudd College and Columbia University show that with intentional programming, gender gaps in STEM fields can be closed. Successfully implementing these programs at a larger scale and having more schools participate in programs that lead to these outcomes will help innovation and bring more creativity to the technology industry.
It is relatively easy to digitize a song or a bank account. Yet fully digitizing physical industries such as manufacturing and agriculture has proven much more challenging. Manufacturers have taken the first step towards digitization by putting sensors into existing products such as turbines and tractors and using the resulting data to improve performance. The goal is now to turn data collection and analysis into a new revenue stream.
But data monetization is only one possible application of IT to manufacturing, and perhaps not the most effective at creating sustainable new markets or new business models. An alternative digital future for manufacturing, the “Internet of Goods,” is emerging. Three trends could lead to a manufacturing sector that uses information technology to boost productivity and create new markets.
What is the future of the Michigan economy? Struggling with a severe hemorrhaging of manufacturing jobs since 2000, the state has welcomed Amazon’s investment in ecommerce fulfillment centers. These centers are expected to add around 5000 jobs to the state economy, many going to workers with a high school education. This is the group that has suffered the most from the manufacturing decline.
Nevertheless, the Detroit News recently ran an opinion piece by Robert Engel, the chief spokesperson for an advocacy group arguing that Amazon hurts local communities. Bizarrely, the core of his case against Amazon seems to be that Amazon Prime is too good for consumers—the number he quotes is “over $780 per year” in value, while “members still only pay $119 for their Prime subscription.” He then alleges that these consumer benefits are being paid for by subsidies from state and local governments.
Certainly Amazon does request and receive tax incentives, like many major companies. Moreover, reputable economists, such as Timothy Bartik of the Upjohn Institute in Kalamazoo(MI), have debated whether the benefits of these subsidies are worth the costs.
However, these discussions over tax incentives don’t account for the truly innovative nature of what Amazon is doing. Amazon has shown that it is possible to use technology to increase the productivity of a key part of the economy—the distribution of goods—while producing benefits for consumers, creating jobs and raising wages at the same time.
First, the numbers. On a national scale, the three ecommerce industries—warehousing (fulfillment centers), couriers and messengers ( delivery), and electronic shopping (headquarters and data centers) have added more than 250,000 jobs over the past two years. Meanwhile, brick-and-mortar retail has risen by some 45,000 jobs over the same stretch. There’s no sign yet of a retail apocalypse
The key is that Amazon and other ecommerce companies have gotten so efficient at sorting and “picking and packing” that they can offer fast home delivery at a price that customers jump at. Rather than spending hours driving to the mall, parking, wandering through aisles, standing on line, and driving home again, consumers are now shifting their unpaid household hours to the paid market sector. The result is tremendous benefits to customers, along with an enormous surge of job creation.
Moreover, these are decent paying jobs for workers with a high school education. Nationally, our research showed that jobs in ecommerce fulfillment centers pay 30% more, on average, than brick-and-mortar retail in the same area.
The same is true in Michigan. Right now Amazon is advertising for entry level warehouse fulfillment associates in Michigan with a high school education at $12.25 an hour. By comparison, Glassdoor shows Walmart paying $9 per hour in Michigan. The median hourly pay for retail salespersons with all levels of experience in Michigan is $10.55 per hour, according to the BLS, and the median hourly pay for packers and packagers is $10.52 an hour. According to the 2016 American Community Survey, median annual earnings in the retail sector in Michigan was a stunningly low $19877. In other words, the entry level wage at Amazon is between 16% to 36% greater than median wages at brick and mortar retail establishments in the same area, depending on which set of figures we look at.
Perhaps more important, these ecommerce fulfillment centers are an essential part of reimagining the Michigan economy for the future. In a paper to be released shortly, we show how this network of hyper-efficient distribution centers can be used by local manufacturers to ship customized products directly to customers, creating new business models that cannot be matched by rivals 10,000 miles away.
In essence, digitization of the distribution chain–led by Amazon, but followed rapidly by other companies as well–is a competitive weapon that will help create a new wave of manufacturing jobs in Michigan.
