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The Hill: Looking Beyond the Minimum Wage

Posted on August 8, 2014September 18, 2024 by The Progressive Policy Institute

The conversation surrounding economic inequality in the United States has risen from its usual steady drone to a headline-grabbing roar in recent weeks. Unlike in 2011, when protest movements such as Occupy Wall Street acted as the main catalysts of the discussion, today the debate erupts from all sides of the issue.

Billboards in San Francisco decry the efforts to raise the minimum wage as a job-killer, while many around the country begin their “live the wage campaign”. Nick Hanauer, self-proclaimed plutocrat, warns his fellow .01%ers that unless economic inequality is reduced soon, the proverbial pitchforks will come for them. Sen. Ted Cruz continues to predictably denounce “job-killing minimum wage legislation,” while the Obama administration continues its equally predictable relentless barrage of advertising insisting that the current minimum wage is not a living wage.

Read the full article at The Hill.

Startup Smart: Australian mobile app market booming as tech job growth outpaces the US and UK

Posted on August 1, 2014 by The Progressive Policy Institute

PPI Chief Economic Strategist Dr. Michael Mandel was quoted today in the Australian publication Startup Smart’s article, “Australian mobile app market booming as tech job growth outpaces the US and UK.” The article discusses both the high hopes for continued growth in the Australian app economy, while taking heed of Mandel’s caution on policymakers striking the right balance of regulation:

The major take-away is that Australia has a good start on the digital economy, especially when viewed from the perspective of mobile apps. This debate is at a fever pitch in both the United States and Europe, especially after the recent NSA revelations.,” Mandel says.

“As this sector continues to expand globally, this opens up new opportunities for Australia to become an exporter of apps and app-related services, especially given the current international importance of English-language markets.”

Mandel warns there are also important lessons in the figures for Australian government policymakers.

“It’s important for policymakers to strike the right balance between essential and excessive regulation, especially in areas such as data privacy,” Mandel says.

“However, a general principle is that the tighter the regulations, the more obstacles in the path of the growth of the rapidly innovating app economy.”

Read the full article here.

Australian Financial Review: App industry growth picks up mining slack

Posted on July 31, 2014 by The Progressive Policy Institute

PPI’s Chief Economic Strategist Dr. Michael Mandel was quoted in an article from the Australian Financial Review this morning. Breaking down Mandel’s recent paper, “Jobs in the Australian App Economy,” the article looks at the Australian app economy’s burgeoning role both nationally and internationally.

As the main source of growth in the economy continues to shift away from mining investment, a new report has found Australia is well-positioned to take advantage of a booming global “app economy”.

But the authors of the report, from United States think tank the Progressive Policy Institute (PPI), warn that a mindset of “digital protectionism” risks stunting future jobs creation in the technology sector.

“Since the introduction of smartphones in 2007, a thriving new creative industry has emerged in the design, building, maintenance, and marketing of applications for these devices that now employs more Australians than the nation’s well-regarded motion picture or publishing industries,” said the report’s lead author, the institute’s chief economic strategist Michael Mandel.

PPI’s research found that employment in Australia’s computer systems design industry has grown at 38 per cent since 2008, outstripping overall employment growth of 8 per cent. Mr Mandel suggests much of the growth in the broader computer systems design industry is due to an explosion in the number of app developers…

PPI found the Australian computer systems design industry employed roughly 140,000 workers, as of June 2014. New South Wales stood out as the capital of the app economy, employing 77,000 people in the industry, more than any other state.

Read the full article at Financial Review.

Why progressives should hold their applause for student loan order

Posted on June 10, 2014 by The Progressive Policy Institute

President Obama issued an executive order yesterday to expand Pay As You Earn (PAYE), the administration’s flagship income-based student loan repayment program. The president’s action offers millions of workers welcome if modest relief from student debt burdens. But progressives should hold their applause, because it also has two downsides.

First, expanding PAYE boosts government public subsidies for a broken higher-education financing model. Second, it will reinforce the already strong bias in public policy toward college attendance at the expense of other post-secondary options for young Americans.

Unlike the standard student-loan repayment program, which has fixed repayment schedules, PAYE is an income-driven repayment program, meaning that how much you pay is based on how much you earn. Eligible borrowers repay up to 10 percent of their monthly income, with any remaining balance forgiven after 20 years. Its commendable goal is to make repayment easier for graduates who take important jobs that pay less — social workers, school teachers, workers in the nonprofit sector.

With the new order, PAYE eligibility will expand to an additional 5 million people who borrowed before the original October 2011 cutoff. It follows last year’s campaign to dramatically increase PAYE enrollment, during which the Department of Education contacted 3.5 million eligible borrowers with limited success. Legal questions surrounding the new order have already been raised regarding presidential authority, especially since the cost to the government remains unknown.

In expanding PAYE, Obama underscored his desire to assure affordable access to college. The idea that college is for everyone rests on the well-established fact that college graduates earn more money than high school graduates on average.

But as I’ve recently argued, while some form of post-secondary education is necessary, not everyone needs a bachelor’s degree. The point was even made recently by Secretary of Labor Thomas Perez.

The wage premium for college graduates is growing not because the degree is worth so much more, but because high school diplomas as worth so much less. In fact, real earnings for recent college graduates have been falling over the last decade, and underemployment remains at record highs. New research shows the number of college graduates taking white-collar jobs declined since 2000, and is now at 1990 levels. If wage growth for recent college graduates was in line with tuition increases, today’s conversation surrounding college affordability would look very different.

Moreover, the new tools of digital learning — such as online courses — should be driving education costs down, yet tuition continues to climb. That suggests the entire financing model for higher education needs reform. And because there are too few viable pathways into the workforce after high school, our $100 billion per year federal student aid system is channeling people into four-year colleges who may be better suited for less expensive options.

Expanding PAYE may relieve the financial strain on borrowers in the short term, but it will almost certainly exacerbate the burden on the federal student aid system in the long run. With PAYE, increased access and opportunity for students comes at the cost of accountability for educational institutions. Borrowers have less incentive to make smart borrowing decisions, or complete in a timely manner. And schools have less incentive to control costs.

When income-based repayment was first introduced in 1993, then called “pay-as-you-can,” it was to encourage “public service” jobs — those jobs earning a relatively modest income. But the idea was not for everyone to enroll in such a plan, only those who needed longer repayment terms to avoid default. Then, in a debate remarkably similar to today, President Clinton acknowledged that the longer terms under income-based repayment were not ideal for most borrowers, and in fact the standard 10-year repayment plan worked well for the majority.

Still, if PAYE expansion goes forward, there are ways to keep its costs in check. First, expand PAYE only to undergraduate loans. If the main intention is to promote college affordability, then it makes sense to focus on undergraduates. Graduate school borrowers, who tend to have higher levels of debt, could apply annually instead of being automatically eligible.

Second, schools should give borrowers the information they need to make an informed decision about which plan is the best for them, and have the Department of Education regularly report on program metrics. Finally, limit, if not eliminate, the provision for “public service” that forgives any remaining balance after 10 years. With the income-based benefits already provided by PAYE, this provision becomes a second subsidy for the same loan.

The president’s executive order could be interpreted as a way of compensating young college graduates for the slow-growth economy they graduated into. Yet while such compassion is admirable, the administration also needs to grapple with the root causes of soaring college costs, including the dearth of pathways into the workforce for young Americans who may not need a four-year bachelor’s degree.

This op-ed is originally appeared in The Hill, find their posting here.

Roll Call: Manufacturing’s Comeback: Numbers Fabricate a Complicated-Yet-Rosy Outlook

Posted on May 8, 2014 by The Progressive Policy Institute

Michael Mandel, PPI’s chief economist, was quoted in David Harrison’s article for Roll Call on unreliable manufacturing data. The article explored the credibility of recent Commerce Department statistics showing that the manufacturing sector has returned to its pre-crash value. Mandel explained how the government provided data painted a complex evolving industry with a broad brush, making it difficult to assess the actual state of affairs:

You think your manufacturing is growing, but it may be shrinking, and you don’t know the right places to apply policy levers,” said Michael Mandel, an economist at the Progressive Policy Institute who has spent years studying these issues. “At this point, in manufacturing we’re flying blind.

Read the full article on Roll Call’s website, here.

Mandel Speaks at All Things Connected Washington Post event

Posted on March 28, 2014September 18, 2024 by The Progressive Policy Institute

Michael Mandel, chief economic strategist at the Progressive Policy Institute, described the Internet of Things as the “extension of the Internet to the physical world. He told the audience at Washington Post Live’s All Things Connected forum, “The Internet has transformed digital industries, while the Internet of Things will transform physical industries.”

Where Government is Working

Posted on March 26, 2014September 18, 2024 by The Progressive Policy Institute

With the federal government in gridlock, cities step into the breach.

Welcome to New Orleans, city of the future.

Wait, New Orleans? The decadent old tourist trap that’s been trading on its fading cultural glories for decades? That’s right – the Crescent City has its mojo working again.

Since the ravages of Hurricane Katrina, the Big Easy has reinvented itself as a mecca for entrepreneurship and a magnet for young and highly educated workers. Forbes ranked New Orleans number one in IT job growth. Another ranking of America’s “cities of aspiration,” which blends economic performance, quality of life measures and demographics, lists New Orleans second behind Austin, Texas. New Orleans is also leading the transformation of urban education. An amazing 79 percent of its students attend charter schools, and — more amazing still — they are on track to become the first inner city students in the nation to outperform their counterparts in the rest of the state.

New Orleans also benefits from dynamic political leadership and a cooperative civic culture. Mayor Mitch Landrieu is a tough-minded progressive who has cut the city’s budget by a quarter, spun off inefficient public health clinics and forced the city’s regulators to dramatically speed up licensing and permitting. Voicing a pragmatism that’s all too rare in the ideological hothouse of Washington, Landrieu notes that “government can be too big and too small at the same time.” He has also launched the New Orleans Business Alliance, the city’s first public-private partnership for economic development, and has used the money freed by his “cut and invest” approach to upgrade municipal infrastructure and improve public safety (an astronomical murder rate is the city’s biggest problem).

What’s happening in New Orleans, however, is hardly unique. It’s emblematic of a larger story: A renaissance in local governance as Washington sinks deeper into paralysis.

While Congress becomes both more ideologically polarized and less productive than ever, local governments are innovating, collaborating and equipping their citizens and communities with tools for successful problem-solving.

This “metropolitan revolution”, as Bruce Katz and Jenifer Bradley of the Brookings Institution have dubbed it, illustrates the genius of American federalism. Its subtle dynamics seem to ensure that not every level of our government can be broken at the same time.

It’s also a dramatic role reversal from a couple decades ago, when the nation’s big cities were synonymous with failure and decline. From New York to Detroit, Cleveland to Los Angeles, U.S. urban centers were beset by deindustrialization and toxic waste, rising poverty, soaring crime rates, municipal corruption, racial friction and middle class flight to the suburbs.

Overwhelmed by these economic and social maladies, many urban leaders took refuge in victimhood and looked to Washington for salvation. As I’ve noted elsewhere, many cities seemed to develop a cargo cult mentality, waiting like Pacific islanders during World War II for pallets of federal aid to drop miraculously from the sky – which never came.

What came instead was a new wave of reform-minded mayors preaching self-reliance and homegrown solutions to local problems. These included pragmatic progressives like John Norquist in Milwaukee, Ed Rendell in Philadephia, Cory Booker in Newark and Martin O’Malley in Baltimore, as well as moderate Republicans Rudy Guiliani and Michael Bloomberg in New York. They used innovations like data-driven analysis and community policing to drive crime rates down. They experimented with ways to reduce welfare dependency and demolished public housing complexes that concentrated and isolated the poor. A few brave souls took over abysmal inner city school systems, cutting swollen bureaucracies, launching innovative charter schools, and holding principals and teachers accountable for student performance.

Metros on Top

Today, America’s cities and metro regions are the star performers of our federal system. They are America’s main hubs of economic innovation and dynamism and are reviving the U.S. economy from the ground up.

Houston, for example, as Derek Thompson of The Atlantic notes, has added more than two jobs for every one it lost in the Great Recession. Katz and Bradley report that cities like Portland and Tampa are concentrating on boosting exports into global markets. In Northeast Ohio, Cleveland and other cities are collaborating on joint strategies to become a hub of advanced manufacturing, targeting 3-D printing in particular. After the recession/financial crisis, Bloomberg launched an imaginative competition to attract engineering and applied science campuses to New York, to lessen the city’s economic dependence on Wall Street.

To Katz and Bradley, it all adds up to “an inversion of the hierarchy of power in the United States.”

The urbanologist Alan Ehrenhalt sees another kind of inversion at work in America’s metropolitan regions. As he explained in an interview with Smartplanet.com:

The demographic inversion simply means that, contrary to where we were a generation ago, with the inner city meaning “the place where poor people live” and the exurbs being where the affluent flee to; in the future, the center of the city is going to be where affluent people choose life. Not necessarily by tens of millions, but in significant numbers. Suburbs are going to be the place where immigrants and the poor congregate.

What’s behind this change? The disappearance of heavy manufacturing from many cities, says Ehrenhalt, has made them more attractive places to live. So has the steady decline in crime rates over the past several decades. And millennials in particular seem to find urban life more exciting than the placid suburbs most of them grew up in.

O Come Emanuel

If there’s a poster child for the metro revolution it’s probably Chicago Mayor Rahm Emanuel. A former adviser to President Clinton and Member of Congress, the acerbic Emanuel left his job as President Obama’s Chief of Staff to run for Mayor after longtime Mayor Richard Daley decided to call it quits. “Washington is dysfunctional politically, and it’s not just a momentary thing,” he explained to the New York Times’ Tom Friedman.

We’ve always said that there’d be a day when all that the federal government does is debt service, entitlement payments and defense. Well, folks, that day is here. So, federal support for after-school programs has shrunk. We added to ours, but I had to figure out where to get the money. The federal government is debating what to do with community colleges. We’ve already converted ours to focus on skills development and career-based education. I worked for two great presidents, but this is the best job I’ve had in public service.

None of this means Washington is at risk of becoming irrelevant – sorry, conservatives. But it does argue the merits of a serious push for a systematic decentralization of decisions and resources to state and local governments. It’s time to revisit former Congressional Budget Office chief Alice Rivlin’s ideas for devolving large responsibilities from Washington. And even during the present political stalemate, there are things Congress and the White House can do to enable local leaders to succeed. One is a generous waiver policy to allow for greater state and local experimentation. Combining lots of small programs – the federal government has 82 for teacher training alone – into broad, performance-based grants would also promote both local flexibility and efficiency.

Most important, progressives should get out of the habit of treating Washington as the line of first resort when some urgent problem demands a governmental response. Congress, the National Journal reports, is more ideologically polarized than ever. Not coincidentally, the previous Congress was the least productive in modern times. The current one – already effectively closed for serious business until November’s midterm elections — could turn out to be even more barren of legislative achievement.

And since no one seems to know how to throw the engines of polarization and hyper-partisanship into reverse, Washington is likely to remain mired in impotence and inertia for quite a while.

But don’t give up on democracy in America just yet. As conservatives try to undermine public confidence in government yet further, progressives should look outside Washington to local governments that are proving to be effective instruments for advancing the common good.

The piece is cross-posted from Republic 3.0.

College – Worth it or worth less?

Posted on March 26, 2014September 18, 2024 by The Progressive Policy Institute

College has never been worth so much – or so little.

New research from the Pew Center shows the wage gap between those with a college degree and those without is at an all-time high. Moreover, the college wage premium has actually been widening. Yet at the same time, real average earnings for young college graduates are at historic lows – down 6 percent from 2007 levels, even as the labor market recovers. Average student debt per borrower has climbed to a staggering $29,400.

Does this double-sided truth about the “value” of college mean that today’s four-year model is sustainable, or is it a sign that change is coming?

At first blush, one might conclude that going to college – specifically a four-year college – is a necessity. But that misses the point of what’s actually driving the wage gap between college and non-college grads, something that young college graduates already know – that not all of this boost is because of a lift-off in the bachelor’s degree job market.

In reality, a college degree is worth “more” in large part because a high school diploma is worth so much less. My research shows college graduates, particularly recent graduates, are increasingly taking lower-skill jobs at the expense of their less educated peers. Because many new jobs being created are low-skill instead of middle-skill, college graduates are getting first dibs, squeezing those with less education from the workforce.

Even worse, the price to compete for these lower-skill jobs is getting higher. As college becomes less affordable, and the labor market less generous, fewer people are able to buy the seemingly only ticket in town for success. New Fed data shows outstanding student debt increased $53 billion in the last 3 months of 2013 alone, with student loans dominating all new borrowing by young Americans under 30 in 2013. Succeeding in today’s higher education model allows for little margin of error: either you make the sacrifice and get the four year degree, or it’s game over.

No group epitomizes the failings of the current college system more than those who enrolled in college but failed to graduate – college drop-outs. Though often left out of the conversation, the latest figures show that the average four-year completion rate for those entering four-year colleges was 38.6 percent and that the six-year completion rate is still just 58.8 percent (rates are lower for two-year schools, but many transfer to other institutions). Minorities and low-income Americans are even less likely to complete college, exacerbating already growing inequality.

College drop-outs face the worst struggle of all. On average, they make little more than those with a high school diploma but are still saddled with thousands in student debt. They are at the highest risk of defaulting on their student loans, by some estimates up to four times more likely than graduates. They are the most vulnerable in terms of financial security, from slipping into a hole they cannot climb out of.
The large share of college drop-outs is evidence that the current structure of postsecondary education as the main vehicle for workforce preparation isn’t working.

Their fate is also an indication that the future of college may – and should – look very different. The ongoing revolution of low-cost, high speed broadband makes education more accessible, affordable, and customizable. This, coupled with decreasing returns on the four-year college model, should lead to more post-secondary pathways into the workforce (such as German-style “apprenticeships”). These alternative pathways have the potential to be just as effective at preparing people for the world of work, except at a lower cost. The nature of today’s innovative data-driven economy means preparing for tomorrow’s high-skill, high-wage jobs will naturally include digitally-oriented training and a dynamic curriculum.

The ideal post-secondary system of the future should correct some of the biggest workforce challenges facing Americans today. These are Americans who are unable to afford college, or who don’t want to take on thousands in student debt to succeed.

One way this could happen is if the current four-year model of college becomes one of several options after high school. Instead, what we could see is employers becoming better integrated into the workforce preparation process, as current workforce demands are unmet and training becomes a lower cost proposition that can be virtually administered. We may also see a renaissance in vocational training, which can cost-effectively prepare workers for well-paid technical and even computer and data-driven jobs. Industry certifications could take the place of a degree. It may be that only a few will pursue a four-year degree, much like a doctorate-level credential is pursued today, in specialty fields.

Still, wholesale change is unlikely to happen quickly, so long as the generous federal student aid system in place prolongs the current college model. The federal government administers more than 90 percent of new student aid – to the tune of more than $100 billion annually – but demands little accountability on the part of institutions and borrowers in terms of graduation rates and employment success.

For the millions of young Americans who’ve already been left behind, reform can’t come soon enough. That’s why the conversation to rethink college must begin now.

This piece is cross-posted from Republic 3.0.

The Fiscal Times: College Grads Are Elbowing Aside Less Educated for Jobs

Posted on January 16, 2014 by The Progressive Policy Institute

Eric Painin, writing for The Fiscal Times, featured recent work by Diana Carew, an economist for PPI, on recent graduates and their struggle to find employment. Painin used Carew’s recent report Jobs and Wages for Young Americans: Is Recovery Coming? to draw attention to the “Great Squeeze” in employment for Young Americans, writing:

“Since 2009, many of the occupations with the fastest employment gains for young people have been lower-skill jobs that typically pay less, according to a new report by economist Diana G. Carew of the Progressive Policy Institute.

Production, health care support and food preparation and serving occupations were the three main occupational groups to see gains for young Americans across all levels of educational attainment. The downside is that all three groups have mean hourly earnings significantly lower than the national average for all occupations.

Notably, young college graduates saw a 15 percent increase in office and administrative employment while more generally employment in this group declined, the report stated. “This is consistent with the argument that young college graduates are struggling with high underemployment,” Carew wrote – and in the process are squeezing their less educated rivals aside.”

Find the full article on The Fiscal Times‘ website here.

Young Americans: Is Recovery Coming?

Posted on January 16, 2014 by The Progressive Policy Institute

Young Americans – the 80 million Americans age 16-34 – have had a rough recession and an almost non-existent recovery. This is reinforced by the latest jobs report, which shows unemployment falling at the expense of labor force participation, now a historically low 70.9 percent. For young Americans age 16-24, labor force participation is just 54.8 percent. Looking ahead, is recovery ever coming?

Four telling facts about jobs and wages for young Americans suggest a labor market recovery is coming, although it will be gradual and uneven by educational attainment. Specifically, young Americans with a postsecondary degree are more likely to be employed, but the nature of their employment suggests they are taking lower-skill jobs at the expense of their less educated peers. These facts also suggest there is more that policymakers could be doing to boost young Americans’ long-term economic and financial well-being.

Read the full brief, including three charts and a table on young Americans in the recovery, here.

Will GOP Stiff Jobless?

Posted on January 6, 2014 by The Progressive Policy Institute

STATEMENT BY WILL MARSHALL:

Today, Will Marshall, President of the Progressive Policy Institute, issued the following statement on legislation proposed in the Senate to extend unemployment insurance benefits:

“The Senate is set to vote this evening on extending unemployment insurance for 1.3 million Americans whose benefits expired at the end of 2013. With the jobless rate still at seven percent following the weakest “recovery” in post-war history, this should be a no-brainer. In days past, legislation to help jobless families keep food on the table and roofs over their heads during economic emergencies has garnered broad, bipartisan support.

“Not only is it morally right to lend a helping hand to people out of work through no fault of their own, it’s good economics, since the unemployed are likely to put every dollar of their benefits right back into the economy. Nonetheless, Senate Republicans are balking on the grounds that Democrats aren’t proposing offsetting budget cuts to pay for the $6.5 billion extension.

“Their commitment to fiscal discipline is selective and phony, since it seems to apply mainly to spending on the poor, vulnerable and jobless, not to taxes on the affluent. But maybe that’s slightly less offensive than Sen. Rand Paul’s insulting warnings against encouraging dependency on government. Either way, the vote is shaping up as a test of the Republican Party’s basic decency, and the early returns don’t look good.”

Is PAYE Paying for the Wrong Higher-Ed Model?

Posted on November 1, 2013September 18, 2024 by The Progressive Policy Institute

Universal adoption of today’s high-speed, low-cost broadband could move the current higher education model into the 21^st century. But are federal student aid programs like Pay As You Earn (PAYE) – a student loan repayment plan based on borrowers’ annual incomes – delaying the industry’s transition?

Quite possibly. One potential consequence of Pay as You Earn (PAYE) is that it enables colleges to transfer the cost of less effective industrial organization to taxpayers, allowing them to maintain status quo practices. The result of less effective higher-ed administration, during a time of rising enrollment, is higher costs. As I explain in my new FAQ sheet, PAYE gives colleges and universities no incentive to curb excessive increases in tuition, because there is no accountability.

Instead of managing tuition, through harnessing the power of broadband to provide mass education and workforce training at lower cost, more colleges are relying on federal aid and debt repayment programs like PAYE. That’s why we are starting to see more schools like GW admitting to “need-aware” admissions policies, and schools like Georgetown taking obvious advantage of the current federal student aid system and income-based repayment plans. And that’s why we are seeing the dramatic rise in outstanding student debt, along with reports of the long-term financial strain it is placing on young Americans.

This week, I spoke on a panel at the Urban Ideas Forum 2013 on “Advancing a Broadband Agenda for Urban America,” that covered the importance of broadband in spurring economic growth and innovation. The key takeaway was that the power of broadband, and the tremendous potential economic and social benefits it can facilitate, will only be possible if adoption is universal.

But realizing the full potential of broadband means the post-secondary education industry must buy-in through systemic adoption. The post-secondary education industry is fast approaching a fork in the road: either it can maintain its role as the premier workforce preparation vehicle, or it can lose competitiveness to alternative sources of post-secondary training provided at lower cost. The first requires the industry to realign itself more closely with the needs of employers, and to cut costs by integrating the power of broadband into its education model. The second is inevitable if the industry maintains its status quo practices, most predominately at second and third tier four-year institutions.

Decision-making time for U.S. colleges and universities is coming, in spite of federal student aid and programs like PAYE. The latest report from the College Board shows average tuition at four-year public universities for this academic year rose at twice the current rate of general inflation, and the difference was even greater at four-year private universities. With rates like this, how long will it be before another provider of workforce training swoops in at lower cost, or before consumers – students – look elsewhere?

Real Earnings for Young College Grads Rose in 2012

Posted on September 18, 2013September 18, 2024 by The Progressive Policy Institute

Finally some good news for young college grads – in 2012 their real average annual earnings increased for the first time in six years. New data reveals average annual earnings for college graduates age 25-34 working full-time increased 0.9 percent in 2012, in constant dollars.

The turnaround could represent a major shift in the fortunes of young grads, who have seen their real average annual earnings fall by 15 percent since 2000. A bottoming out of this precipitous decline is welcome news to current and recent college graduates struggling to balance paying off student loans with gaining financial independence.

However, this good news should be met with cautious optimism. The same data also shows that real average annual earnings of all college graduates continued to fall in 2012. As shown in the chart below, real average annual earnings for people age 18 and over working full-time with a Bachelor’s degree only fell 2 percent last year, now almost 10 percent below 2000 levels. The fact remains that people with a college degree (and only a college degree) continue to have a tough time in today’s labor market.

That real earnings for all college graduates continued to fall suggests young college graduates aren’t yet in the clear. Young college graduates epitomize the today’s middle-class – they typically work in middle-skill jobs that pay average wages. It follows that young college grads were one of the groups worst affected by the financial crisis and the decade-long hollowing out of middle-skill jobs. Since their wages have fallen significantly more than their older college graduate peers, the turnaround could be an early indicator of labor market recovery for the middle-class or it could simply reflect they have much further to climb. Continued downward pressure on earnings of all college graduates won’t help sustain this momentum.

That means many challenges remain for young college graduates, in spite of this turnaround in earnings. The most recent figures show over half of recent college graduates are underemployed or unemployed, a historical high. The downward pressure on earnings from “The Great Squeeze” – the economic reality that college graduates are increasingly forced to take lower skill jobs for less pay – was exacerbated by the recession but started well before. Once a college graduate starts on a slow-growth career trajectory, it can be very hard to catch up financially.

The economic obstacles afflicting young college graduates will be difficult to truly reverse unless there are fundamental changes in how we prepare and train our workforce. Given how much lost ground real earnings for young graduates still have to recapture, and the importance of investing in a college education in today’s economy, that means policymakers would be well-served to make such reforms a bigger priority.

Can the Internet of Everything bring back the High-Growth Economy?

Posted on September 12, 2013 by The Progressive Policy Institute

The United States and the other major advanced economies are currently stuck in a seemingly endless twilight of slow growth. The numbers are ugly: The April 2013 forecast from the International Monetary Fund predicts that economic growth in Europe will average only 1.7% over the next five years. Japan is projected to average only 1.2% growth. Germany, held up as a paragon of success, is expected to grow at only 1.3% annually.

The United States is doing better than Europe and Japan, but not by much. The nonpartisan Congressional Budget Office is currently projecting that the underlying growth rate of the U.S. economy—the so-called ‘potential’ growth—is around 2.2% annually, compared to an average of roughly 3.3% in the post-war period.

Both Democrats and Republicans in Washington, miles apart on most issues, have accepted the slow growth scenario. That helps explain, in part, the political gridlock in Washington. An economy growing at barely over 2% per year doesn’t generate enough income to pay for everything that Americans need: Social Security and Medicare for the aging population, defense spending sufficient to handle critical threats, and support for essential government investment in basic research, education, and infrastructure. The longer that the slow-growth assumption gets locked in, the more it becomes a self-fulfilling prophecy.

Yet we are not stuck with the slow-growth scenario and the endless and frustrating Washington policy debates about dividing a shrinking pie. Over the past year, a series of studies from research institutes and industry have laid out a compelling new vision of a highgrowth future—one that that could revolutionize manufacturing and energy, create employment for the jobless generation, and bring back rising living standards.

These new studies—from organizations such as the McKinsey Global Institute, GE, Cisco, and AT&T—describe the economic potential of a new wave of technological innovations known as the Internet of Everything (IoE)—also sometimes called the Internet of Things, the Industrial Internet or Machine to Machine. (Though as discussed below, the Internet of Everything is a broader, more accurate concept than the other terms, encompassing much more than just ‘things’.)

Taking the McKinsey projections as a base, we estimate that the Internet of Everything could raise the level of U.S. gross domestic product by 2%-5% by 2025. This gain from the IoE, if realized, would boost the annual U.S. GDP growth rate by 0.2-0.4 percentage points over this period, bringing growth closer to 3% per year. This would go a long way toward regaining the output—and jobs—lost in the Great Recession.

Equally important, from the macro perspective, the result will be a shift to growth that is not just faster, but higher quality. Rather than being fueled by consumption and borrowing, the Internet of Everything will lead to an economy built on production and investment, with much more extensive education and training built right into the fabric of the economy rather than being separated out.

Download the memo.