Forget free college. How about free credentials?

A four-year degree is not the only path to middle-class security. High-quality occupational credentialing opportunities deserve equal standing and federal support.

Many progressives believe “free college” to be the best way of helping more Americans achieve economic mobility and security. On average, workers with four-year degrees enjoy greater earnings and job security than high school graduates,1 and it’s axiomatic that most future jobs will require some sort of postsecondary education.2 Free college, the logic goes, would ensure that more Americans share in the fruits of an economy where skills are increasingly at a premium.

This desire to tackle what many see as a root cause of growing inequality was a big reason “free college” figured so prominently in the presidential campaigns of both Democrats Hillary Clinton and Bernie Sanders in 2016. No doubt the idea will re-emerge in 2020.

But the single-minded focus on college diminishes other, equally viable paths to middle-class security – such as in health care, information technology, advanced manufacturing and other skilled professions – that require specialized occupational “credentials” but no four-year degree.

 

The Next Ten Million Jobs: Energizing the Physical Industries in the Heartland States

We start with a healthy dose of reality: Since 2000, healthcare and education have been the main sources of private-sector job growth, both nationally and in the heartland states.

From home health aides to technicians to physicians, from child care helpers to well-paid professors in private colleges, private-sector healthcare and education jobs have provided a welcome safety net for otherwise turbulent labor markets, since they receive substantial funding via government programs such as Medicare, Medicaid, and federal student loans, and are not easily subject to globalization or automation.

But we believe a prosperous future for Americans requires much more than healthcare and education. For one, the rapid expansion of the private-sector healthcare and education workforces is the major reason healthcare and education costs are rising so quickly. Getting the cost of healthcare under control will necessarily involve slowing the rate of healthcare hiring. Second, it’s important to diversify the local economic base, and not rely on just two industries that are substantially supported by taxpayer money.

 

Ecommerce employment update for October

With the publication of my WSJ op-ed, “Get Ready for the Internet of Goods,” it’s time to update our  ecommerce analysis for the third quarter. Rather than reaching back to 2007, as previously,  I want to focus on a more recent period. First, take a look at the chart below, which graphs the full-time equivalent (FTE) employment for brick-and-mortar retail, with a 3-month moving average.

On a quarterly basis, brick-and-mortar FTE peaked in the third quarter of 2015, and since then has been drifting down at about a half percent annually. The figure for brick-and-mortar FTE in the third quarter of 2017 is probably a bit lower than it should be because of the effects of Hurricanes Harvey and Maria on hours worked in retail.

So let’s look at the two years since brick-and-mortar FTE peaked. Over those two years, brick-and-mortar retail FTE jobs fell by 123,000. That’s a decline of about 1%. The increase in FTE ecommerce jobs was 178,000 over the same stretch. That’s based on hours worked in the electronic shopping and mail-order industry, and the warehousing industry, where many fulfillment centers are reported. FTE jobs at couriers and messengers, including express delivery companies, rose by 58,000. All told, the gains in ecommerce and delivery services was almost twice the size of the losses in brick=and-mortar retail.

Change in FTE jobs, 3Q15-3Q17 (thousands)

Brick-and-mortar retail             -123

Ecommerce                                 +178

Express delivery and couriers  +58

Data: BLS, PPI.

Several points: First, FTE adjusts for changes in hours worked per week. Second, we now see a significant employment impact on the delivery side.  To put it a different way, those UPS drivers are working way hard. Third, a portion of the third quarter decline in brick-and-mortar FTE is likely to be due to Hurricanes Harvey and Maria reducing the number of hours for retail workers in Texas,  Florida, and other storm-hit areas..

 

Disassembling Kodak

Kodak is regularly held up as an example of how a “real” innovation company behaves. For example, a recent New York Times story compared Apple unfavorably to Kodak, saying.

“Think about the contrast between George Eastman, who pioneered fundamental innovations in photography, and Steve Jobs,” Mr. Summers wrote in 2014. “While Eastman’s innovations and their dissemination through the Eastman Kodak Co. provided a foundation for a prosperous middle class in Rochester for generations, no comparable impact has been created by Jobs’s innovations” at Apple.

But the NYT story did not actually look at the number of people employed by Kodak over time, and compare it to the workers employed by by Apple and other tech companies.  So we’ve peered through years of annual reports to start disassembling Kodak.

Kodak was founded in 1888, but it incorporated in 1902 in its “modern” form.  Its worldwide employment peaked at 145K in 1988. At that time, 40% of its workforce was outside the United States. After that point, the company’s workforce fell off sharply, heading towards bankruptcy in 2012 (not shown). Note that there is a gap in reported worldwide employment during the war years. Also, worldwide employment was not reported for 1902 and 1903, and US employment was not reported for 1902.

It took Kodak 51 years to reach 70K employees worldwide, and 65 years to reach 100K employees. By contrast, today’s tech leaders got to those employment levels much faster

Years to reach this workforce
70K 100K
Kodak 51 65
Amazon 16 17
Apple 32 35
Facebook * *
Google 13 *
Microsoft 22 30

 

Here’s some charts that show this difference graphically.  We age-adjust employment by matching Kodak’s date of incorporation, 1902, with the 1981 FY of Apple’s IPO. This charge shows that at year 36, Apple’s workforce is almost triple the size of Kodak’s at the same age

Here are comparable charts for the other tech leaders.

 

 

 

 

How Ecommerce Creates Jobs and Reduces Income Inequality

The last retail revolution, the rise of the big box store, was not a good thing for the typical sales clerk or cashier.

“Warehouse clubs” and “supercenters” started popping up everywhere in the late 1980s. Retail productivity as measured by the government doubled from 1987 to 2007, as this new retail format was more efficient than traditional department stores and mom-and-pop operations, many of which were pushed out of business. Nevertheless, average real wages for
retail workers actually fell from 1987 to 2007, and the pay gap between retail workers and the rest of the workforce widened.

Now comes the ecommerce revolution. Given the bad experience of workers with the last retail revolution, it’s only natural to worry that this one will have an equally bad effect. As of the new first quarter of 2017, ecommerce has less than 9% of retail sales. What will happen to brick-and-mortar retail workers as 10% or 20%of sales move onto the Internet? Are we facing
a retail “apocalypse” that will destroy jobs that employ 15% of the American work.



			

Weinstein for US News, “The Last Chance for Relevance”

The curtain is about to come down on Paul Ryan’s run as a major force in Washington politics. Should Democrats gain control of the House of Representatives next year Ryan would lose his speakership (and he would likely be forced to step down as Republican leader as well). If Republicans hold onto the House by a few votes, the Republican majority will be even more dependent on the Freedom Caucus, which will want one of their own as speaker. Either way, Ryan’s window to enact any of his major legislative priorities is rapidly dwindling.

It seems it was just yesterday that Ryan was viewed as the future of the Republican Party. He was hailed as one of the GOP’s true, big policy thinkers and his so-called talents were rewarded with a series of plum jobs normally held aside for more seasoned members of Congress. Ranking member of the House Budget Committee at 37, his party’s vice presidential nominee at 42, chairman of the powerful Ways and Means Committee at 45, and then speaker shortly thereafter.

Continue reading at U.S. News & World Report.

A Listening Tour Through Trump Territory: Public Policy and the Towns in Between

This is a challenging time to study public policy, given the bitter political divisions in the United States. Competing world views challenge our sense of common national purpose. The electoral shocks of November 8, 2016 have made this a hard time to teach public policymaking skills: data analysis, coalition building and use of legislative precedents. At the public policy school where I work, we need to teach these skills to the next generation of public servants. Students need insights about how to assist communities where voters feel left behind by the forces of globalization and changing job markets.

There are many ways to take the pulse of the country. Supposedly scientific polls have failed us in recent elections—too many have been dead wrong. They miss too many voters. They fail to capture the motives, the hopes and fears behind the choices voters make.

After months of struggling to explain the Trump agenda in my University of Virginia classrooms, I decided that to become a better teacher, I needed to take a road trip. I’ve crisscrossed the country enough times to visit almost every state. Yet, I’ve rarely ventured south of Richmond. So the route was designed to take me through the small towns of southwestern Virginia, eastern Tennessee, clear down to the Alabama River and Selma, then run north through upcountry South Carolina to the Smoky Mountains. Avoiding the interstates, I would loop back and forth to towns from Marion, Virginia to Maplesville, Alabama to Black Mountain, North Carolina. The laptop was left behind and the IPhone turned off. The primary news source for nine days was going to be hard copies of the disappearing local dailies. The Bristol News-Courier and the Asheville Citizen-Times offer insights into community concerns you won’t get from cable news.

 



			

Holzer for The Hill, “The Path to a Strong Middle Class Moves Forward, Not Backward”

To be elected president, Donald Trump rode a wave of anger and disillusionment among white non-college voters who are bitterly disappointed over their recent economic experiences and hopeless about their futures.

Trump exploited their anger brilliantly, feeding them false hopes that he would restore their lost jobs in manufacturing and mining, thus resurrecting the pathways that once enabled Americans with only a high school education to join the middle class.

But this plan will fail. The new digital technologies and market forces that enable goods to be manufactured much more cheaply by machines or foreign workers cannot and should not be reversed; any remaining manufacturing jobs will be far fewer in number than before and require much more technical skill than most workers in these industries ever had.

Continue reading at The Hill. 

How Ecommerce Creates Jobs and Reduces Income Inequality

The expansion of ecommerce is a significant plus for the income and living standards of high-school educated workers, not a minus. That’s welcome news, as demonstrated in our latest paper, “How Ecommerce Creates Jobs and Reduces Income Inequality:”

We estimate that ecommerce jobs in fulfillment centers and ecommerce companies rose by 400,000 from December 2007 to June 2017, substantially exceeding the 140,000 decline of brickand- mortar retail jobs. We explain this job growth by showing that households are saving 64 million hours of week of shopping time because of ecommerce, and some of these unpaid household hours are being shifted into market work. One consequence is that productivity growth is being underestimated.

Based on a county-by-county analysis, we estimate that fulfillment center jobs pay 31% more than brick-and-mortar retail jobs in the same area. This suggests the shift to ecommerce jobs is reducing income inequality by raising the wages paid to high school graduates.

This research was cited in today ‘s Greg Ip’s Wall Street Journal piece, “Workers: Fear not the Robot Apocalypse”.  Read the paper here.

 

 

 

 

Yarrow for SF Chronicle: “Fathers’ unemployment taking huge toll on children”

“After I got divorced in 1999, I had custody of my kids, but I went out of my way to drop them at their mother’s house over the weekends,” said a 47-year-old African American man in Baltimore. He lost his job during the 2008 recession and was out of work for two years. After finding and losing another job, he lost his house, and his teenage daughters moved in with their mother. “Things should have been done differently,” he said. “I felt like they didn’t listen to me and based my value on my income.”

The decline of men at work has primarily been seen as a labor-market or broader economic issue. Yet it is a child-welfare issue of concern to us all. For the sake of their children, millions of working-age men need to work.

Many fathers and mothers are out of work for some period while their children are growing up, yet the effects on kids of fathers not working has received relatively little attention. This is a significant and growing problem, as about 13 million 25- to 64-year-old men are not working, and several million more are in part-time jobs not by choice, according to U.S. Bureau of Labor Statistics economist Steve Hipple. This number excludes about 1.1 million incarcerated fathers.

Continue Reading at San Francisco Chronicle. 

Building a New Middle Class in the Knowledge Economy

The election of Donald Trump to the presidency in 2016 has made policymakers and politicians in the U.S. much more aware of an important demographic group – the white working class – than before.

We have ignored their plight and their concerns for far too long, and have grown much too complacent about the extent to which they have fallen behind more-educated groups and shared insufficiently in the economic growth we’ve experienced in the past few decades.

Of course, even before the election, labor market analysts and demographers had been discovering that the economic and social outcomes we observe among a large group of less-educated Americans – particularly men with high school or less education – were stagnating or deteriorating.



			

Ecommerce job gains are much larger than retail job losses: Here’s Why

There is a huge debate about whether automation leads to an aggregate loss of jobs. On the one side are those who believe that robots are about to unleash a massive wave of job destruction, rendering most of us superfluous. On the other side are those who are skeptical about the value of new technologies, and believe that the US and other developed countries are stuck in permanent stagnation.

A key case in point is ecommerce. The “robots are here” believers see the impending end of brick and mortar retail and shopping malls, to be replaced by soulless and totally automated warehouses. From their perspective, the latest employment report, which showed a sharp decline in general merchandise stores since October, was only the first sign of the retail workforce circling the drain.

Meanwhile, the stagnationists argue that ecommerce is no big deal, just another way of distributing the same products.

But here is an interesting fact.  First, by PPI’s calculations, the ecommerce industry including fulfillment centers has added 270,000 jobs since March 2014.  Over the same three year period, general retail stores have actually added 53,000 jobs, including the latest declines reported by the BLS  (by our definition, ‘general retail’ includes those stores which compete most closely with ecommerce–see definition below).

 

So in fact, the number of ecommerce jobs has increased sharply in recent years. And as we have shown in a recent paper, these jobs pay considerably more than the low-weekly-earning jobs that comprise most of the retail sector.

How could this be?  The reality is that ecommerce has evolved. The old ecommerce provided the same physical product, but required a long wait compared to going to a store. The new ecommerce, with next day delivery, provides the same physical product as going to a store, with a much shorter wait and much less hassle.

The new ecommerce places much more emphasis on the speed of moving physical objects and quickly getting them to the right place, rather than simply the ease of ordering. It is the cutting edge of the digitization of the physical industries that has the potential to greatly accelerate overall productivity, as Bret Swanson and I wrote in a recent paper.

In fact, I’d like to propose that we stop using the 1990s term ‘ecommerce’, and start calling the new industry “advanced distribution.”  Advanced distribution includes the “electronic shopping and mail order industry,” but it also includes the new fulfillment centers that are currently counted in the warehouse industry.

We suggest that advanced distribution–the ability to ensure an order-delivery lag of one day or less–represents a genuinely new advance that has the potential to generate spin-offs of its own.  For example, custom manufacturing  may become a viable business model if a customer can order a made-to-order shirt or chair and get it in one day.  That would require the custom manufacturers to be located near the fulfillment centers, giving them a durable competitive advantage that overseas rivals would not be able to match.

In that way advanced distribution could become an essential complement to advanced manufacturing,  potentially exacting a significant time penalty for offshoring.   Rather building distribution centers around factories, we’ll start building advanced manufacturing or custom manufacturing hubs around fulfillment centers.

The rise of custom manufacturing is speculative at this point, but the advanced distribution jobs are not. As history shows, productivity gains, when used to offer genuinely new products or services, can create good jobs.

Added (4/10/17): Over the week the WSJ wrote a piece entitled “Online Retailers’ New Warehouses Heat Up Local Job Markets” which talked about the rise in wages at fulfillment centers.  By our calculations, total payroll for ecommerce workers has risen by $19 billion  (in 2016 dollars) since 2007, while payroll for general retail has fallen by $5 billion. On net, advanced distribution is a plus for workers.

 

Note: By our definition, ecommerce or advanced distribution includes the electronic shopping and mail order industry, and the warehouse industry. General retail includes furniture and home furnishings stores;  electronics and appliance stores; clothing and clothing accessory stores;sporting goods, hobby, book, and music stores; and general merchandise stores. This is a slightly broader definition than we used in the recent paper.

 

 

 

 

 

 

 

 

Corporate Tax Reform: Time for Republicans to Show Us the Plan

While much of the debate over the first few months of the Trump Presidency has focused on immigration, cabinet nominations, and Russian interference in the U.S. election, the push toward corporate tax reform may be building momentum.

With a growing number of President Trump’s inner circle embracing Speaker Paul Ryan’s proposed Border Adjusted Destination-Based Cash Flow Tax (DBCFT), the likelihood the concept will be included in a final tax reform package has jumped considerably.

At the same time, the Ryan proposal has split the business community and drawn fire from some prominent Senate Republicans, raising questions as to whether Republicans can unite behind the Ryan approach – or, indeed, any tax reform proposal. Meanwhile, Democrats are keeping their powder dry, noting that, at this point, no one has actually seen a concrete proposal. It’s time for Republicans to show us their plan.



			

Berg for The Hill: Why AmeriCorps is a program conservatives should love

AmeriCorps is the conservative program that conservatives love to hate.

AmeriCorps, a domestic Peace Corps, is a federally funded program that provides modest living allowances and college aid to Americans who perform significant amounts of structured community service by responding to natural disasters, boosting education, bolstering public safety, fighting poverty, improving health, helping the environment and protecting homeland security.

AmeriCorps benefits go only those who work hard. Grants are awarded mostly by states. The vast majority of its participants work in nonprofit groups (not government agencies). And the program generates hundreds of millions of private-sector matching funds.

In theory, conservatives should embrace AmeriCorps as a model of how to boost self-reliance and empower communities.

Read more on The Hill.

Ecommerce Has Added Almost 100K Jobs Over the Past Year

In our new paper, we develop a methodology for tracking ecommerce jobs and pay. Applying that methodology to today’s jobs report, we find that the ecommerce sector has added 97,000 jobs over the past year. This figure includes fulfillment centers. Surprisingly, general retail–which includes the retailers competing most directly with ecommerce–has added 27,000 jobs over the same stretch.

The ecommerce jobs pay much better than general retail. For example, production and nonsupervisory workers in the ecommerce sector, including fulfillment centers, earned an average of $17.41 per hour in 2016, compared to $13.83 in general retail—a 26 percent premium.

Based on official data, it looks like the ecommerce sector is adding new, better-paying jobs without actually reducing existing jobs in retail. Moreover, as our paper shows, these jobs are widely distributed around the country, including states such as Kentucky and Indiana.

 

 

Background: In our new paper, “The Creation of a New Middle Class?: A Historical and Analytic Perspective on Job and Wage Growth in the Digital Sector, Part I,”  we explore the possibility that the job and wage growth generated by the digital boom is creating a new middle class, with gains across the entire country. Our historical benchmark is the first half of the 20th century, when superstar industries companies such as Ford, General Motors, General Electric, and DuPont  accomplished what had seemed impossible at the time: create hundreds of thousands of jobs while paying good wages and offering consumers lower prices than their rivals. We provide evidence that

For the purpose of this analysis, we define the ecommerce sector to include what the government calls the “electronic shopping and mail order house” industry (NAICS 4541) and “general warehousing” (NAICS 49311).  Based on careful examination of the data, this second industry apparently contains the bulk of fulfillment centers and similar establishments.

We define the general retail sector to include those retailers that compete most directly with ecommerce, including electronic and appliance stores (NAICS 443); clothing, shoes, and jewelry stores (NAICS 448); sporting goods, hobby, musical instrument, and book stores (NAICS 451); and general merchandise stores, including department stores and supercenters (NAICS 452).

Because of the way that the BLS collects data, it is possible that the general retail sector includes some workers involved in ecommerce.  That would mean we are underestimating ecommerce jobs and overestimating brick-and-mortar general retail jobs by the same amount.

For the results reported in this blog post, we use 12-month averages.