Wednesday, December 31, 2014

Labor Line

November 2014___________________________________

Labor line has job news and commentary with a one stop short cut for America's job markets and job related data including the latest data from the Bureau of Labor Statistics.

This month's job and employment summary data are below. This month's inflation data is below.

The Establishment Job Report and Establishment Job Details for data released November 7, 2014.

American Job Market The Chronicle

Current Job and Employment Data

Total Non-Farm Establishment Jobs up 214,000 to 139,680,000
Total Private Jobs up 209,000 to 117,766,000
Total Government Employment up 5,000 to 21,914,000

Employment Note
Civilian Non-Institutional Population up 211,000 to 248,657,000
Civilian Labor Force up 416,000 to 156,278,000
Employed up 683,000 to 147,283,000
Employed Men up 219,000 to 78,321,000
Employed Women up 463,000 to 68,962,000
Unemployed down 267,000 to 8,995,000
Not in the Labor Force down 206,000 to 92,378,000

Unemployment Rate down .1 to 5.8%, or 8,995/156,278
Labor Force Participation Rate up .1% to 62.8%, or 156,278/248,657

Prices and inflation measured by the Consumer Price Index (CPI) for all Urban Consumers was down 1.46 percent for 2013.

The October CPI report for the 12 months ending with September, shows the

CPI for All Items was up 1.7%
CPI for Food and Beverages was up 2.9%
CPI for Housing was up 2.6%
CPI for Apparel was up .5%
CPI for Transportation including gasoline was down .8%
CPI for Medical Care was up 2.0%
CPI for Recreation was up .1%
CPI for Education was up 3.3%
CPI for Communication was down .5%

This Month's Establishment Jobs Press Report


The Bureau of Labor Statistics published its November report of jobs in October. The October employed were up 683,000 from a combination of sources that included a decrease of 267,000 in the unemployed, 209 thousand people who returned to the labor force and found jobs, and a normal population increase that found jobs. The labor force increase of 416 thousand in combination with the big decline in the unemployed worked together to lower the unemployment rate. It dropped .1 percent to 5.8 percent. The labor force participation rate eked out a small gain going from 62.7 in September to 62.8 in October. It is only 62.7 percent as of September.

The seasonally adjusted total of establishment jobs was up 214 thousand for October, an increase less than last month. The increase was 181 thousand more private sector service jobs combined with an increase of 28 thousand goods production jobs and 5 thousand more government service jobs.

The goods production sector did a little better than average for October. Natural resources added only a thousand new jobs. Construction continues to grow except that the October increase of 12 thousand jobs dropped below the increases of the last three months. Manufacturing did better with 15 thousand new jobs at an annual growth rate of 1.48 percent. Machinery and fabricated metal products continue to dominate the job gains in manufacturing.

The 5 thousand increase of government jobs was a net increase. The federal government had a decline of 3 thousand jobs, while state government, excluding education was up 600 jobs, and local government excluding education was up 10.6 thousand jobs, an unusually large increase at the local level. Both state and local education declined, down 200 jobs at the state level and down 3.1 thousand jobs at the local level. Private education was up 13.7 thousand jobs to net an increase of 10.4 thousand jobs in education.

Leisure and hospitality services took first place for private service sector gains in October with 52 thousand new jobs and an annual growth rate of 4.24 percent compared to 1.84 percent for all non-farm employment. Arts, entertainment and recreation, especially amusements, gambling and recreation did well with an increase of 11.9 thousand jobs, the biggest increase in a year. Food services, mostly restaurants, picked up 41.8 thousand new jobs. Accommodation had a small but typical loss of 1.3 thousand jobs.

Trade, transportation and utilities employment had 49 thousand new jobs for October with job gains for all four sub-sectors. Wholesale and retail trade were both up with 35.6 thousand new jobs. Transportation did better than usual with 13.3 thousand new jobs where modal industries added 2.8 thousand new airline jobs and 3.9 thousand new trucking jobs. There were more jobs in courier and messenger services, and support activities for terminals and warehouses. Public utilities added 400 jobs for October.

Professional and business services added 37 thousand new jobs at an annual growth rate of 2.29 percent, which continues to be above the national average growth rate for non-farm employment, but lower than recent growth rates for professional and business services. Professional and technical services had 20 thousand of the new jobs with computer design and related services leading the way with 6.8 thousand new jobs and 4 thousand new jobs in management and technical consulting services.

The management of establishments and administrative and support service sectors added 16.7 thousand new jobs. Employment services gains of 24 thousand jobs were offset with other losses in support services. Building support services was a loser, dropping 2.4 thousand jobs.

Health care had a modest increase of 27 thousand jobs with the majority of jobs coming in ambulatory care that had 18.5 thousand of the total health care gain. Hospital jobs were up 3.5 thousand but nursing care facilities were down a thousand jobs. This month's health employment growth rate of 1.8 percent falls below long term trends with a growth rate of 2.44 percent.

Information services lost 4 thousand jobs and financial services added 3 thousand, both typical changes. Data processing, hosting and related services picked up 1.3 thousand jobs, offset by small losses in publishing, motion picture and sound recordings and broadcasting. Financial activities gained 3 thousand jobs. The October gains were more in real estate than usual with 2.3 thousand jobs, but securities and investments and insurance carriers made small gains while commercial banking continued its mordant mournful decline.

Repair and maintenance service lost 2 thousand jobs; personal services added 2.9 thousand jobs; non-profit associations added 1.5 thousand. In spite of ups and downs all three of these sub sectors have virtually the same number of jobs now as they did a year ago.

The October increase of 214 thousand jobs each month for the next 12 months represents an annual growth rate of 1.84 percent. The increase this month is big enough to expect a continuation of upward trends even though it is slower than last month. The big increases in restaurant jobs and employment services, especially temp services, are disappointing. The two increases make up almost 31 percent of the October job gains. These are not the best industries to lead an upward employment trend. Health care is not adding as many jobs as it has in the past several years and no other industry sectors show signs of picking up the slack. It remains a time to be cautious forecasting new jobs.


October Details

Non Farm Total +214
The Bureau of Labor Statistics (BLS) reported Non-Farm employment for establishments increased from September by 214 thousand jobs for a(n) October total of 139.680 million. (Note 1 below) An increase of 214 thousand each month for the next 12 months represents an annual growth rate of 1.84%. The annual growth rate from a year ago beginning October 2013 was +1.93%; the average annual growth rate from 5 years ago beginning October 2009 was +1.45%; from 15 years ago beginning October 1999 it was .47%. America needs growth around 1.5 percent a year to keep itself employed.


Sector breakdown for 12 Sectors in 000's of jobs

1. Natural Resources +1
Natural Resources including logging and mining were up 1 thousand from September at 928 thousand jobs in October. An increase of 1 thousand jobs each month for the next 12 months would be an annual growth rate of +1.29 percent. Natural resource jobs are up 47 thousand for the 12 months just ended. Jobs in the 1990's totaled around 770 thousand. Job growth here will be small compared to America's job needs. This is the smallest of 12 major sectors of the economy with .7 percent of establishment jobs.

2. Construction +12
Construction jobs were up 12 thousand from September at 6.095 million jobs in October. An increase of 12 thousand jobs each month for the next 12 months would be an annual growth rate of +2.37 percent. Construction jobs are up 231 thousand for the last 12 months. The growth rate for the last 5 years is +.99%. Construction jobs rank 9th among the 12 sectors with 4.4 percent of non farm employment.

3. Manufacturing +15
Manufacturing jobs were up 15 thousand from September at 12.181 million jobs in October. An increase of 15 thousand jobs each month for the next 12 months would be an annual growth rate of +1.48 percent. Manufacturing jobs were up for the last 12 months by 170 thousand. The growth rate for the last 5 years is +1.09%. In 1994, manufacturing ranked 2nd but now ranks 6th among 12 major sectors in the economy with 8.7 percent of establishment jobs.

4. Trade, Transportation & Utility +49
Trade, both wholesale and retail, transportation and utility employment was up by 49 thousand jobs from September to 26.549 million jobs in October. These jobs tend to increase at a slower rate than the total of non-farm jobs, but an increase of 49 thousand each month for the next 12 months would be an annual growth rate of +2.22 percent. Jobs are up by 532 thousand for the last 12 months. Growth rates for the last 5 years are +1.52 percent. Jobs in these sectors rank first as the biggest sectors with combined employment of 19.0 percent of total establishment employment.

5. Information Services -4
Information Services employment were down by 4 from September to 2.698 million jobs in October. A decrease of 4 thousand each month for the next 12 months would be an annual growth rate of -1.78 percent. (Note 2 below) Jobs are up by 10 thousand for the last 12 months. Monthly employment in information services gyrates month to month and has been doing so for over a decade. Information jobs reached 3.7 million at the end of 2000, but started dropping, reaching 3 million by 2004 and continues below 2.7 million now. Information Services is a small sector ranking 11th of 12 with 1.9 percent of establishment jobs.

6. Financial Activities +3
Financial Activities were up 3 thousand jobs from September to 7.988 million in October. An increase of 3 thousand each month for the next 12 months would be an annual growth rate of +.45 percent. Jobs are up 85 thousand for the last 12 months. (Note 3 below)This sector also includes real estate as well as real estate lending. Financial Services has been declining with negative annual growth rates, a 5 year growth rate of +.60 percent, and a 15 year growth rate of
+.18 percent. Financial activities rank 8 of 12 with 5.7 percent of establishment jobs.

7. Business & Professional Services +37
Business and Professional Service jobs went up 37 thousand from September to 19.410 million in October. An increase of 37 thousand each month for the next 12 months would be an annual growth rate of +2.29 percent. Jobs are up 657 thousand for the last 12 months. Note 4 The annual growth rate for the last 5 years was 3.41 percent. It ranks as 2nd among the 12 sectors. It was third in May 1993, when manufacturing was bigger and second rank now with 13.9 percent of establishment employment.

8. Education including public and private +10
Education jobs went up 10 thousand jobs from September at 13.671 million in October. These include public and private education. An increase of 10 thousand each month for the next 12 months would be an annual growth rate of +.91 percent. Jobs are up 117 thousand for the last 12 months. (note 5) The 15 year growth rate equals 1.13 percent, faster than the national average. Education ranks 4th among 12 sectors with 9.8 percent of establishment jobs.

9. Health Care +27
Health care jobs were up 27 thousand from September to 18.197 million in October. An increase of 27 thousand each month for the next 12 months would be an annual growth rate of +1.80 percent. Jobs are up 348 thousand for the last 12 months. (note 6) The current month was below long term trends and less than growth from a year ago when the annual growth rate was +1.95 percent. Health care has been growing at +2.44 percent annual growth rate for 15 years, a rate not quite double the national rate. Health care ranks 3rd of 12 with 13.0 percent of establishment jobs.

10. Leisure and hospitality +52
Leisure and hospitality jobs went up 52 thousand from September to 14.760 million in October. An increase of 52 thousand each month for the next 12 months would be an annual growth rate of +4.24 percent. Jobs are up 380 thousand for the last 12 months. (note 7) The 5 year growth rate is 2.58%. More than 80 percent of leisure and hospitality are accommodations and restaurants assuring that most of the new jobs are in restaurants. Leisure and hospitality ranks 4th of 12 with 10.6 percent of establishment jobs. It moved up from 7th in the 1990's to 5th in the last few years.

11. Other +3
Other Service jobs, which include repair, maintenance, personal services and non-profit organizations went up 3 thousand from September to 5.517 million jobs in October. An increase of 3 thousand each month for the next 12 months would be an annual growth rate of +.65 percent. Jobs are up 43 thousand for the last 12 months. (note 8) Other services had +.68 percent growth for the last 5 years. These sectors rank 10th of 12 with 4.0 percent of total non-farm establishment jobs.

12. Government, excluding education +8
Government service employment was up 8 thousand jobs from September to 11.686 million in October. An increase of 8 thousand each month for the next 12 months would be an annual growth rate of +.84 percent. Jobs are up 26 thousand for the last 12 months. (note 9) Government jobs excluding education tend to increase slowly but surely with a 15 year growth rate of .25 percent. Government, excluding education, ranks 7th of 12 with 8.4 percent of total non-farm establishment jobs.


Sector Notes___________________________

(1) The total cited above is non-farm establishment employment that counts jobs and not people. If one person has two jobs then two jobs are counted. It excludes agricultural employment and the self employed. Out of a total of people employed agricultural employment typically has about 1.5 percent, the self employed about 6.8 percent, the rest make up wage and salary employment. Jobs and people employed are close to the same, but not identical numbers because jobs are not the same as people employed: some hold two jobs. Remember all these totals are jobs. back

(2) Information Services is part of the new North American Industry Classification System(NAICS). It includes firms or establishments in publishing, motion picture & sound recording, broadcasting, Internet publishing and broadcasting, telecommunications, ISPs, web search portals, data processing, libraries, archives and a few others.back

(3) Financial Activities includes deposit and non-deposit credit firms, most of which are still known as banks, savings and loan and credit unions, but also real estate firms and general and commercial rental and leasing.back

(4) Business and Professional services includes the professional areas such as legal services, architecture, engineering, computing, advertising and supporting services including office services, facilities support, services to buildings, security services, employment agencies and so on.back

(5) Education includes private and public education. Therefore education job totals include public schools and colleges as well as private schools and colleges. back

(6) Health care includes ambulatory care, private hospitals, nursing and residential care, and social services including child care. back

(7) Leisure and hospitality has establishment with arts, entertainment and recreation which has performing arts, spectator sports, gambling, fitness centers and others, which are the leisure part. The hospitality part has accommodations, motels, hotels, RV parks, and full service and fast food restaurants. back

(8) Other is a smorgasbord of repair and maintenance services, especially car repair, personal services and non-profit services of organizations like foundations, social advocacy and civic groups, and business, professional, labor unions, political groups and political parties. back

(9) Government job totals include federal, state, and local government administrative work but without education jobs. back



Jobs are not the same as employment because jobs are counted once but one person could have two jobs adding one to employment but two to jobs. Also the employment numbers include agricultural workers, the self employed, unpaid family workers, household workers and those on unpaid leave. Jobs are establishment jobs and non-other. back


Friday, October 24, 2014

Jobs for Software Developers

Software Developers

Software Developers have two occupations

Standard Occupational Classification #15-1132 Software Developers, Applications
Standard Occupational Classification #15-1133 Software Developers, Systems Software

SOC Definition for #15-1132 -- Develop, create, and modify general computer applications software or specialized utility programs. Analyze user needs and develop software solutions. Design software or customize software for client use with the aim of optimizing operational efficiency. May analyze and design databases within an application area, working individually or coordinating database development as part of a team. Excludes "Computer Hardware Engineers" (17-2061).

Examples of other common names in use -- Applications Developer; Programmer Analyst; Software Designer

SOC Definition for #15-1133 -- Research, design, develop, and test operating systems-level software, compilers, and network distribution software for medical, industrial, military, communications, aerospace, business, scientific, and general computing applications. Set operational specifications and formulate and analyze software requirements. May design embedded systems software. Apply principles and techniques of computer science, engineering, and mathematical analysis.

Examples of other common names in use--Developer, Infrastructure Engineer, Network Engineer, Publishing Systems Analyst, Senior Software Engineer, Software Architect, Software Developer, Software Engineer, Systems Coordinator, Systems Engineer

National 2013 employment as Software Developers was 1,017,340, 643,830 for software developers, applications, and 373,510 for software developers, system software.
Software Developers for Applications have some jobs in nearly every sector of the economy so anyone with these skills should expect to work in every sector of the economy. Job concentrations occur in professional and business services with 45 percent of the jobs that include 35 percent of the jobs in the computer systems design and related activities industry. Publishing including software publishers has 10 percent of jobs; finance and insurance has 9 percent of jobs. Manufacturing firms employ 8.5 percent of Software Developers for Applications spread among all manufacturing sub sectors with 5 percent in computer and electronic products manufacturing.

Software Developers, System Software have job concentrations in professional and business services with 47 percent of the jobs. Computer and electronic product manufacturing has 14 percent of jobs with another 5 percent scattered in other areas of manufacturing. Publishing has 5 percent, telecommunications and data processing, hosting and related services another 5 percent, with finance and insurance also at 5 percent.

The individual growth rate of new jobs per year since 2000 varies widely for the two occupations. Software developer for applications had a steady growth of 4.25 percent a year that averaged 20.7 thousand new jobs a year, triple job growth for the economy. The Bureau of Labor Statistics is forecasting modest job growth of 14.0 thousand per year through 2022 at 2.08 percent a year

Software developers for system software had a steady increase of 2.69 percent a year that averaged 8.4 thousand new jobs a year since 2000, still rapid growth above the national average. The combined increase equals 29.1 thousand new jobs a year. The Bureau of Labor Statistics is forecasting modest job growth of 8.3 thousand per year through 2022 at 1.88 percent a year.

Job growth is not the only measure of new hiring. Job openings equal job growth and the number of net replacements. Net replacements are people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be any job growth. Job openings for software developers, for applications are forecast to be 21,850 a year through 2022. Job openings for software developers, system software are forecast to be 13,470 a year through 2022.

The recently updated BLS Education and Training Classification assignment lists BA degree skills as necessary for entry into both software developers for applications and system software. Previous work experience of 1 to 5 years is listed as an entry level requirement for the system software occupation, but not for applications. On-the-job training are not important factors in hiring for either.

New BA degrees in computing are part of 10 different Computer and Information Sciences and Support Services specialties and those 10 are part of 26 degree programs in Computer and Information Sciences and Support Services. BA degrees in Computer Science programs totaled 47,384 for the year ending 2012. The latest total is up from 47,299 degrees in 2001 but also down from 59,488 in 2004. The biggest share of these degrees are general survey courses in information systems and computer science and not specifically for software development. There were also 20,917 masters degrees and 1,698 doctorates in the computer science programs. Totals for computer degree programs have remained stable for over a decade but show no sign of increasing in spite of the excellent job prospects.

The ratio of relevant BA degrees to software developer openings equals 1.34, or 47,384/35,320. However, he total of computer graduates lags behind the number of job openings for the eleven computer occupations defined in the Standard Occupational Classification that use BA degree skills. There are 99.5 thousand job openings for the eleven BA degree occupations compared to 47,384 total computer BA degree candidates. To the extent that computer degree holders can find computing jobs from a variety of degree programs, there ratio of BA relevant BA degrees to job openings is .48, indicating a shortage of computer degrees from U.S. colleges.

The entry wage for software developers for applications is reported as $55,770 in 2013, which is also the 10th percentile wage. The median wage is $92,660, and the 90th percentile wage is $143,540. The wages of software developers for applications have kept up with inflation in recent years. For example, to have the buying power of the 2006 median wage of $79 780, in 2013, the software developer for application wage would need to be $92,189. Instead it was $92,660, a .51 percent increase in the real wage for those seven years.

The entry wage for software developers, systems software is reported as $63,140 in 2013, which is also the 10th percentile wage. The median wage is $101,410, and the 90th percentile wage is $150,760. The wages of software developers, systems software have kept up with inflation in recent years. For example, to have the buying power of the 2006 median wage of $85,370, in 2013, the software developer for application wage would need to be $98,648.98. Instead it was $101,410, a 2.8 percent increase in the real wage for those seven years. The 90th percentile wage is 2.6 times the entry level wage, or 10th percentile wage, which implies there is opportunity for advancement.

Wednesday, October 8, 2014

Jobs for Librarians

Librarians and Library Technicians

Standard Occupational Classification #25-4021 Librarians
Standard Occupational Classification #25-4031 Library Technicians

SOC Definition - Librarians #25-4021 – Administer libraries and perform related library services. Work in a variety of settings, including public libraries, schools, colleges and universities, museums, corporations, government agencies, law firms, non-profit organizations, and healthcare providers. Tasks may include selecting, acquiring, cataloguing, classifying, circulating, and maintaining library materials; and furnishing reference, bibliographical, and readers' advisory services. May perform in-depth, strategic research, and synthesize, analyze, edit, and filter information. May set up or work with databases and information systems to catalogue and access information.
Examples of other common names in use: School Library Media Specialist; Circulation Manager

SOC Definition - Library Technicians #25-4031 -- Assist librarians by helping readers in the use of library catalogs, databases, and indexes to locate books and other materials; and by answering questions that require only brief consultation of standard reference. Compile records; sort and shelve books; remove or repair damaged books; register patrons; check materials in and out of the circulation process. Replace materials in shelving area (stacks) or files. Include bookmobile drivers who operate bookmobiles or light trucks that pull trailers to specific locations on a predetermined schedule and assist with providing services in mobile libraries. Examples of other common names in use: Assistant Librarian, Bookmobile Driver.

America employs 136.5 thousand librarians and 96 thousand library technicians. Roughly 58 percent of librarians are employed in schools and colleges, 5 percent in independent libraries and archives, 32 percent in government excluding education and another percent or two scattered at law firms, research or professional associations. Library Technicians have 37 percent employed in schools and colleges, 6 percent in independent libraries and archives, 54 percent in government excluding education and the rest scattered in other industries.

Librarians need a master’s degree in library science to be considered; library technicians need some vocational training, work experience, or associates degree training with an emphasis on computers. Both librarians and library technicians need to be able to work in schools as well as public libraries.

Jobs as librarians have slowly declined for more than a decade. Jobs for librarians declined an average 227 a year from 2000 at an annual growth rate of -.16 percent. Jobs as library technicians also have slowly declined since 2000 with an average decrease of 362 a year at an annual growth rate of -.37 percent. In spite of the recent decline the Bureau of Labor Statistics has forecasted a small increase of both occupations through 2022. It is 1.1 thousand a year for librarians and 900 a year for library technicians.

Job openings make a better measure of new hiring than job growth. Job openings are job growth and the number of net replacements. Net replacements are people who permanently leave an occupation for another occupation or retirement and must be replaced before there can be job growth. Job openings for librarians are forecast to be 4,440 a year through 2022. Job openings for library technicians are forecast to be 6,630 a year through 2022.

The recently updated BLS Education and Training Classification assignments lists MA degree skills as necessary for entry into jobs as librarians and training in a post-secondary program for library technicians. Previous work experience and on-the-job training are not important factors in hiring. However, percentages from survey data are published for library and library technicians that show an educational distribution where 58.7 percent of librarians have a master’s degree, 36 percent have some college up to a BA degree and almost 5 percent have a doctorate in some related field. Library technicians show an educational distribution where 38.6 percent have a high school or less than high school education, 48.3 percent have some college up to a BA degree and only 11.3 percent have a master’s degree.

The National Center for Education Statistics reports degree data for America’s colleges and universities that can be compared with job growth and openings. New master’s degrees in library science for the year ending June 2011 were 7,441, which is up from 2010 when the total was 7,727. Because the master’s degree is the entry level degree only a hand full of BA degree programs in library science exist at America’s colleges and universities. There are virtually no BA degrees in library science. Computer science is a good undergraduate degree before entering a library science master’s program.

The ratio of relevant MA degrees to librarian openings equals 1.68, or 7,441/4,440, assuring more than enough qualified candidates to fill job openings. Openings minus entry degrees are 7,441 – 4,440 = 3,001 degrees over openings indicating some surplus of qualified applicants.

The basic wage data from the BLS occupational employment survey includes a wage distribution. Averages are not used much in wage data. A few high wages pull up the average and make it unrepresentative. Instead a distribution range of wages is published with the 10th, 25th, median, 75th, and 90th percentiles of wages. A 10th percentile wage means 10 percent working in this job have wages equal to or less than the 10th percentile wage and so on. Annual wages are converted to hourly wages by dividing annual wages by 2080.

The entry wage for the national market in the 10th percentile for librarians is reported as $33,380 in 2013. The 25th percentile wage equals $43,890. The median wage is $55,690, the 75th percentile wage equals $70,010 and the 90th percentile wage is $86,360.

The wages of Librarians have not kept up with inflation in recent years. For example, to have the buying power of the 2006 median wage of $49,060 in 2013, the librarian wage would need to be $56,690.80. In stead it was $55,690, a 1.77 percent decrease in the real wage for those seven years.

The entry wage for the national market in the 10th percentile for library technicians is reported as $18,820 in 2013. The 25th percentile wage equals $23,740. The median wage is $31,280, the 75th percentile wage equals $40,320 and the 90th percentile wage is $49,650.

The wages of library technicians have kept up with inflation in recent years. For example, to have the buying power of the 2006 median wage of $26 560, in 2013, the library technician wage would need to be $30.691.15. Instead it was $31,280, a 1.92 percent increase in the real wage for those seven years.

Thursday, August 14, 2014

Capital in the Twenty First Century

Thomas Piketty, translated from French by Arthur Goldhammer, Capital in the Twenty-First Century, (Cambridge, MA: Belknap Press of Harvard University Press, 2014) 577 pages, $39.95.

Capital in the Twenty-First Century by French economist Thomas Piketty studies and examines the only controversial question in economics: the distribution of income and wealth. It studies distribution between capital and labor, among wage earners, among capital owners, between countries and over several hundred years.

Few authors of economics books more than 500 pages with analytical foundations and a reflective data driven discussion attract attention in the popular media as Piketty has done. Paul Krugman comes to mind, but his notoriety comes in small doses from his New York Times editorials more than his books. None of Krugman’s books resemble Piketty’s except they both challenge the status quo and say things America’s wealthy like suppressed.

The book has four parts divided into sixteen chapters and subchapters that builds an economic framework and applies it to data from national income accounts. Data and discussion applies to France, Great Britain, Germany and the United States and a few more countries where data is available. Piketty develops his arguments after an expansive and rambling thirty-eight page introduction that has nearly as much to say about Piketty and the economics fraternity as it does about capital in the twenty first century.

The two part I chapters define terms from National Income Accounts: national income, capital, wealth, the capital to income ratio and growth of output, population, and per capita output. Piketty applies these terms in his first fundamental law of capitalism, which is the accounting identity α = r x β, where alpha(α) equals capital’s share of national income or the capital-labor split, r is the percentage rate of return on capital and Beta(β) is a ratio equal to the value of capital necessary to generate a years worth of national income.

The part II chapters develop an expanded discussion of Beta(β), the capital-income ratio already introduced. Here he applies his second fundamental law of capitalism: Beta(β) = s/g, where s is the percentage of net private saving and g is a percentage growth in national income. Economist readers will recognize this second fundamental law as a clever adaptation of market growth theory. Long ago economists theorized growth of national income depended on the saving rate multiplied by the ratio of income to capital, or g = s x (1/ β). Using the rules of algebra Piketty converted the equation to make the capital to income ratio depend on the ratio s/g. The conversion gives him a second way to study inequality.

Piketty builds his inequality discussion around these two fundamental laws. Several chapter five tables give example growth rates and saving rates in eight rich countries including the United States for the years 1970 to 2010. Both fundamental laws generate ratios to allow inter-country and inter-temporal comparisons of inequality. The data suggest the richer countries can expect s greater than g and r greater than g over long periods that can generate an ever higher capital to income ratio. If r = 5% and g = 1% then the wealthy have to consume at least 80 percent of their high incomes or capital will grow faster than national income and inequality will get worse.

Part II chapters report, chart and discuss the results for national economies where Piketty concludes that inequality does not necessarily diminish from market forces and can get much worse over time. This main or primary conclusion is also summarized in the introduction and again in the brief conclusion. Readers can get the main point with just the introduction and conclusion as I have heard people say they did, but only by missing extensive historical discussion and the much more detailed breakdown of inequality that comes in the part III material.

Keep in mind that Piketty has spent countless hours mastering the intricacies of national income accounting in a way that few American economists do. Our Federal government produces fine data for the U.S. economy but American economists still prefer theorizing while Piketty has built and maintains massive multi-country data files to test if its all true, or needs a few adjustments.

Part III makes extensive use of these data files in discussions that use forty percent of the book to cover inequality for combined capital and labor income, for labor income, for capital income, for inheritance and for wealth. The first of the six chapters in the structure of inequality section gives an introductory warm up to the others.

Piketty begins his warm up chapter with a plot summary from the Honore de Balzac novel, Pere Goriot. Occasional allusions to literature and history give a nice break to otherwise continuous technical material. The plot and characters in Pere Goriot contrast the inequality of class and culture from France around 1835, but you too may feel the parallel to the fading meritocracy of 2014. Then he summarizes and defines terms for the low, medium and high inequality he describes in more detail in the chapters that follow.

These remaining part III chapters build discussion from numerous charts that measure inequality of income and wealth for different countries over time, mostly 1910 to 2010 for income inequality and 1810-2010 for wealth inequality. Most charts plot the share of the top 10 percent of income, the decile, or 1 percent of income, the centile, against time, and similarly for wealth.

In the United States of the late 1920’s the top 10 percent had almost 50 percent of national income. That share declined in the depression and stayed 32 to 35 percent until 1980, but climbed back to 50 percent by 2010.

Wealth distributions generate greater inequality than income because the bottom half of a country’s population typically has no wealth at all. The U.S. share of the top 10 percent of wealth reached a high of 80 per cent in 1910. It dropped to 65 percent by 1950, before beginning a slow by steady climb to 70 percent in 2010.

One of many Piketty interpretations included “. . . there is absolutely no doubt that the increase of inequality in the United States contributed to the nation’s financial instability. The reason is simple: one consequence of increasing inequality was virtual stagnation of the purchasing power of the lower and middle classes in the United States . . .”

Part IV has four chapters in a hundred page discussion of policy that repeatedly returns to the need for progressive taxation to correct for inequality. At page 497 he writes “The progressive tax is indispensable for making sure that everyone benefits from globalization, and the increasingly glaring absence of progressive taxation may ultimately undermine support for a globalized economy.”

He argues in favor of a progressive capital tax, but he offers support for, and historical discussion of, progressive income and inheritance taxes. He warns the rich progressive taxes offer a way to correct for inequality without undermining private property and the forces of competition.

The book is unnecessarily long in part because Piketty, or his editor, adopted conventions common to college textbooks. These are repeated plan of the book sections that give a roadmap of material yet to come and excessive introduction and summary. “I want to tell you about something important, but I can’t do that until I tell you about this, and then this, and then I will get back to that.” Textbook editors love this stuff but it is hard to follow or understand what you will read about later. I think of it as surplus.

More pages are added with material intended only for economists. Non-economists should notice in the introduction where he tells readers he was hired to teach at a university near Boston after finishing graduate school. He left off the name, MIT. After three years he went back to France. Then he writes “the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences.”

Piketty learned at MIT that economics education at American colleges walks a fine line between education and indoctrination. American economists are expected to conform and confirm that capitalism and free enterprise bring ideal results. They theorize in ever more complex ways because they have nothing else to do. They avoid data that contradicts theory or career opportunities decline, or disappear.

His experience at MIT clearly left him with the urge to take a few pokes at American economists. After page 200 he brings in the Cobb-Douglas Production function, the elasticity of substitution, the Roy Harrod, Evsey Domar and Robert Solow growth theories, marginal productivity theory, Franco Modigliani’s Life Cycle theory and a few more; all standard fare in economics graduate programs at American Colleges. He can’t resist reporting his data contradict these long established market theories, but non-economists can skip this insider stuff.

Still there are many things to admire about this book that I can recommend it to non-economists. Non-economists can follow the principal arguments if they read carefully, study the charts, and doggedly keep in mind the difference between stocks and flows after he defines them in Part I and gives examples.

Piketty has attracted attention in the United States similar to British economist John Maynard Keynes after he published his General Theory of Employment, Interest and Money way back in 1936. The General Theory is not a general theory at all, but an abstract discussion of special cases in which Keynes describes conditions where markets and the economy break down and need an active policy of correction, even, god forbid, a policy of government spending.

Politicians and the Chamber of Commerce still attack and condemn Keynes after 78 years, but only a few of them care enough to read or study what he wrote; they just dislike his conclusions. It is early in the Piketty discussion but there are plenty of wealthy and well to do ready to condemn his conclusions without reading what he wrote. Keynes wrote only for economists while Piketty tries, somewhat erratically, for a broader audience. With some extra effort you can decide for yourself. It will be slow going, but forge ahead and the like.

Tuesday, July 22, 2014

The Declining Returns to College Education

A good financial return for a college education should not be assumed as it once was. Chances remain high that college will pay, but changes in tuition and labor markets are lowering the return and raising the risk it might not pay for all graduates. Higher and higher tuition, delays finding jobs and the course of study head a list of trouble spots to consider when making a college investment.


All the states have one and usually two public universities that offer the best opportunity to measure tuition inflation. Private colleges tend to have higher tuition than public colleges, but they are more likely to offer discounts to attract good students away from the less expensive public colleges. Competition for good students means the posted tuition at private colleges may not be a good measure of actual tuition paid, or its rate of increase. Public colleges are less likely to discount tuition than private colleges, which makes them a better measure of tuition increases.

Compare the 2002 tuition for the two largest state universities in each of the fifty states with the tuition of 2013. Some like the University of Arizona have tuition increases at rates that range up to five times the rate of inflation. For example, if the 2002 tuition of $2,490 at the University of Arizona increased by the rate of inflation until 2013, it would be $3,224.80. Instead it is $10,391, an increase of 317.31 percent, which is an annual compounded increase of 13.87 percent when the general inflation rate was 2.38 percent in the same years. (1)

The high percentage increase at the University of Arizona results partly from its relatively low 2002 tuition. The lower 2002 tuition exaggerates the percentage increase over the period but I can find 31 state colleges out of the hundred that have higher tuition than the University of Arizona. Take the University of Vermont. If its 2002 tuition of $8,994 increased by the rate of inflation until 2013, it would be $11,648.13. Instead it is $15,718, an increase of 74.76 percent, which is a annual compounded percent increase of 5.21 percent, one of the lower rates of increase of tuition for the 100 colleges reviewed.

All of the hundred colleges mentioned above had tuition increases higher than the 2.38 percent increase in the Consumer Price Index. All but seven had increases at least twice the rate of inflation; forty-nine had tuition increases at least three times the rate of inflation.


Wage for jobs that need BA degree skills need to go up as fast as tuition to avoid lowering the rate of return on a college education. The Bureau of Labor Statistics (BLS) identifies occupations and careers that need BA degree skills. (2)

In 2013, the Bureau of Labor Statistics reported 169 occupations that require BA degree skills with a combined 20.5 million jobs. The total includes 93 occupations with 10 million jobs that had a median wage increase above the inflation rate of 2.38 percent from 2002 to 2013. The median increase of the median wage for the 93 occupations was 2.9 percent. There were 32 occupations with 6.8 million jobs that had a median wage increase less than the inflation rate. The median increase of the median wage for the 32 occupations was 2.0 percent.

The remaining 44 occupations of the 169 do not have corresponding median wage data for 2013 because some occupations were defined in broader categories in 2002. For example, a nurse in 2002 was broken into four occupations in 2013: Registered Nurse, Nurse Anesthetists, Nurse Midwives, and Nurse Practitioners. Hence wage data is not reported for both years for 44 occupations that have 3.7 million jobs.

In sum, only three of the hundred colleges reviewed had tuition increases less than 4 percent a year, while only seven occupations of the 125 with data had median wage increases as high as four percent, and four of the seven were management occupations. The combination of tuition and wage changes over time assures a general decline in the rate of return on a BA degree.

Measuring the Decline

A few calculations help measure the decline. Someone entering the University of Arizona in 2002 had to pay $2,490 for a year’s tuition. At the time student loan interest was set at 4.06 percent. Using the 4.06 interest rate the total four-year investment would be $11,012.82 assuming tuition is paid in the fall and compounded once a year. [Computations are courtesy of the Excel FV spreadsheet function. Entries for the $11,012.82 are FV(.0406/1, 4, -$2,409, 0 ,1). ]

Someone graduating at age 22 in 2006 has 44 years to work and earn a return on the investment. If the $11,012.82 was invested in stocks and bonds and earned a 4.06 percent return over the 44 years it would be $65,525.86. To have the equivalent $65,525.86 because of a better job requiring college degree skills, it will be necessary to earn an extra $44.64 a month for the same 44 years. [Excel entries for the $65,525.86 are FV(.0406/12, 528, 0, -$11,012.82 ,1) and so on.]

Any amount above $44.64 and the return is above 4.06 percent. If the amount was $100 a month for 44 years the return would be 10.9 percent, a return higher than most long term stock returns or student loans.

However, compare that to what happens to someone entering the University of Arizona in 2013 when a year’s tuition jumped to $10,391. In the time between 2002 and 2013 the interest on college student loans has gyrated from a low of 3.4 to a high of 6.8 percent, but it was set at 3.86 percent for the 2013-2014 academic year. Using a 3.86 interest rate the total four-year investment will be $45,732.76, again assuming tuition is paid in the fall and compounded once a year.

If the $45,732.76 was invested in stocks and bonds and earned a 3.86 percent return over 44 years, as above, it would be $249,258.16. To have the equivalent $249,258.16 because of a better job requiring college degree skills, it will be necessary to earn an extra $179.58 a month for 44 years, a little over four times $44.64.

Any amount above $179.58 and the return will be greater than 3.86 percent, but any amount below $179.58 and the return is lower. If the amount was $100 as it was above the return drops to a paltry .67 percent.


Rapidly rising tuition during a period of stagnant wages has not slowed the tied of graduates. The number of working age adults with BA degrees keeps growing because current graduates are more than double the graduates from the 1970’s who are reaching retirement age. BA degree graduates total 48.7 million from June 1971 until the end of the academic year in 2012. If the two years yet to be reported have at least the same number as 2012, as seems likely, then 52.3 million working age adults have BA degrees. (3)

Some of the 52.3 million with BA degrees went on to get master’s degrees, doctorates and professional degrees. Subtracting the graduate and professional degrees from the total still leaves 28.2 million working age adults with BA degrees to fill the 20.5 million jobs in 2013 that need BA degree skills.

The growing number of people with BA degree skills raises the risk of delay to find higher wage career employment. Compare what happens with 10 years of delay. If the tuition was invested in stocks and bonds and earned 3.86 percent for 10 more years it would grow to $67,235.10. If the $67,235.10 was invested in stocks and bonds and earned a 3.86 percent return over 34 years, it would also be $249,258.16 as above. To have the equivalent $249,258.16 because of a better job for 34 years, it will be necessary to earn an extra $295.21 a month, more than six times the $44.64 from above. An additional $100 a month would be a negative return that would not earn the initial investment.

The chances remain good that college will pay, but individual decisions matter more than ever. I can find 65 occupations in the Occupational Employment Survey requiring no more than high school skills with employment just over 11 million people that have a median wage greater than $50,000. I expect some of the people in those jobs have college degrees, but it is likely their tuition money would be earning a higher return in the stock market. Allow me to repeat, a good financial return for a college education should not be assumed.

1) Tuition data is from the College Board
2) Occupational Employment Survey, BLS
3) Degree data from the Center for Education Statistics, US Department of Education

Monday, July 7, 2014

From the Jaws of Victory

Matt Garcia, From the Jaws of Victory: the Triumph and Tragedy of Cesar Chavez and the Farm Worker Movement, (Berkeley, CA: University of California Press, 2012), 298 pages

From the Jaws of Victory narrates the rise and fall of the United Farm Workers (UFW) union. An introductory chapter gives a brief roadmap of the book and a warning: the book includes the failures and shortcomings of UFW founder, Cesar Chavez, not just his success.

The first three chapters chronicle the slow but successful efforts to organize farm workers and improve wages and working conditions. After a brief discussion of historical material and the former Bracero Program, the narrative turns to Cesar Chavez and his decision to leave community organizing to organize farm workers. That was April 12, 1962.

Chavez built a devoted following to his United Farm Workers Association (UFWA) by knocking on doors and recruiting members one by one. He used marches, rallies and fasts to attract public attention in what turned into a crusade. His UFWA lacked the funds to support a strike when Larry Itliong of the Agriculture Workers Organizing Committee (AWOC) called his mostly Filipino members out of the Delano vineyards September 8, 1965. UFW joined the strike and the two unions combined their efforts to attract public support and put economic pressure on the growers.

Garcia develops the strike and its unfolding strategies over the next 70 pages. The two unions eventually merged to become the UFW with Chavez as president. His leadership in the Delano grape strike put the UFW on the path of success. The coincidence of the farm worker movement with civil rights helped bring in hundreds of volunteers and make the strike a cause for social justice. The early presence of UAW president Walter Reuther brought additional publicity.

The narrative follows the path of decisions that evolved into a successful consumer boycott. The union set up boycott houses in big grape consuming cities and volunteers settled in to devise strategies to reduce grape sales and sales of branded products made from grapes, like wine. Some grocery store chains agreed not to shelve grapes; pickets confronted shoppers at stores that would not go along. In Toronto, young Harvard dropout Marshall Ganz let balloons lettered with “Don’t buy Grapes” float to the ceiling of grocery stores, much to the anger of store managers.

Gradually the boycott succeeded. Prices dropped and then sales. Total shipments were off 9.2 percent by 1969. The bigger producers settled and others followed. Growers in the Coachella valley agreed first, then 26 growers in the San Joaquin Valley signed a labor union contract July 29, 1970.

By August 1970 UFW had 12,000 members, but external and internal problems brought celebrating to an abrupt halt. Chapter four narrates the division and conflict with the Teamsters union after they reneged on their promise not to organize farm workers. The Teamsters organized Salinas’ lettuce growers in August 1970 without a vote of farm workers and in competition with the United Farm Workers. Garcia takes readers through the gritty details of their conflict: picketing, fights, beatings, a court injunction and twenty days in jail for Cesar Chavez who defied the court.

The competition between the UFW and the Teamsters generated questions about labor law. Farm workers are excluded from the National Labor Relations Act that established voting procedures for union representation, but the law also makes boycotts an unfair labor practice subject to immediate court injunction. Chapter five describes the pros and cons of passing a California Agricultural Labor Relations Act, the administration of the law after it passed in May 1975, and the decision to propose changes in the law through a statewide initiative, proposition 14.

UFW won a majority of its representation elections, but the law in practice generated many disputes and unfair labor practice charges, often because the growers did not want the UFW organizing on their property. After a short period of operation both the growers and the unions wanted to amend the law, but the UFW made the aggressive and risky decision to propose a statewide referendum. Proposition 14, among other things, proposed to give union organizers access to workers on California farms during elections and required farm owners to allow organizers on their farms an hour before work, an hour after work, and at lunch time.

Garcia takes readers through the UFW campaign to pass proposition 14. Chavez diverted significant money and personnel to the campaign and over ruled internal opposition, but there was organized opposition from the growers who found a Japanese-American internment camp victim who characterized the access issue as stealing property rights.

Proposition 14 lost badly in the November 1976 election. Garcia interviewed union personnel who described Chavez as badly shaken up by the defeat and they give November 1976 as the date he changed.

There were ominous signs of trouble before the proposition 14 election loss. Chavez previously moved his headquarters to a remote place he called La Paz near Keene, California, which took him away from the activities of the union and the farm workers he needed to influence. He had trouble accepting that the labor contracts he signed needed administration. He did not appreciate the need to switch from volunteers to paid professional staff and continued to prefer organizing to the day to day work of a union, but these were miner compared to the trouble after the election loss.

The last three chapters - six, seven and eight - narrate the union’s post election decline and Chavez role in the union’s ruin. It is a story of the obsession Chavez developed to force union volunteers and staff to travel to La Paz to play a “Game” developed by his friend Charles Dederich as part of a drug rehabilitation program. The Game called for a moderator to attack and ridicule a target and then have a dozen others join in as part of “therapy” for self-examination. Only Chavez and few sycophants could see any connection to the needs of a union.

It is also a story of Executive Board meetings filled with personal attacks and purges of people Chavez falsely accused of plotting against him and the union. The people Garcia interviewed remember specific episodes like the “Monday Night Massacre” where the vegetarians at La Paz were attacked with accusations of plotting against the union and expelled without a chance to reply. Later the entire legal staff was summarily fired; 17 attorneys and dozens of support staff. Chavez arbitrarily called off the boycott and then badly offended Filipino farm workers when he insisted on a visit to Philippine dictator Ferdinand Marcos.

Many volunteers and staff protested through this period and tried to continue with the business of the union, but to no avail. Over the course of four years firings and resignations decimated the union which ceased doing what unions do by the early 1980’s. The book stops at this point followed by a brief epilogue.

The book covers the rise and fall of Cesar Chavez and the UFW thoroughly and clearly as it sets out to do, but not more. The book is not a history of farm workers or farm worker unions. Other unions and union organizing are mentioned only as necessary for the UFW story.

Given the tight focus of the book it has many details. Garcia had access to tape recordings of meetings and especially Executive Board meetings that allow a line by line recounting of who said what that fills the last three chapters of the book. Readers are introduced to many names in the narrative; some disappear, some reappear many times. Readers get to know a few key figures like Marshall Ganz and chief counsel Jerry Cohen, but special effort is required to keep track of all the people and their role in the story. Sometimes discussion reads like an organizer’s convention.

As I finished the book I weighed the positives and negatives in the work of Cesar Chavez and the legacy he leaves to organized labor, but one thing caught my eye in the epilogue: not one person picking grapes in California in 2012 was a member of a union.

Tuesday, July 1, 2014

The Gamblers Dilemma

When I speak of gamblers I am not talking about a bet on your favorite football pool at the office or a game of cards with friends on Saturday night; that you can call entertainment and fun. What I am talking about is repeated bets in commercial casinos or state lotteries. Gamblers who gamble day after day or month after month will earn nothing at best.

Suppose you bet a dollar on the flip of a coin. For a head you win a dollar, for a tail you lose your dollar. Probably you recognize that bet as a fair bet; your chance of winning a dollar just equals your chance of losing a dollar. But suppose you play the game day after day after day. Each day your chance is the same, but after 100 days you might win 56 out of a 100 to be $6.00’s up. After another 100 days you might win 47 and be up only $3.00.

Keep playing and the laws of large numbers take over. Play the game 10 thousand times and you can only expect to win $5,000 and lose $5,000. Play the game long enough and in the parlance of chance, your expected return will be zero: nothing. Most investors will not be happy earning nothing.

What is true for a private game of coin flipping is also true for all fair bets. Parties to a fair bet will earn nothing unless one of them stops soon after they have a stretch of good luck. Now we all know the state lotteries and commercial gambling casinos are earning money. State lotteries and casinos earn money because they are allowed to tilt the odds in their favor and the laws of large numbers take over to earn them a return.

For decades gambling was discouraged or illegal and even by the late 1980’s gambling was limited to two travel locations where table gambling prevailed as the dominate wager. After twenty-five years of expansion gambling may already be available at a shopping mall near you, and it will likely be at slot machines.

A modern slot machine is a computer programmed to lure players into repeated betting, but it is not a fair bet. State gambling commissions allow them tilt the odds in favor of the house. Keep gambling and no matter how many jackpots you win and you will end with nothing.

“Real investors do not play at casinos.”