Standard Occupational Classification #29-1051 Pharmacist
Standard Occupational Classification #29-2052 Pharmacy Technician
Standard Occupational Classification #31-9095 Pharmacy Aide
SOC Definition #29-1051-Pharmacist---Dispense drugs prescribed by physicians and other health practitioners and provide information to patients about medications and their use. May advise physicians and other health practitioners on the selection, dosage, interactions, and side effects of medications. Examples of other names in common use are apothecary; druggist; industrial pharmacist
SOC Definition #29-2052-Pharmacy Technicians---Prepare medications under the direction of a pharmacist. May measure, mix, count out, label, and record amounts and dosages of medications.
SOC Definition #31-9095-Pharmacy Aides---Record drugs delivered to the pharmacy, store incoming merchandise, and inform the supervisor of stock needs. May operate cash register and accept prescriptions for filling. Examples of other names in common use are dispensary attendant; prescription clerk
Both pharmacists and pharmacy technicians are classified as health care occupations. Pharmacy aides are in health care support occupations. Pharmacists have two-thirds of their employment in retail trade, mostly at pharmacies and drug stores, but some also work in grocery stores and department stores. Another 25 percent work at hospitals and a few more at clinics and nursing homes. A small percent are scattered in industries unrelated to health care like education and employment services.
Pharmacy technicians and pharmacy aides can only work with pharmacists, but they are more closely connected to retail trade than pharmacists. Over 70 percent of pharmacy technicians and at least 85 percent of pharmacy aides work in retail with almost all the rest at hospitals. The difference suggests retail trade make more intensive use of their pharmacists while hospital pharmacists do more of their own support work.
National employment as pharmacists was 287,420 in 2013. Jobs are up from 212,660 since 2000 in a steady increase. Annual average job growth equals 5,751 per year since 2000 at a growth rate of 2.34 percent, higher than the average for all employment. National employment as pharmacy technicians was 362,690 in 2013. Jobs are up since 2000 when jobs were 190,940. The annual average job increase equals 13,212 per year since 2000 at a growth rate of 5.06 percent, more than double the national growth rate for jobs. National employment as pharmacy aides was 42,250 in 2013. Jobs are down since 2000 when jobs were 59,890. The annual average job decline equals 1,357 per year since 2000 at a growth rate of –2.65 percent.
The Bureau of Labor Statistics is forecasting job growth for pharmacists at almost the same rate as the last 13 years at 12,330 per year through 2022. Because of anticipated turnover and retirements, openings, or growth plus replacement needs, are expected to be 29,640 a year. Forecast job growth for pharmacy technicians is 7,070 a year through 2022. Anticipated turnover and retirements are expected to create 10,590 openings a year. Forecast job growth for pharmacy aides is much smaller at 480 a year through 2022. Because of anticipated turnover and retirements, openings, or growth plus replacement needs, are expected to be 1,290 a year.
Pharmacists need a doctor of pharmacy degree from a program accredited by the Accreditation Council for Pharmacy education. There are 120 accredited programs and two programs on probation listed by the Accreditation Council. It was not always this way. Earlier pharmacy programs had specialty training at the BA degree level, but these programs have been phased out. Some of those working as pharmacists were trained under the old requirements, but new pharmacists must have the Pharm. D degree. Applicants should now expect seven years of study to finish the degree.
All pharmacists are required to pass state licensing exams before they can work as pharmacists. On-the-job training is not important in that pharmacists are expected to know the work before they can apply for a job or be a pharmacist. Work experience in a related occupation might help in some ways but is not necessary for entry.
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High school degree skills are adequate for pharmacy technicians and aides, although Bureau of Labor Statistics survey data indicate over half working as pharmacy technicians have some college or a college degree. Experience in a related occupation is not necessary, but qualified candidates need some short term on-the-job training working in a pharmacy to be considered fully qualified.
The National Center for Education Statistics reports degree data for America’s colleges and universities that can be compared with job growth and openings. There were 12,943 doctor of pharmacy degrees granted in June 2012, the last year of complete degree data. They were granted as 36 percent to men and 64 percent to women.
Degrees are up in 2012 from previous years at annual growth rates around five percent, much faster than the MD degree or dentistry. The ratio of relevant BA degree to openings equals .44, or 12,943/29,640, suggesting a likely shortage of qualified candidates to fill job openings.
The basic wage data from the BLS occupational employment survey includes a wage distribution. Averages are seldom used 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 Pharmacists is reported as $89,000 in 2013. The 25th percentile wage equals $104,100. The median wage is $119,280, the 75th percentile wage equals $136,360 and the 90th percentile wage is $147,350.
The wages of Pharmacists have kept up with inflation for the last decade. For example, to have the buying power of the 2006 median wage of $94,250 in 2013, the Pharmacist wage would need to be $109,221.70. In stead it was $119,280, a 9.21 percent increase in the real wage for those seven years. Other years also show an increase in real wages.
The entry wage for the national market in the 10th percentile for Pharmacy Technicians is reported as $20,040 in 2012. The 25th percentile wage equals $24,440. The median wage is $29,650, the 75th percentile wage equals $36,270 and the 90th percentile wage is $43,230.
The wages of Pharmacy Technicians have kept up with inflation for the last decade. For example, to have the buying power of the 2006 median wage of $25 630, in 2013, the pharmacy technician wage would need to be $29,616.50. Instead it was $29,650, a .11 percent increase in the real wage for those seven years. Other years also show increasing real wages.
The entry wage for the national market in the 10th percentile for Pharmacy Aides is reported as $17,160 in 2013. The 25th percentile wage equals $19,070. The median wage is $22,580, the 75th percentile wage equals $28,050 and the 90th percentile wage is $35,680.
The wages of Pharmacy Aides have kept up with inflation for the last decade. For example, to have the buying power of the 2006 median wage of $19,440, in 2013, the Pharmacy Aides wage would need to be $22,463.70. Instead it was $22,580, a .52 percent increase in the real wage for those seven years. Other years also show increasing real wages.
Monday, December 29, 2014
Thursday, December 11, 2014
Be a Millionaire
I was speaking with a financial advisor but not at his office. It was at a party where there was lots of informal chit-chat over a nip of the grape. One thing he said to me and some others standing close by was meant as humor, a joke. It was “People sometimes ask me, How did you accumulate your first million? I tell them my simple strategy. Don’t buy anything.”
It got a laugh and it was funny the way he told it, his voice and exaggeration. Then he went on to tell about a personal choice he made back in the 1980’s after finishing college. The car he had was a used Chevrolet with no cachet, but it ran well and was reliable. The fancier car he wanted to buy at the time he said was $9,100. Of course he didn’t have the money, but he recalled the deal he got to buy it was $2,000 down and a three year loan at 7 percent for the rest. He didn’t buy the car but decided to take advantage of pension rules that allow savings to go untaxed in the stock market for decades. He claimed his “not buy a car” investment was worth around $100,000 dollars now.
Not buying a car put him 10 percent of the way to retiring a millionaire, but there are other goods and services that are relatively easy to do without or to substitute something much cheaper. Regular or monthly service charges for cable TV, storage lockers, gym memberships, newspaper, magazine and Internet subscriptions, cleaning services, yard services, and life insurance come to mind quickly.
Decisions not to buy deluxe cars, electronics and appliances over the budget models, or replace them early for the newer models can generate thousands of dollars at retirement. Even essential services like phone, heating and air conditioning allow more saving opportunities to become a millionaire.
How much buying to avoid and things to cut back to reach a million dollars depends on time and interest rates as it does in all financial accumulations. Assuming work starts between the ages of 18 and 22 and continues to the Social Security retirement age makes it reasonable to use forty years of work life to save for retirement. The many stock index funds give a comparable measure of expected returns for a retirement account. The Standard and Poors 500 index earned a 7.2 percent return for the decade ending 2014 assuming dividends were reinvested. For the past twenty-five years the Standard and Poors Index had a 9.4 percent return.
Using an 8 percent return rate and Microsoft Excel spreadsheet functions computes to $284.56 a month of consumer goods and services not purchased will be a million dollars at retirement in 40 years. Lets start by eliminating new cars and then cable television, storage lockers, gym memberships, and newspaper, magazine or Internet subscriptions, all of which have cheap and available substitutes.
In today’s economy a $20,000 new car is common. Put $2,000 down and finance the rest on a 60 month self amortizing loan at 4 percent interest and monthly payments will be $331.50. If a new college graduate invested the $2,000 down payment for 40 years and invested the $331.40 each month for 5 years and then invested that five year total for the next 35 years, the total comes to $428,604.33, assuming the stock market return rates of the past continue in the future.
Few people want to acknowledge the place of a car in their personal finances. Today’s cars can and do go 200 thousand miles. Compare two people who keep a car for 10 years and drive it 10 thousand miles a year. Over forty years the one who buys and drives that car for the last 10 years and the last 100 thousand miles can expect to retire a millionaire on the invested savings.
Many people worry about the age of their car and forget that most of the wearing out and many of the costs of ownership - tires, brakes, oil changes - depend on mileage, not age. Worry that an old car will break down and strand you in the middle of no-where and therefore you need a new one, turns into an expensive worry.
Moving on I found a variety of cable television packages on the Internet that ranged from $44.24 a month up to premium services of $112.94. A typical 5 by 5 storage locker will go for $49 a month. Bigger 10 by 10 lockers go for up to $89 a month. Gym memberships vary but range up to $36 a month. I found magazine, newspaper and Internet subscriptions from $1.00 a month up to $2.95 a month.
Home ownership allows opportunities to choose do it yourself work that renters have to cover in their monthly rent. Still many homeowners hire home cleaning services and yard services. I found a typical home cleaning services at $90 for three hours of cleaning once a month. I found basic yard services at $49 a mow up to $85 for premium services.
For phone service I found phone and Internets services for $39 a month instead of unlimited nationwide talk and text cell charges at $59.95 a month, plus $30.00 more for a two gig data package. Many run over the data limits and add more charges. Phone bills now routinely run over a $100 a month for many.
There are people and families without enough discretionary income to buy any of these services. Those who have discretionary income could be millionaires with a little planning. Drop the $44.95 of cable television expense and use an aerial. Drop the $49 storage locker and store your own junk, or get rid of it. Drop the $36 a month gym membership and do your own exercise for free. Give up ten magazine, newspaper and Internet subscriptions and save $10 a month. Drop the maid service and save $90 a month. Get a $39 dollar a month phone and Internet package and save at least $60 on the fancy cell and data service packages. The total monthly savings is $289.95 a month, even without saving on a car.
Will you suffer doing without these services? I can’t answer that for you, but I am gonna be millionaire.
It got a laugh and it was funny the way he told it, his voice and exaggeration. Then he went on to tell about a personal choice he made back in the 1980’s after finishing college. The car he had was a used Chevrolet with no cachet, but it ran well and was reliable. The fancier car he wanted to buy at the time he said was $9,100. Of course he didn’t have the money, but he recalled the deal he got to buy it was $2,000 down and a three year loan at 7 percent for the rest. He didn’t buy the car but decided to take advantage of pension rules that allow savings to go untaxed in the stock market for decades. He claimed his “not buy a car” investment was worth around $100,000 dollars now.
Not buying a car put him 10 percent of the way to retiring a millionaire, but there are other goods and services that are relatively easy to do without or to substitute something much cheaper. Regular or monthly service charges for cable TV, storage lockers, gym memberships, newspaper, magazine and Internet subscriptions, cleaning services, yard services, and life insurance come to mind quickly.
Decisions not to buy deluxe cars, electronics and appliances over the budget models, or replace them early for the newer models can generate thousands of dollars at retirement. Even essential services like phone, heating and air conditioning allow more saving opportunities to become a millionaire.
How much buying to avoid and things to cut back to reach a million dollars depends on time and interest rates as it does in all financial accumulations. Assuming work starts between the ages of 18 and 22 and continues to the Social Security retirement age makes it reasonable to use forty years of work life to save for retirement. The many stock index funds give a comparable measure of expected returns for a retirement account. The Standard and Poors 500 index earned a 7.2 percent return for the decade ending 2014 assuming dividends were reinvested. For the past twenty-five years the Standard and Poors Index had a 9.4 percent return.
Using an 8 percent return rate and Microsoft Excel spreadsheet functions computes to $284.56 a month of consumer goods and services not purchased will be a million dollars at retirement in 40 years. Lets start by eliminating new cars and then cable television, storage lockers, gym memberships, and newspaper, magazine or Internet subscriptions, all of which have cheap and available substitutes.
In today’s economy a $20,000 new car is common. Put $2,000 down and finance the rest on a 60 month self amortizing loan at 4 percent interest and monthly payments will be $331.50. If a new college graduate invested the $2,000 down payment for 40 years and invested the $331.40 each month for 5 years and then invested that five year total for the next 35 years, the total comes to $428,604.33, assuming the stock market return rates of the past continue in the future.
Few people want to acknowledge the place of a car in their personal finances. Today’s cars can and do go 200 thousand miles. Compare two people who keep a car for 10 years and drive it 10 thousand miles a year. Over forty years the one who buys and drives that car for the last 10 years and the last 100 thousand miles can expect to retire a millionaire on the invested savings.
Many people worry about the age of their car and forget that most of the wearing out and many of the costs of ownership - tires, brakes, oil changes - depend on mileage, not age. Worry that an old car will break down and strand you in the middle of no-where and therefore you need a new one, turns into an expensive worry.
Moving on I found a variety of cable television packages on the Internet that ranged from $44.24 a month up to premium services of $112.94. A typical 5 by 5 storage locker will go for $49 a month. Bigger 10 by 10 lockers go for up to $89 a month. Gym memberships vary but range up to $36 a month. I found magazine, newspaper and Internet subscriptions from $1.00 a month up to $2.95 a month.
Home ownership allows opportunities to choose do it yourself work that renters have to cover in their monthly rent. Still many homeowners hire home cleaning services and yard services. I found a typical home cleaning services at $90 for three hours of cleaning once a month. I found basic yard services at $49 a mow up to $85 for premium services.
For phone service I found phone and Internets services for $39 a month instead of unlimited nationwide talk and text cell charges at $59.95 a month, plus $30.00 more for a two gig data package. Many run over the data limits and add more charges. Phone bills now routinely run over a $100 a month for many.
There are people and families without enough discretionary income to buy any of these services. Those who have discretionary income could be millionaires with a little planning. Drop the $44.95 of cable television expense and use an aerial. Drop the $49 storage locker and store your own junk, or get rid of it. Drop the $36 a month gym membership and do your own exercise for free. Give up ten magazine, newspaper and Internet subscriptions and save $10 a month. Drop the maid service and save $90 a month. Get a $39 dollar a month phone and Internet package and save at least $60 on the fancy cell and data service packages. The total monthly savings is $289.95 a month, even without saving on a car.
Will you suffer doing without these services? I can’t answer that for you, but I am gonna be millionaire.
Thursday, December 4, 2014
Needless Markup
Needless Markup
I have a friend who calls Neiman Marcus, Needless Markup, although probably lots of people do that. She still shops there but complains about the prices. I couldn’t resist the opportunity to report a modest but pleasing savings I made just three days before on a pair of $175 Nunn-Bush shoes. I got them for $7.99 at a Goodwill thrift shop. Better yet they were absolutely 100 percent new; not a scratch, not a scuff, on the tops, on the soles, anywhere.
Finding a brand new pair of shoes at Goodwill is lucky, but there is more to it than luck. Savings at thrift stores comes with strategy and patience. Never shop at a thrift store if you need something right away. If it’s Friday afternoon and you have to get new and respectable shoes for your sister’s wedding, then it’s not the time to go to Goodwill or any thrift.
Savings at thrift stores is a long term thing requiring regular, but short visits. At Goodwill stores and Salvation Army stores, especially in big metropolitan areas, the good stuff turns over very fast. That is important because infrequent visits mean lots of good stuff will come and go and you’ll never see it.
Frequent visits make it easier to spot the good stuff. Plan to stay twenty minutes to a half an hour, but never longer. Have a departmental route: pants, shirts, shoes, furniture, electronics, sporting goods, books and so on. Don’t linger. If the bargain is there, you will see it. If you stay too long you’ll get depressed looking at worn out stuff and begin thinking thrift shops are hopeless when they are not.
Thrift shops are a special preserve for those who like a challenge, but they pay off, especially when you find something you might not buy otherwise. The above mentioned shoes are only one of many fun buys. Include new to nearly new Ralph Lauren, Tommy Hilfiger, Bill Blass and Brooks Brothers shirts, Jos. A Banks pants, 3 all leather belts, New & Lingwood sweaters, a Harris Tweed sports coat, all bought for a song. Take that Needless Markup.
I have a friend who calls Neiman Marcus, Needless Markup, although probably lots of people do that. She still shops there but complains about the prices. I couldn’t resist the opportunity to report a modest but pleasing savings I made just three days before on a pair of $175 Nunn-Bush shoes. I got them for $7.99 at a Goodwill thrift shop. Better yet they were absolutely 100 percent new; not a scratch, not a scuff, on the tops, on the soles, anywhere.
Finding a brand new pair of shoes at Goodwill is lucky, but there is more to it than luck. Savings at thrift stores comes with strategy and patience. Never shop at a thrift store if you need something right away. If it’s Friday afternoon and you have to get new and respectable shoes for your sister’s wedding, then it’s not the time to go to Goodwill or any thrift.
Savings at thrift stores is a long term thing requiring regular, but short visits. At Goodwill stores and Salvation Army stores, especially in big metropolitan areas, the good stuff turns over very fast. That is important because infrequent visits mean lots of good stuff will come and go and you’ll never see it.
Frequent visits make it easier to spot the good stuff. Plan to stay twenty minutes to a half an hour, but never longer. Have a departmental route: pants, shirts, shoes, furniture, electronics, sporting goods, books and so on. Don’t linger. If the bargain is there, you will see it. If you stay too long you’ll get depressed looking at worn out stuff and begin thinking thrift shops are hopeless when they are not.
Thrift shops are a special preserve for those who like a challenge, but they pay off, especially when you find something you might not buy otherwise. The above mentioned shoes are only one of many fun buys. Include new to nearly new Ralph Lauren, Tommy Hilfiger, Bill Blass and Brooks Brothers shirts, Jos. A Banks pants, 3 all leather belts, New & Lingwood sweaters, a Harris Tweed sports coat, all bought for a song. Take that Needless Markup.
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.
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.
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.
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.
Tuition
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.
Wages
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.
Risk
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.
Notes
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.
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.”
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.”
Friday, June 13, 2014
Flash Boys - A Review
Michael Lewis, Flash Boys: A Wall Street Revolt, (New York, NY: W.W. Norton & Co. 2014), 271 pages, $27.95
Michael Lewis is back with another book on Wall Street just four years after The Big Short, his last book on the abuses of Wall Street. Flash Boys tells the story of new abuses and how and why the old stock market has disappeared.
Back in 2002 eighty-five percent of stock trades traded on the New York Exchange with a person who processed the order. Other stocks traded at Nasdaq; no stocks traded at both. Then in 2005 the Securities and Exchange Commission responded to complaints of cronyism by allowing entry of new stock exchanges that could be corporations run for profit rather than just a club run like a public utility. Exchanges multiplied. By 2008 there were thirteen mostly in northern New Jersey: BATS, Direct Edge, Nasdaq BX, Citadel, Getco and others. The new exchanges employed programmers to program a “matching engine” for a room full of computer servers that do “electronic trading.”
Lewis tells the story of the use and abuse of electronic trading with a large caste of characters, one, the star of the show, a dozen other main characters and additional supporting characters. They are variously Canadians, Russians, Asians and some Americans. We meet the star in chapter two. He is Brad Katsuyama, a Canadian of Asian descent, who works in New York for the Royal Bank of Canada.
Katsuyama traded stocks on the New York Exchange for several years until his bosses in Canada decided their New York office should get into the new trend of electronic trading. Since they did not know how to do it, they bought an American company that did: Carlin Financial. The Carlin Financial boss turned out to be a loud and obnoxious American who walked about the office wielding a baseball bat. The new boss did not explain electronic trading but announced loudly, “It’s all about speed.”
The education of Katsuyama started when he tried to sell a million shares of a stock listed for bid on his computer screen at a price of $3.70 a share. When he clicked to sell, the offer disappeared to be replaced with a much smaller offer at a much lower price.
The plot thickens; there is mystery as well as outrage. Katsuyama begins an investigation. He calls in tech support. He says, Watch, closely.” There were a total of one hundred thousand shares of Amgen offered at $48 a share on four exchanges. He clicked to buy them all, but again, the offers disappeared and the price jumped higher. Tech support says “Wow,” but no answers.
In the old days specialist traders in one or a few stocks took customer orders with conditions or limits: sell if the stock goes up to $10 or buy if it goes down to $5. A specialist trader reading over his or her list of orders could make millions if they were allowed to front-run the market and trade for themselves. Stock market rules prohibited the practice, back then. Fast forward to a computer age and a few rule changes and the new results sound very much like the computer assisted same thing, except that multiple exchanges and universal access to computers make it necessary to have faster computers than the competition.
The Carlin financial operation was losing millions for the Royal Bank of Canada and Katsuyama begins to suspect their computers are a few micro seconds too slow to keep up with competitors. His bosses fire the Carlin Financial guy and put him in place to run electronic operations. From there the story moves along as he finds new people with various skills and experience who can turn the operation around.
His first hire is an acquaintance and former Royal Bank of Canada employee, a computer guy who can write computer code and talk to humans. Then there is the hardware guy and others with specialty skills and experience. Readers get a little bio-material about them all and should not be surprised to find them quirky and eccentric, but they do turn the operation around. Generally though they feel dissatisfied just coping; Katsuyama decides to leave his job and start his own exchange with an eye to defeating the abuses they now know so well. The rest of the story follows these efforts.
High frequency trading makes two transactions out of what should be one. When a client wants to buy a stock, the high frequency trader’s computer can find all the other offers to sell in a few milliseconds. If the computer bought the stock at the lowest price on behalf of their client, that would be one transaction. If instead the high frequency trader’s computer buys the stock for the firm and then sells it to the client, two transactions take place. As Lewis explains “In buying from every seller and selling to every buyer, it[high frequency trading] winds up: a) doubling the trades in the marketplace and b) being exactly 50 percent of the booming volume. It adds nothing to the market but at the same time might be mistaken for the central player in that market.”
In the earlier housing collapse Wall Street bought home mortgages and repackaged them into Collateral Debt Obligation bonds to resell to others, or they generated profits by inventing transactions. With High Frequency Trading Wall Street uses computer technology to get between a buyer and seller, or they generate profits by inventing transactions.
Lewis branches into several sub plots at various points in the story. The need for speed obsesses everyone in high frequency trading with hilarious results. Even though a computer signal can go from Chicago to New York and back in twelve milliseconds, a broker closer to the computer doing the trade can front run other orders farther away. Having the latest hardware and locating it in the best place is the newest problem in stocks; some argued over which side of a room their server should be.
The trials and troubles of Russian programmer, Sergey Aleynikow, made grist for another sub plot. Sergey wrote computer code for the Goldman-Sachs high frequency trading operation. He downloaded lots of open source code to reuse and adapt, but his bosses told him everything he did was their property. After he emailed some of the code to himself, Goldman-Sachs complained to the FBI. They arrested him and he was later convicted of stealing proprietary material. He served time, was released on appeal, re-arrested by the state of New York on the same charge, then denied bail as a flight risk and on and on.
The book has the plot, characters and theme I expect to find in a short story or novella. There is no index or references to other works or web sites. There is no research, nor really any argument to follow. The book is based entirely on interviews and some explanation as necessary. The book comes to an end without resolving anything, except like good fiction there is a theme: Wall Street, a bunch of self-serving pickpockets.
Michael Lewis is back with another book on Wall Street just four years after The Big Short, his last book on the abuses of Wall Street. Flash Boys tells the story of new abuses and how and why the old stock market has disappeared.
Back in 2002 eighty-five percent of stock trades traded on the New York Exchange with a person who processed the order. Other stocks traded at Nasdaq; no stocks traded at both. Then in 2005 the Securities and Exchange Commission responded to complaints of cronyism by allowing entry of new stock exchanges that could be corporations run for profit rather than just a club run like a public utility. Exchanges multiplied. By 2008 there were thirteen mostly in northern New Jersey: BATS, Direct Edge, Nasdaq BX, Citadel, Getco and others. The new exchanges employed programmers to program a “matching engine” for a room full of computer servers that do “electronic trading.”
Lewis tells the story of the use and abuse of electronic trading with a large caste of characters, one, the star of the show, a dozen other main characters and additional supporting characters. They are variously Canadians, Russians, Asians and some Americans. We meet the star in chapter two. He is Brad Katsuyama, a Canadian of Asian descent, who works in New York for the Royal Bank of Canada.
Katsuyama traded stocks on the New York Exchange for several years until his bosses in Canada decided their New York office should get into the new trend of electronic trading. Since they did not know how to do it, they bought an American company that did: Carlin Financial. The Carlin Financial boss turned out to be a loud and obnoxious American who walked about the office wielding a baseball bat. The new boss did not explain electronic trading but announced loudly, “It’s all about speed.”
The education of Katsuyama started when he tried to sell a million shares of a stock listed for bid on his computer screen at a price of $3.70 a share. When he clicked to sell, the offer disappeared to be replaced with a much smaller offer at a much lower price.
The plot thickens; there is mystery as well as outrage. Katsuyama begins an investigation. He calls in tech support. He says, Watch, closely.” There were a total of one hundred thousand shares of Amgen offered at $48 a share on four exchanges. He clicked to buy them all, but again, the offers disappeared and the price jumped higher. Tech support says “Wow,” but no answers.
In the old days specialist traders in one or a few stocks took customer orders with conditions or limits: sell if the stock goes up to $10 or buy if it goes down to $5. A specialist trader reading over his or her list of orders could make millions if they were allowed to front-run the market and trade for themselves. Stock market rules prohibited the practice, back then. Fast forward to a computer age and a few rule changes and the new results sound very much like the computer assisted same thing, except that multiple exchanges and universal access to computers make it necessary to have faster computers than the competition.
The Carlin financial operation was losing millions for the Royal Bank of Canada and Katsuyama begins to suspect their computers are a few micro seconds too slow to keep up with competitors. His bosses fire the Carlin Financial guy and put him in place to run electronic operations. From there the story moves along as he finds new people with various skills and experience who can turn the operation around.
His first hire is an acquaintance and former Royal Bank of Canada employee, a computer guy who can write computer code and talk to humans. Then there is the hardware guy and others with specialty skills and experience. Readers get a little bio-material about them all and should not be surprised to find them quirky and eccentric, but they do turn the operation around. Generally though they feel dissatisfied just coping; Katsuyama decides to leave his job and start his own exchange with an eye to defeating the abuses they now know so well. The rest of the story follows these efforts.
High frequency trading makes two transactions out of what should be one. When a client wants to buy a stock, the high frequency trader’s computer can find all the other offers to sell in a few milliseconds. If the computer bought the stock at the lowest price on behalf of their client, that would be one transaction. If instead the high frequency trader’s computer buys the stock for the firm and then sells it to the client, two transactions take place. As Lewis explains “In buying from every seller and selling to every buyer, it[high frequency trading] winds up: a) doubling the trades in the marketplace and b) being exactly 50 percent of the booming volume. It adds nothing to the market but at the same time might be mistaken for the central player in that market.”
In the earlier housing collapse Wall Street bought home mortgages and repackaged them into Collateral Debt Obligation bonds to resell to others, or they generated profits by inventing transactions. With High Frequency Trading Wall Street uses computer technology to get between a buyer and seller, or they generate profits by inventing transactions.
Lewis branches into several sub plots at various points in the story. The need for speed obsesses everyone in high frequency trading with hilarious results. Even though a computer signal can go from Chicago to New York and back in twelve milliseconds, a broker closer to the computer doing the trade can front run other orders farther away. Having the latest hardware and locating it in the best place is the newest problem in stocks; some argued over which side of a room their server should be.
The trials and troubles of Russian programmer, Sergey Aleynikow, made grist for another sub plot. Sergey wrote computer code for the Goldman-Sachs high frequency trading operation. He downloaded lots of open source code to reuse and adapt, but his bosses told him everything he did was their property. After he emailed some of the code to himself, Goldman-Sachs complained to the FBI. They arrested him and he was later convicted of stealing proprietary material. He served time, was released on appeal, re-arrested by the state of New York on the same charge, then denied bail as a flight risk and on and on.
The book has the plot, characters and theme I expect to find in a short story or novella. There is no index or references to other works or web sites. There is no research, nor really any argument to follow. The book is based entirely on interviews and some explanation as necessary. The book comes to an end without resolving anything, except like good fiction there is a theme: Wall Street, a bunch of self-serving pickpockets.
Thursday, May 15, 2014
Unions in College Sports
A Union of Northwestern University Football Players
On March 26th the Chicago regional office of the National Labor Relations Board (“ the Board”) agreed that 55 scholarship football players of Northwestern University can be represented by a union for purposes of collective bargaining. The 24 page ruling relies on relevant citations from the National Labor Relations Act as amended. The player’s petition argued grants-in-aid scholarship recipients meet the definition of employees under the act. The University argued the players were students or at best temporary employees not suitable for bargaining.
The Board opinion included an extensive explanation and statement of facts. The scholarship players received $61,000 a year worth of tuition, fees, books, plus room and board in exchange for signing a written document defining their duties and responsibilities. Contracts apply to one year at a time and players can be let go at anytime if they do not play as well as expected or follow the rules. They have to sit out a year to play at another college.
Scholarship players are under strict and exacting control by their employer throughout the calendar year. The work year starts with training camp six weeks before the academic year with the coaches preparing daily hour by hour itineraries that start as early as 5:45 a.m. and go into the evening watching films, after which they are expected to be in bed. Once the season starts activities like practices, meetings, film sessions, workouts and week end games cover 40 to 50 hours per week. There are January workouts, a “winning edge” program in February prior to spring football and summer strength training.
Given the facts cited above the board concluded scholarship players at Northwestern University and by inference the NCAA meet the definition of an employee under the National Labor Relations Act: “a person who performs services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment.” The Regional Board wrote pages of detail describing the work of Northwestern football players to make it difficult to deny their conclusion.
Northwestern and the NCAA oppose the decision. The NCAA frets that a union might harm non-revenue generating sports, especially women’s sports. However, they do not cite athletic department budget figures that would show how much of the football money goes to football facilities, coaching salaries and administrative and recruiting costs and how much goes to say, Women’s lacrosse.
The nature of the public discussion implies that players need a lawyer and the government to help them organize a union, but the NLRA rewrites and rewords rights everyone has always had, at least since the ratification of the U.S. Constitution and Bill of Rights. Rights of free speech and free assembly in the first amendment assure the rights to bargain collectively with representatives of our own choosing and the right to withhold work in a strike and to peaceable protest by picketing.
With or without the NLRA it will be hard for Northwestern University Players to organize a union. Players will confront a rich and well-organized cartel, the NCAA. Cartel rules that cap player expenses across many colleges and conferences make their total value enormous relative to a single school like Northwestern University. Organizing at one or a few schools would be easy to defeat; the NCAA would suspend a school violating cartel rules and blacklist the players. The losses would be trivial compared to threats to the cartel. To have a chance of success the union would need to organize many players across many schools. Organizing many would pose a significant financial threat to the cartel, but poses a nearly impossible organizing challenge.
The major league team sports all have unions to represent players, but college sports have more conferences, more teams and more players to organize. Players have only four years of eligibility, which guarantees rapid turnover of players and limits their time to hold out in a labor dispute.
The players could meet together and form their own union if they are unified enough to call for a meeting with coaches and officials to air their grievances. If their grievances are brushed off or ignored they could plan a measured show of solidarity like showing up late for practice before moving on to something more.
Self help organizing may sound quixotic and impracticable, but compare organizing a union under the National Labor Relations Act(NLRA). It requires a long process of filings to the National Labor Relations Board (NLRB) and bureaucratic review to assure the union meets the terms and conditions of the law. The request to the National Labor Relations Board for a ruling on their status as employees barely gets the process started.
Before the National Labor Relations Act labor disputes were private disputes, which often brought nationwide strikes and shutdowns in major industries. For decades employers would claim their employees were happy and contented and did not want a union. Employers were free to dismiss employees for union organizing or union membership. They could impose company union and force employees to join. After the National Labor Relations Legislation in 1935 labor relations became public policy to be administered by public agencies with legally defined powers over unions and a strong desire to prevent strikes and shut downs.
When employees or union organizers attempt to establish a union, the National Labor Relations Act requires management to bargain in good faith, but bargaining in good faith has been hard to define much less enforce. Hence the procedure of enforcement has tried to define good faith through hearings at the National Labor Relations Board to settle disputes.
Good faith obligates both sides to meet and make an honest effort to keep an open mind and settle differences, but the two sides only have to try to reach an agreement. After decades of hearings and written opinions good faith requires little more than going through the motions of sitting and talking or holding an initial position indefinitely. Despite years of rulings good faith, or not, rests on inference based on the mood or apparent state of mind of the parties.
The only help the Northwestern University football players will get from American labor law is a governmental interpretation of good faith bargaining. The National Labor Relations Act does not limit management rights, does not require agreements to end strikes or grievances; does not keep employers from hiring replacement workers; and does not limit management powers to discipline or control employees. Failure to act in good faith by an employer is an unfair labor practice, but there are no penalties for acting in bad faith. After hearings and delay the National labor Relations Board can order employers to follow the law and they can order back pay for those dismissed for union organizing, but there is little to deter more subtle forms of anti union actions.
As the matter stands the players have already voted, yes or no, to have a union. The results are not released as of this writing, May 13, 2014, pending a review and decision by the Washington office of the National Labor Relations Board.
The crude and heavy-handed exploitation of players in college football and basketball remains. In the major league team sports players have fought restrictions on their rights of free agency, but unlike college sports there was never an absolute dollar cap on their salaries. College players get their tuition and room and board and nothing else. The amount of money in college sports has gotten so high that independent commercial interests might organize a minor league for players ages 18 to 24. Generally a large commercial interest like the NCAA has to be challenged by another large commercial interest to bring some reforms. What happens after the Washington Board decision will be fun to watch, but do not expect a union to result.
On March 26th the Chicago regional office of the National Labor Relations Board (“ the Board”) agreed that 55 scholarship football players of Northwestern University can be represented by a union for purposes of collective bargaining. The 24 page ruling relies on relevant citations from the National Labor Relations Act as amended. The player’s petition argued grants-in-aid scholarship recipients meet the definition of employees under the act. The University argued the players were students or at best temporary employees not suitable for bargaining.
The Board opinion included an extensive explanation and statement of facts. The scholarship players received $61,000 a year worth of tuition, fees, books, plus room and board in exchange for signing a written document defining their duties and responsibilities. Contracts apply to one year at a time and players can be let go at anytime if they do not play as well as expected or follow the rules. They have to sit out a year to play at another college.
Scholarship players are under strict and exacting control by their employer throughout the calendar year. The work year starts with training camp six weeks before the academic year with the coaches preparing daily hour by hour itineraries that start as early as 5:45 a.m. and go into the evening watching films, after which they are expected to be in bed. Once the season starts activities like practices, meetings, film sessions, workouts and week end games cover 40 to 50 hours per week. There are January workouts, a “winning edge” program in February prior to spring football and summer strength training.
Given the facts cited above the board concluded scholarship players at Northwestern University and by inference the NCAA meet the definition of an employee under the National Labor Relations Act: “a person who performs services for another under a contract of hire, subject to the other’s control or right of control, and in return for payment.” The Regional Board wrote pages of detail describing the work of Northwestern football players to make it difficult to deny their conclusion.
Northwestern and the NCAA oppose the decision. The NCAA frets that a union might harm non-revenue generating sports, especially women’s sports. However, they do not cite athletic department budget figures that would show how much of the football money goes to football facilities, coaching salaries and administrative and recruiting costs and how much goes to say, Women’s lacrosse.
The nature of the public discussion implies that players need a lawyer and the government to help them organize a union, but the NLRA rewrites and rewords rights everyone has always had, at least since the ratification of the U.S. Constitution and Bill of Rights. Rights of free speech and free assembly in the first amendment assure the rights to bargain collectively with representatives of our own choosing and the right to withhold work in a strike and to peaceable protest by picketing.
With or without the NLRA it will be hard for Northwestern University Players to organize a union. Players will confront a rich and well-organized cartel, the NCAA. Cartel rules that cap player expenses across many colleges and conferences make their total value enormous relative to a single school like Northwestern University. Organizing at one or a few schools would be easy to defeat; the NCAA would suspend a school violating cartel rules and blacklist the players. The losses would be trivial compared to threats to the cartel. To have a chance of success the union would need to organize many players across many schools. Organizing many would pose a significant financial threat to the cartel, but poses a nearly impossible organizing challenge.
The major league team sports all have unions to represent players, but college sports have more conferences, more teams and more players to organize. Players have only four years of eligibility, which guarantees rapid turnover of players and limits their time to hold out in a labor dispute.
The players could meet together and form their own union if they are unified enough to call for a meeting with coaches and officials to air their grievances. If their grievances are brushed off or ignored they could plan a measured show of solidarity like showing up late for practice before moving on to something more.
Self help organizing may sound quixotic and impracticable, but compare organizing a union under the National Labor Relations Act(NLRA). It requires a long process of filings to the National Labor Relations Board (NLRB) and bureaucratic review to assure the union meets the terms and conditions of the law. The request to the National Labor Relations Board for a ruling on their status as employees barely gets the process started.
Before the National Labor Relations Act labor disputes were private disputes, which often brought nationwide strikes and shutdowns in major industries. For decades employers would claim their employees were happy and contented and did not want a union. Employers were free to dismiss employees for union organizing or union membership. They could impose company union and force employees to join. After the National Labor Relations Legislation in 1935 labor relations became public policy to be administered by public agencies with legally defined powers over unions and a strong desire to prevent strikes and shut downs.
When employees or union organizers attempt to establish a union, the National Labor Relations Act requires management to bargain in good faith, but bargaining in good faith has been hard to define much less enforce. Hence the procedure of enforcement has tried to define good faith through hearings at the National Labor Relations Board to settle disputes.
Good faith obligates both sides to meet and make an honest effort to keep an open mind and settle differences, but the two sides only have to try to reach an agreement. After decades of hearings and written opinions good faith requires little more than going through the motions of sitting and talking or holding an initial position indefinitely. Despite years of rulings good faith, or not, rests on inference based on the mood or apparent state of mind of the parties.
The only help the Northwestern University football players will get from American labor law is a governmental interpretation of good faith bargaining. The National Labor Relations Act does not limit management rights, does not require agreements to end strikes or grievances; does not keep employers from hiring replacement workers; and does not limit management powers to discipline or control employees. Failure to act in good faith by an employer is an unfair labor practice, but there are no penalties for acting in bad faith. After hearings and delay the National labor Relations Board can order employers to follow the law and they can order back pay for those dismissed for union organizing, but there is little to deter more subtle forms of anti union actions.
As the matter stands the players have already voted, yes or no, to have a union. The results are not released as of this writing, May 13, 2014, pending a review and decision by the Washington office of the National Labor Relations Board.
The crude and heavy-handed exploitation of players in college football and basketball remains. In the major league team sports players have fought restrictions on their rights of free agency, but unlike college sports there was never an absolute dollar cap on their salaries. College players get their tuition and room and board and nothing else. The amount of money in college sports has gotten so high that independent commercial interests might organize a minor league for players ages 18 to 24. Generally a large commercial interest like the NCAA has to be challenged by another large commercial interest to bring some reforms. What happens after the Washington Board decision will be fun to watch, but do not expect a union to result.
Friday, May 9, 2014
Jobs in Day Care Centers
A recent article in the Washington Post ["Math 101 for New Parents," WP, 1-10-14] reported the cost of a year of day care in many states exceeds a year of tuition at state colleges. The article cited Child Care Aware of America as a source of information. They publish annual expenses by state for child care centers and family care centers. Expenses are broken out for infant care, 4 year olds, and school age care for the two types of facilities.
While they do not report college tuitions the child care center expenses they report exceed $10,000 for 19 states; the average for the 50 states is $9,466.00. In Oregon, for example, the College Board gives in-state tuition at the University of Oregon as $9,767, compared to $13,452 reported as a year's expenses for infant child care. Expenses reported for 4 year olds and for school age children tend to be lower. In Oregon the expenses reported for 4 year olds dropped to $10,200 and to $5,028 for school age children. School age children need after school care rather than all day at least during the school year.
Licensed day care costs include rent, supplies, maintenance, toys-equipment, liability insurance, utilities but wages for staff make up the biggest share of a day care program budget. The Bureau of Labor Statistics confirms staffing information also reported on the Child Care Aware website. Both report that three occupations account for 76 to 80 percent of employment at child care centers: preschool teachers, teacher assistants and childcare workers.
Preschool teachers have the highest median wage of the three occupations at $27,570 in 2013, up from $22,680 in 2006. The increase of wages exceeds the rate of inflation by enough to raise buying power by 5 percent over the 8 year period. States do not require a BA degree or teacher certification for the lead teacher in a pre-school. Training hours in early childhood education or child development activities are required in 19 states, but 31 states allow a high school education or less than high school as training for a preschool teacher. The low entry requirement to work in day care makes it unnecessary to compete with the public schools for certified teachers and assures a large pool of labor to help keep wages low.
Teacher assistants have a median wage of $24,000 in 2013, up from $20,740 in 2006. To have the buying power of 2006 in 2013 the wage would need to be $23,965, which makes $24,000 a tiny increase in buying power for teacher assistants for the 8 year period.
Child care workers make up a little over 30 percent of staffing but they have the lowest wages of the three occupations with a median wage of $19,700. To have the buying power of the 2006 median wage of $14,630 in 2013, the median wage would need to be $20,372. Instead it was $19,700 a 3.8 percent decline in buying power over the 8 years.
State licensing rules limit the number of children per staff, the child to staff ratio. For children in infant care some states allow 6 children per staff in; some states allow only 3 per staff. The ratio goes up for older children. For school age children the maximum for some states is 25 per staff; the low for others is 9.
With six to one staff 30 children in infant care need to have one lead teacher and four other staff ready to assist suggesting payroll expenses of $127,644 a year that allows for 20 percent extra to pay Social Security taxes, workman’s compensation and so on. [i.e. ($27,570 + 4 x $19,700)*1.2 = $127,644 ] A day care center with 30 children and the average charge of $9,644 can generate revenue $284,000, and over $400,000 with charges like Oregon. The difference of revenue and payroll suggests an adequate margin for expenses and maybe a little extra.
Some of the revenue paid to day care centers comes from the Child Care Development Block Grant program and Temporary Assistance to Needy Families (TANF), the Clinton Administration replacement for welfare, but Child Care Aware of America reports 60 percent of revenues come directly from parents.
If a couple that both earn $45,000 salaries then social security and joint federal income taxes generates taxes of $19,338.75. Adding in the average day care expense of $9,644 brings the total to $28,982.75. If one stays home and the other continues at $45,000, taxes drop to $6,411.25 including a small child care tax credit of $250. When both work they are left with $61,017.25 when one works they are left with $38,588.75. Therefore $45,000 additional income from a second salary adds only $22,428.75 to net income and the difference of $45,000 - $22,428.75 equals the cost of working and paying for child care, which in this example is $22,571.50.
Child Care Aware of America tells website visitors they are the nation’s leading voice for child care. They also write “A major hidden funding source for child care subsidies are the teachers in child care centers and family child care homes. . . . In effect, the low wages of the early care and education workforce serve as a subsidy for parents.”
It’s nice they are honest, but those working do earn enough to be self supporting. High prices and low wages are getting to be an old story in American job markets.
While they do not report college tuitions the child care center expenses they report exceed $10,000 for 19 states; the average for the 50 states is $9,466.00. In Oregon, for example, the College Board gives in-state tuition at the University of Oregon as $9,767, compared to $13,452 reported as a year's expenses for infant child care. Expenses reported for 4 year olds and for school age children tend to be lower. In Oregon the expenses reported for 4 year olds dropped to $10,200 and to $5,028 for school age children. School age children need after school care rather than all day at least during the school year.
Licensed day care costs include rent, supplies, maintenance, toys-equipment, liability insurance, utilities but wages for staff make up the biggest share of a day care program budget. The Bureau of Labor Statistics confirms staffing information also reported on the Child Care Aware website. Both report that three occupations account for 76 to 80 percent of employment at child care centers: preschool teachers, teacher assistants and childcare workers.
Preschool teachers have the highest median wage of the three occupations at $27,570 in 2013, up from $22,680 in 2006. The increase of wages exceeds the rate of inflation by enough to raise buying power by 5 percent over the 8 year period. States do not require a BA degree or teacher certification for the lead teacher in a pre-school. Training hours in early childhood education or child development activities are required in 19 states, but 31 states allow a high school education or less than high school as training for a preschool teacher. The low entry requirement to work in day care makes it unnecessary to compete with the public schools for certified teachers and assures a large pool of labor to help keep wages low.
Teacher assistants have a median wage of $24,000 in 2013, up from $20,740 in 2006. To have the buying power of 2006 in 2013 the wage would need to be $23,965, which makes $24,000 a tiny increase in buying power for teacher assistants for the 8 year period.
Child care workers make up a little over 30 percent of staffing but they have the lowest wages of the three occupations with a median wage of $19,700. To have the buying power of the 2006 median wage of $14,630 in 2013, the median wage would need to be $20,372. Instead it was $19,700 a 3.8 percent decline in buying power over the 8 years.
State licensing rules limit the number of children per staff, the child to staff ratio. For children in infant care some states allow 6 children per staff in; some states allow only 3 per staff. The ratio goes up for older children. For school age children the maximum for some states is 25 per staff; the low for others is 9.
With six to one staff 30 children in infant care need to have one lead teacher and four other staff ready to assist suggesting payroll expenses of $127,644 a year that allows for 20 percent extra to pay Social Security taxes, workman’s compensation and so on. [i.e. ($27,570 + 4 x $19,700)*1.2 = $127,644 ] A day care center with 30 children and the average charge of $9,644 can generate revenue $284,000, and over $400,000 with charges like Oregon. The difference of revenue and payroll suggests an adequate margin for expenses and maybe a little extra.
Some of the revenue paid to day care centers comes from the Child Care Development Block Grant program and Temporary Assistance to Needy Families (TANF), the Clinton Administration replacement for welfare, but Child Care Aware of America reports 60 percent of revenues come directly from parents.
If a couple that both earn $45,000 salaries then social security and joint federal income taxes generates taxes of $19,338.75. Adding in the average day care expense of $9,644 brings the total to $28,982.75. If one stays home and the other continues at $45,000, taxes drop to $6,411.25 including a small child care tax credit of $250. When both work they are left with $61,017.25 when one works they are left with $38,588.75. Therefore $45,000 additional income from a second salary adds only $22,428.75 to net income and the difference of $45,000 - $22,428.75 equals the cost of working and paying for child care, which in this example is $22,571.50.
Child Care Aware of America tells website visitors they are the nation’s leading voice for child care. They also write “A major hidden funding source for child care subsidies are the teachers in child care centers and family child care homes. . . . In effect, the low wages of the early care and education workforce serve as a subsidy for parents.”
It’s nice they are honest, but those working do earn enough to be self supporting. High prices and low wages are getting to be an old story in American job markets.
Monday, April 21, 2014
Labor Market Forecast 2014
Labor Market Forecast 2014
The Bureau of Labor Statistics has published its annual benchmark review and revision for the year 2013 that makes it a good time for an assessment of job growth for the future. The increase for the 12 months ending December 2013 is 2.331 million jobs, better than last year. It equals a growth rate of 1.73 percent for the 12 months of 2013. The growth rate of establishment jobs is faster than the growth rate of the adult civilian population and labor force, indicating a modest progress for the 2013.
During the recession of January 2008 to February of 2010 jobs declined 8.78 million, a 6.33 percent decrease in non-farm establishment employment. After the turnaround beginning March 2010 until December 2013 non-farm establishment jobs recovered 7.7 million to just over 137.4 million, a little over 89 percent of the recession losses.
Almost all of the short term changes for the 12 months ending with December 2013 followed the same long term trends from as far back as 1990. That is the industry sectors that showed a declining share of total non-farm employment in 2013 also have a declining share of jobs from 1990 to 2013, and vice versa for the industries with an increasing share.
The Declining Share of Goods Production
Combined goods production jobs were 13.7 percent of non-farm employment in 2013, down 7.9 percent from 1990. Natural resources - logging and mining – have only 868 thousand jobs, less than one percent of non-farm employment, which is a .1 percent smaller share of 2013 employment than 1990. In spite of recent growth construction employment remains 1.86 million below its 2006 high of 7.7 million. A sustained increase in construction will be necessary to bring a recovery of construction jobs.
Manufacturing is the biggest disappointment for 2013 with an employment gain of only 78 thousand jobs with an anemic growth rate of .65 percent, well below the national average. The 2012 gain was 201 thousand, but manufacturing gains do not signal a turn around of decline in manufacutring.
The Declining Shares in Service Production
Services sectors in wholesale and retail trade, utility services, information services, financial and real estate services, repair and maintenance services and federal government ,and state and local government excluding education had their share of non-farm employment decrease in 2013 as they have been doing since 1990. Combined these services were 32.9 percent of non-farm employment at the end of 2013, down 3.9 percent from 1990.
Combined goods production and long term declining service sectors have 46.6 percent of jobs, but it is the percent of jobs left after two decades of decline that shows no sign of reversal. In the service sectors like trade and finance computer technologies have raised productivity and cut job growth. Higher productivity has cut jobs in manufacturing, but also millions of manufacturing jobs are now offshore. A trickle of these jobs have come back giving hope that foreign wages will rise relative to the decline in U.S. wages, but it will take more than hope to create new manufacturing jobs. American companies will have to invest more here and less abroad.
The Increasing Shares in Service Production
Service sector industries in transportation, professional and technical services, establishments managing companies, administrative support services, arts, entertainment, recreation, food services and restaurants, personal services and health care had their share of non-farm employment increase in 2013. Combined these services were 41.4 percent of non-farm employment at the end of 2013, up 10.3 percent from 1990.
Educational services and non-profit associations fell below their long term trends for 2013. Private schools, state education at colleges and local education in the public schools had more jobs for 2013, but just barely. The total increase was a couple thousand, which cut the share of education in total non-farm employment. Non-profit associations lost a few thousand jobs, and therefore its percentage share declined as well. Combined these two services were 12.0 percent of non-farm employment at the end of 2013, up 1.6 percent from 1990, but down about .2 percent for 2013.
In 2013, the big gainers were in administrative support services that generated 422 thousand new jobs for the 12 months ending December 2013. Temporary help services had 227 thousand of the 422 thousand jobs, which was the biggest individual increase in jobs that also have a higher percentage of U.S. non-farm employment. Firms and establishments in administrative support services contract office and facility support services, and do employment placement services, executive search services, telephone call centers, investigation and security services, exterminating and pest control services, janitorial services, landscaping services, carpet and upholstery cleaning services all gained jobs with a continuing increase in their percentage of non-farm employment for 2013.
Other big gains came at restaurants with 341 thousand new jobs; more new jobs than logging, mining, construction and manufacturing combined; more new jobs than the health care sector including social services. Full service restaurants, fast food restaurants, bars and coffee bars are all growing at two to three times the national average of job growth.
The health care increase of 308 thousand jobs for the 12 months ending December 2013 was well below last year’s increase of 469 thousand. The increase came even though hospital employment dropped over the same 12 months.
Professional and technical services had third place among sub-sectors with a growing percentage of employment. The new jobs here totaled 204 thousand for the 12 months ending December 2013. However, 60 percent of the gains in professional and technical services were in computer design and related services and managerial and technical consulting services; another 20 percent were in architectural and engineering services.
Good job opportunities continue for Baccalaureate degree students in computing, still the most employable BA degree. The many new jobs in managerial and technical consulting service offer career employment, but the competition for these jobs has started to push up degree requirements. An M.B.A. may be about to replace the BA as an entry degree.
Architecture and engineering did well with 40 thousand new jobs for the 12 months of 2013. However, new architecture and engineering graduates have to compete with other engineers who have left the construction and manufacturing industries to look for work at specialty architecture and engineering firms. The new employment is not necessarily entry level jobs.
Other professional employment has slow growth and college graduates will find it harder to get started in a professional career. Legal services generated only 4 thousand new jobs in the 12 months ending December 2013. The best jobs at law firms require a law degree, although a BA degree has an entry degree for a paralegal. Paralegal employment is growing faster than lawyers.
Accounting firms hire BA degree candidates but accounting firms generated only 10 thousand new jobs in the 12 months ending December 2013. Scientific development and research services generated 45 thousand new jobs for the 12 months of 2013. The best jobs here require advanced degrees although there are many assistant research positions for BA candidates.
A Growth Rate for the next Decade
There are several approaches to labor market forecasts. One starts with a projected growth rate for non-farm employment based on long term trends with consideration for productivity, and expected social and political events. Then the projected total increase can be divided by industry sector and individual industries based on the trend of year by year share changes for individual industries. A second approach starts with projected growth rates for individual sectors and builds up, or adds up the total; both can be tried and compared.
The latest forecast from the Bureau of Labor Statistics for non-farm establishment employment for the ten years ending 2022 is 1.09 percent a year. The annual average growth rate of the adult civilian population from 1990 through 2013 is 1.14 percent, and from 2000 to 2013 it was 1.12 percent. Theoretically establishment jobs and the civilian labor force can grow faster than the adult population if those not in the labor force look for work or find jobs that help expand establishment employment. Those with work or those looking for work are part of the civilian labor force, which has settled at 63 percent of the adult population in recent years. The other 37 percent of the adult population not in the labor force could decide to look for work and take jobs, which theoretically allows jobs to grow faster than population growth.
In practice it has not happened. From 1990 to 2013 the growth rate of the civilian labor force averaged .92 percent per year; from 2000 to 2013 it was .66 percent. From 1990 to 2013 the growth rate of those not in the labor force averaged 1.98 percent per year; from 2000 to 2013 it was 1.56 percent.
The long term growth rate of establishment employment from 1990-2013 averaged .96 percent per year. Therefore, the Bureau of Labor Statistics forecast of 1.09 percent, slightly above the long term growth of jobs and slightly below population growth, pushes their forecast into a moderately optimistic range.
Annual growth rates in establishment employment are subject to cyclical fluctuations from expansion or recession. In the decade of 2000-2010 there were five years where one year of change decreased and five years where one year of change increased. The high year growth rate was 1.8 percent for 2005 to 2006, which was the high point of the housing bubble. The low year growth rate was -4.34 percent for 2008 to 2009, after the housing bubble and stock market bubble burst and the economy sank into recession.
Last year’s growth rate of 1.73 percent includes some increase of jobs from cyclical expansion. Year to year forecasts can allow for cyclical fluctuations by allowing for expected fluctuations in GDP, but the year to year forecasts in this report allow for long term trends of the individual industry sectors of the economy. When I compile my forecasts for the separate industries I get an annual growth rate of 1.07 percent.
A 1.07 percent forecast means 1.530 million new jobs in the coming year 2014, or an average of 127.5 thousand new jobs a month. That is the non-cyclical forecast applied to a year, which like the BLS forecast is on the optimistic side. The country has relied on a limited range of industry sub-sectors to create employment for the last decade at least, and especially since the recession ended.
Some Forecast Details
The separate industry forecasts include recovery in construction but a slow, steady erosion of jobs in manufacturing with a small net annual decline in combined goods production jobs and its continued loss of percentage share of employment that has to be made up elsewhere. The forecast calls for 1.4 percent decline in share over the next 10 years, a smaller decline compared to the 5.0 percent decline from 2000 to 2013.
Two services are forecast to lose jobs and percentage share: utilities and information services. Information services, primarily telecommunications and publishing, but also broadcasting, motion pictures and the Internet services, has been declining; all use computer technologies. Utilities are also in decline from productivity and mergers. The forecast calls for a 13 thousand new jobs a year with a .3 percent decline in share over the next decade, less than the .8 percent decline since 2000.
Wholesale and retail trade, finance and real estate are forecast to have more jobs, but not enough new jobs to prevent a continued decline in percentage share of these services. The forecast calls for 0.6 percent decline in share over the next 10 years, a smaller decline compared to the .9 percent decline from 2000 to 2013.
Unpredictable politics affects government forecasts. In the past few years government employment declined with the most political pressure for cuts coming to the Federal Government. The Federal government has declined from 2.9 percent of non-establishment employment to 2.2 percent in 2000, and 2 percent in 2013. The forecast calls for a decline in federal employment from 2.7 to 2.5 million over the next decade, a decline or nearly .4 percent over the decade.
State and local government including education is up from a 13.6 percent share of non-farm employment in 2000 to 14.0 percent in 2013. However, all of the .4 percent share increase comes in public education. State and local excluding education has a 6.5 percent share in 2013 as it did in 2000. The forecast calls for a decline of .6 percent share of state and local government for the next 10 years.
Private education is up from 1.8 percent to 2.5 percent of establishment employment from 2000 to 2013. However, the growth of public education has slowed down in the last 3 years and slowed down enough that its percentage share has dropped since 2010. For the last three years private education has replaced jobs in public education. The forecast calls for a combined private and public education increase of .8 percent in share over the next decade, a smaller increase than the 1.0 increase since 2000.
Transportation, business and professional services, health care, leisure and hospitality, especially restaurants, and personal services will be the primary sources of new jobs in the next decade. The forecast calls for a 6.8 percent increase in share over the next decade, a smaller increase than the 10.3 percent increase since 2000.
A Difficult Task
To create an average of 125.7 thousand jobs a month will be difficult. Too many industries cannot contribute many new jobs even if the economy does well. Wholesale and retail trade and finance are two examples. Trade remains 560 thousand jobs below its highest job total which came in November 2007 right before the recession started. However, its percentage share of non-farm employment at that time was down from 2000 and from 1990. Given the automation from computer technology no realistic forecast would predict an increase in jobs that reverses that downward share trend.
Finance remains 493 thousand jobs below its highest total which came in November 2006, right as the housing bubble started. Like trade, the financial activities share of total non-farm employment was down from 1990 and 2000. Job totals have stabilized in the last few years, but it’s share of jobs keeps falling. Given the automation from computer technology no realistic forecast would predict an increase that reverses that downward share trend.
The country must rely on the industries with a long run trend of rising share to take up the slack and provide enough jobs if there are going to be enough jobs. Health care needs a minimum of 30 to 31 thousand new jobs a month. Because the forecast has declining sectors declining at a slower rate than they have been, the expanding sectors are in turn forecast to increase at a slower rate than they have been to make up the difference, but they must increase.
Combined government jobs are down almost 700 thousand jobs since the recession ended. Whether they will stop falling, increase or decrease, depends more on politics than the private sector forecasts, but declining government payrolls take money out of the spending stream that hurts private sector employment as well.
Except for professional services like computing and management consulting, the remaining services sectors with long term growth are also sectors with low wages and also prone to a high percentage of recessionary layoffs. Restaurants, arts, entertainment, recreation and personal services have a larger share of jobs in 2013 than 2000 and 1990, but they are more cyclical than education and health care.
In sum, I have made a cautious non-cyclical forecast of annual average increase in jobs for a decade. Time will tell just how good it is.
The Bureau of Labor Statistics has published its annual benchmark review and revision for the year 2013 that makes it a good time for an assessment of job growth for the future. The increase for the 12 months ending December 2013 is 2.331 million jobs, better than last year. It equals a growth rate of 1.73 percent for the 12 months of 2013. The growth rate of establishment jobs is faster than the growth rate of the adult civilian population and labor force, indicating a modest progress for the 2013.
During the recession of January 2008 to February of 2010 jobs declined 8.78 million, a 6.33 percent decrease in non-farm establishment employment. After the turnaround beginning March 2010 until December 2013 non-farm establishment jobs recovered 7.7 million to just over 137.4 million, a little over 89 percent of the recession losses.
Almost all of the short term changes for the 12 months ending with December 2013 followed the same long term trends from as far back as 1990. That is the industry sectors that showed a declining share of total non-farm employment in 2013 also have a declining share of jobs from 1990 to 2013, and vice versa for the industries with an increasing share.
The Declining Share of Goods Production
Combined goods production jobs were 13.7 percent of non-farm employment in 2013, down 7.9 percent from 1990. Natural resources - logging and mining – have only 868 thousand jobs, less than one percent of non-farm employment, which is a .1 percent smaller share of 2013 employment than 1990. In spite of recent growth construction employment remains 1.86 million below its 2006 high of 7.7 million. A sustained increase in construction will be necessary to bring a recovery of construction jobs.
Manufacturing is the biggest disappointment for 2013 with an employment gain of only 78 thousand jobs with an anemic growth rate of .65 percent, well below the national average. The 2012 gain was 201 thousand, but manufacturing gains do not signal a turn around of decline in manufacutring.
The Declining Shares in Service Production
Services sectors in wholesale and retail trade, utility services, information services, financial and real estate services, repair and maintenance services and federal government ,and state and local government excluding education had their share of non-farm employment decrease in 2013 as they have been doing since 1990. Combined these services were 32.9 percent of non-farm employment at the end of 2013, down 3.9 percent from 1990.
Combined goods production and long term declining service sectors have 46.6 percent of jobs, but it is the percent of jobs left after two decades of decline that shows no sign of reversal. In the service sectors like trade and finance computer technologies have raised productivity and cut job growth. Higher productivity has cut jobs in manufacturing, but also millions of manufacturing jobs are now offshore. A trickle of these jobs have come back giving hope that foreign wages will rise relative to the decline in U.S. wages, but it will take more than hope to create new manufacturing jobs. American companies will have to invest more here and less abroad.
The Increasing Shares in Service Production
Service sector industries in transportation, professional and technical services, establishments managing companies, administrative support services, arts, entertainment, recreation, food services and restaurants, personal services and health care had their share of non-farm employment increase in 2013. Combined these services were 41.4 percent of non-farm employment at the end of 2013, up 10.3 percent from 1990.
Educational services and non-profit associations fell below their long term trends for 2013. Private schools, state education at colleges and local education in the public schools had more jobs for 2013, but just barely. The total increase was a couple thousand, which cut the share of education in total non-farm employment. Non-profit associations lost a few thousand jobs, and therefore its percentage share declined as well. Combined these two services were 12.0 percent of non-farm employment at the end of 2013, up 1.6 percent from 1990, but down about .2 percent for 2013.
In 2013, the big gainers were in administrative support services that generated 422 thousand new jobs for the 12 months ending December 2013. Temporary help services had 227 thousand of the 422 thousand jobs, which was the biggest individual increase in jobs that also have a higher percentage of U.S. non-farm employment. Firms and establishments in administrative support services contract office and facility support services, and do employment placement services, executive search services, telephone call centers, investigation and security services, exterminating and pest control services, janitorial services, landscaping services, carpet and upholstery cleaning services all gained jobs with a continuing increase in their percentage of non-farm employment for 2013.
Other big gains came at restaurants with 341 thousand new jobs; more new jobs than logging, mining, construction and manufacturing combined; more new jobs than the health care sector including social services. Full service restaurants, fast food restaurants, bars and coffee bars are all growing at two to three times the national average of job growth.
The health care increase of 308 thousand jobs for the 12 months ending December 2013 was well below last year’s increase of 469 thousand. The increase came even though hospital employment dropped over the same 12 months.
Professional and technical services had third place among sub-sectors with a growing percentage of employment. The new jobs here totaled 204 thousand for the 12 months ending December 2013. However, 60 percent of the gains in professional and technical services were in computer design and related services and managerial and technical consulting services; another 20 percent were in architectural and engineering services.
Good job opportunities continue for Baccalaureate degree students in computing, still the most employable BA degree. The many new jobs in managerial and technical consulting service offer career employment, but the competition for these jobs has started to push up degree requirements. An M.B.A. may be about to replace the BA as an entry degree.
Architecture and engineering did well with 40 thousand new jobs for the 12 months of 2013. However, new architecture and engineering graduates have to compete with other engineers who have left the construction and manufacturing industries to look for work at specialty architecture and engineering firms. The new employment is not necessarily entry level jobs.
Other professional employment has slow growth and college graduates will find it harder to get started in a professional career. Legal services generated only 4 thousand new jobs in the 12 months ending December 2013. The best jobs at law firms require a law degree, although a BA degree has an entry degree for a paralegal. Paralegal employment is growing faster than lawyers.
Accounting firms hire BA degree candidates but accounting firms generated only 10 thousand new jobs in the 12 months ending December 2013. Scientific development and research services generated 45 thousand new jobs for the 12 months of 2013. The best jobs here require advanced degrees although there are many assistant research positions for BA candidates.
A Growth Rate for the next Decade
There are several approaches to labor market forecasts. One starts with a projected growth rate for non-farm employment based on long term trends with consideration for productivity, and expected social and political events. Then the projected total increase can be divided by industry sector and individual industries based on the trend of year by year share changes for individual industries. A second approach starts with projected growth rates for individual sectors and builds up, or adds up the total; both can be tried and compared.
The latest forecast from the Bureau of Labor Statistics for non-farm establishment employment for the ten years ending 2022 is 1.09 percent a year. The annual average growth rate of the adult civilian population from 1990 through 2013 is 1.14 percent, and from 2000 to 2013 it was 1.12 percent. Theoretically establishment jobs and the civilian labor force can grow faster than the adult population if those not in the labor force look for work or find jobs that help expand establishment employment. Those with work or those looking for work are part of the civilian labor force, which has settled at 63 percent of the adult population in recent years. The other 37 percent of the adult population not in the labor force could decide to look for work and take jobs, which theoretically allows jobs to grow faster than population growth.
In practice it has not happened. From 1990 to 2013 the growth rate of the civilian labor force averaged .92 percent per year; from 2000 to 2013 it was .66 percent. From 1990 to 2013 the growth rate of those not in the labor force averaged 1.98 percent per year; from 2000 to 2013 it was 1.56 percent.
The long term growth rate of establishment employment from 1990-2013 averaged .96 percent per year. Therefore, the Bureau of Labor Statistics forecast of 1.09 percent, slightly above the long term growth of jobs and slightly below population growth, pushes their forecast into a moderately optimistic range.
Annual growth rates in establishment employment are subject to cyclical fluctuations from expansion or recession. In the decade of 2000-2010 there were five years where one year of change decreased and five years where one year of change increased. The high year growth rate was 1.8 percent for 2005 to 2006, which was the high point of the housing bubble. The low year growth rate was -4.34 percent for 2008 to 2009, after the housing bubble and stock market bubble burst and the economy sank into recession.
Last year’s growth rate of 1.73 percent includes some increase of jobs from cyclical expansion. Year to year forecasts can allow for cyclical fluctuations by allowing for expected fluctuations in GDP, but the year to year forecasts in this report allow for long term trends of the individual industry sectors of the economy. When I compile my forecasts for the separate industries I get an annual growth rate of 1.07 percent.
A 1.07 percent forecast means 1.530 million new jobs in the coming year 2014, or an average of 127.5 thousand new jobs a month. That is the non-cyclical forecast applied to a year, which like the BLS forecast is on the optimistic side. The country has relied on a limited range of industry sub-sectors to create employment for the last decade at least, and especially since the recession ended.
Some Forecast Details
The separate industry forecasts include recovery in construction but a slow, steady erosion of jobs in manufacturing with a small net annual decline in combined goods production jobs and its continued loss of percentage share of employment that has to be made up elsewhere. The forecast calls for 1.4 percent decline in share over the next 10 years, a smaller decline compared to the 5.0 percent decline from 2000 to 2013.
Two services are forecast to lose jobs and percentage share: utilities and information services. Information services, primarily telecommunications and publishing, but also broadcasting, motion pictures and the Internet services, has been declining; all use computer technologies. Utilities are also in decline from productivity and mergers. The forecast calls for a 13 thousand new jobs a year with a .3 percent decline in share over the next decade, less than the .8 percent decline since 2000.
Wholesale and retail trade, finance and real estate are forecast to have more jobs, but not enough new jobs to prevent a continued decline in percentage share of these services. The forecast calls for 0.6 percent decline in share over the next 10 years, a smaller decline compared to the .9 percent decline from 2000 to 2013.
Unpredictable politics affects government forecasts. In the past few years government employment declined with the most political pressure for cuts coming to the Federal Government. The Federal government has declined from 2.9 percent of non-establishment employment to 2.2 percent in 2000, and 2 percent in 2013. The forecast calls for a decline in federal employment from 2.7 to 2.5 million over the next decade, a decline or nearly .4 percent over the decade.
State and local government including education is up from a 13.6 percent share of non-farm employment in 2000 to 14.0 percent in 2013. However, all of the .4 percent share increase comes in public education. State and local excluding education has a 6.5 percent share in 2013 as it did in 2000. The forecast calls for a decline of .6 percent share of state and local government for the next 10 years.
Private education is up from 1.8 percent to 2.5 percent of establishment employment from 2000 to 2013. However, the growth of public education has slowed down in the last 3 years and slowed down enough that its percentage share has dropped since 2010. For the last three years private education has replaced jobs in public education. The forecast calls for a combined private and public education increase of .8 percent in share over the next decade, a smaller increase than the 1.0 increase since 2000.
Transportation, business and professional services, health care, leisure and hospitality, especially restaurants, and personal services will be the primary sources of new jobs in the next decade. The forecast calls for a 6.8 percent increase in share over the next decade, a smaller increase than the 10.3 percent increase since 2000.
A Difficult Task
To create an average of 125.7 thousand jobs a month will be difficult. Too many industries cannot contribute many new jobs even if the economy does well. Wholesale and retail trade and finance are two examples. Trade remains 560 thousand jobs below its highest job total which came in November 2007 right before the recession started. However, its percentage share of non-farm employment at that time was down from 2000 and from 1990. Given the automation from computer technology no realistic forecast would predict an increase in jobs that reverses that downward share trend.
Finance remains 493 thousand jobs below its highest total which came in November 2006, right as the housing bubble started. Like trade, the financial activities share of total non-farm employment was down from 1990 and 2000. Job totals have stabilized in the last few years, but it’s share of jobs keeps falling. Given the automation from computer technology no realistic forecast would predict an increase that reverses that downward share trend.
The country must rely on the industries with a long run trend of rising share to take up the slack and provide enough jobs if there are going to be enough jobs. Health care needs a minimum of 30 to 31 thousand new jobs a month. Because the forecast has declining sectors declining at a slower rate than they have been, the expanding sectors are in turn forecast to increase at a slower rate than they have been to make up the difference, but they must increase.
Combined government jobs are down almost 700 thousand jobs since the recession ended. Whether they will stop falling, increase or decrease, depends more on politics than the private sector forecasts, but declining government payrolls take money out of the spending stream that hurts private sector employment as well.
Except for professional services like computing and management consulting, the remaining services sectors with long term growth are also sectors with low wages and also prone to a high percentage of recessionary layoffs. Restaurants, arts, entertainment, recreation and personal services have a larger share of jobs in 2013 than 2000 and 1990, but they are more cyclical than education and health care.
In sum, I have made a cautious non-cyclical forecast of annual average increase in jobs for a decade. Time will tell just how good it is.
Sunday, April 6, 2014
Free Speech, Picketing and Bribery and the McCutcheon Case
The phrasing in the first amendment to the U.S Constitution intends to guarantee the right of free speech and the right to peaceably assemble to redress grievances. The Supreme Court just decided that campaign finance laws that limit contributions to candidates limit free speech. In this case known as McCutcheon v. FEC it might be an example of the justices changing the subject to justify a personal agenda rather than application of a constitutional principle like free speech. Before you decide how you think read below and compare the case known as Truax v. Corrigan (257 U.S. 312).
The case of Truax versus Corrigan resulted from a strike of employees at a restaurant in Bisbee Arizona. Strikers picketed, displayed banners and passed out brochures condemning the restaurant as unfair to unions and encouraging customers to boycott. Revenues dropped 50 percent as a result of union résistance. The restaurant filed for an injunction to end picketing as a cause of irreparable harm to the restaurant. Restaurant attorneys claimed the union could not rely on the recently enacted Arizona law that forbid restraining orders and injunctions in a labor dispute. They claimed the Arizona law violated 14th amendment rights against the taking of property without due process of law and denied them equal protection of the law.
The state court dismissed the case and the Arizona Supreme Court concurred citing the state law. The case moved to the U.S. Supreme Court, where the majority opinion written by Chief Justice William Howard Taft reversed the Arizona courts.
The Taft opinion declared "plaintiff's business is a property right" protected from injury caused by the striker's picketing. Pickets induced willing patrons to leave "by having agents of the union walk forward and back in front of plaintiff's restaurant . . ." and by having agents at the restaurant "during all business hours" to "continuously announce in a loud voice, audible for a great distance, that the restaurant was unfair to the labor union." Willing and would-be patrons were asked "Can you patronize such a place and look the world in the face?" and told "All ye who enter here leave all hope behind" and "Don't be a traitor to humanity."
Justice Taft characterized the picketing as a "campaign" of "unlawful annoyance and a hurtful nuisance in respect of the free access to the plaintiffs' place of business" that "was compelling every customer or would be customer to run the gauntlet of most uncomfortable publicity, aggressive and annoying importunity, libelous attacks, and fear of injurious consequences, illegally inflicted, to his reputation and standing in the community."
After declaring union picketing an unlawful conspiracy, Justice Taft and the majority declared the Arizona law forbidding injunctions in labor disputes to be an unconstitutional "subordination of fundamental principles of right and justice." If "a wrongful and highly injurious invasion of property rights," allowed by the Arizona Supreme Court is "practically sanctioned" by the U.S. Supreme Court, then the owner will be "stripped of all real remedy," which is "wholly at variance" with the principle against taking property without due process of law in the 14th amendment.
Further, the majority declared the Arizona law denied the restaurant owner the 14th amendment guarantee of equal protection of the law. Instead the majority declared the law created class privilege for unions because a violation of property rights from picketing would be subject to injunction under Arizona law, "except when committed by ex-employees of the injured person."
Justice Oliver Holmes wrote a blunt dissent for the court minority who recognized the majority opinion depended entirely from defining business as a "thing" with property rights. "By calling a business 'property' you make it seem like land, and lead up to the conclusion that a statute cannot substantially cut down the advantages of ownership existing before the statute was passed." . . . Business "is a course of conduct and like other conduct is subject to substantial modification according to time and circumstances both in itself and in regard to what shall justify doing it harm." Justice Holmes added "There is nothing that I more deprecate than the use of the Fourteenth Amendment beyond the absolute compulsion of its words to prevent the making of social experiments that an important part of the community desires . . ."
In Truax v. Corrigan the court changed the subject from the right to picket as an expression of free speech and free assembly to a violation of property rights and due process. Pickets that block streets, break windows or destroy property can be arrested, but not as pickets, as criminals committing misdemeanor crimes. Pickets that assemble on public property to protest and redress grievances are engaged in one of the most fundamental rights of democracy, except that William Howard Taft, lawyer, federal judge, president of the United States, Yale University law professor and Chief Justice of the United States Supreme Court would not recognize his opinion as a grant of protection and privilege to the well-to-do and the upper class.
In McCutcheon v. FEC the majority of the court changed the subject from bribery to free speech. The majority acknowledges the bribery issue, but defines it away by demanding bribery be a proven transaction with thorough evidence of an exchange of money for political favors, whereas Congress and many others notice how wealthy corporate campaign contributions correlate with political favors.
Picketing is the poor man’s avenue to free speech; inexpensive and equally available to all. When free speech was a disadvantage to the well to do the Supreme Court made it an unconstitutional interference with property rights. Now that limits on campaign contributions are a disadvantage to the well to do the Supreme Court makes these limits an unconstitutional interference with free speech.
Heads I win, tails you lose. Think of that as judicial precedent at the U.S. Supreme Court.
The case of Truax versus Corrigan resulted from a strike of employees at a restaurant in Bisbee Arizona. Strikers picketed, displayed banners and passed out brochures condemning the restaurant as unfair to unions and encouraging customers to boycott. Revenues dropped 50 percent as a result of union résistance. The restaurant filed for an injunction to end picketing as a cause of irreparable harm to the restaurant. Restaurant attorneys claimed the union could not rely on the recently enacted Arizona law that forbid restraining orders and injunctions in a labor dispute. They claimed the Arizona law violated 14th amendment rights against the taking of property without due process of law and denied them equal protection of the law.
The state court dismissed the case and the Arizona Supreme Court concurred citing the state law. The case moved to the U.S. Supreme Court, where the majority opinion written by Chief Justice William Howard Taft reversed the Arizona courts.
The Taft opinion declared "plaintiff's business is a property right" protected from injury caused by the striker's picketing. Pickets induced willing patrons to leave "by having agents of the union walk forward and back in front of plaintiff's restaurant . . ." and by having agents at the restaurant "during all business hours" to "continuously announce in a loud voice, audible for a great distance, that the restaurant was unfair to the labor union." Willing and would-be patrons were asked "Can you patronize such a place and look the world in the face?" and told "All ye who enter here leave all hope behind" and "Don't be a traitor to humanity."
Justice Taft characterized the picketing as a "campaign" of "unlawful annoyance and a hurtful nuisance in respect of the free access to the plaintiffs' place of business" that "was compelling every customer or would be customer to run the gauntlet of most uncomfortable publicity, aggressive and annoying importunity, libelous attacks, and fear of injurious consequences, illegally inflicted, to his reputation and standing in the community."
After declaring union picketing an unlawful conspiracy, Justice Taft and the majority declared the Arizona law forbidding injunctions in labor disputes to be an unconstitutional "subordination of fundamental principles of right and justice." If "a wrongful and highly injurious invasion of property rights," allowed by the Arizona Supreme Court is "practically sanctioned" by the U.S. Supreme Court, then the owner will be "stripped of all real remedy," which is "wholly at variance" with the principle against taking property without due process of law in the 14th amendment.
Further, the majority declared the Arizona law denied the restaurant owner the 14th amendment guarantee of equal protection of the law. Instead the majority declared the law created class privilege for unions because a violation of property rights from picketing would be subject to injunction under Arizona law, "except when committed by ex-employees of the injured person."
Justice Oliver Holmes wrote a blunt dissent for the court minority who recognized the majority opinion depended entirely from defining business as a "thing" with property rights. "By calling a business 'property' you make it seem like land, and lead up to the conclusion that a statute cannot substantially cut down the advantages of ownership existing before the statute was passed." . . . Business "is a course of conduct and like other conduct is subject to substantial modification according to time and circumstances both in itself and in regard to what shall justify doing it harm." Justice Holmes added "There is nothing that I more deprecate than the use of the Fourteenth Amendment beyond the absolute compulsion of its words to prevent the making of social experiments that an important part of the community desires . . ."
In Truax v. Corrigan the court changed the subject from the right to picket as an expression of free speech and free assembly to a violation of property rights and due process. Pickets that block streets, break windows or destroy property can be arrested, but not as pickets, as criminals committing misdemeanor crimes. Pickets that assemble on public property to protest and redress grievances are engaged in one of the most fundamental rights of democracy, except that William Howard Taft, lawyer, federal judge, president of the United States, Yale University law professor and Chief Justice of the United States Supreme Court would not recognize his opinion as a grant of protection and privilege to the well-to-do and the upper class.
In McCutcheon v. FEC the majority of the court changed the subject from bribery to free speech. The majority acknowledges the bribery issue, but defines it away by demanding bribery be a proven transaction with thorough evidence of an exchange of money for political favors, whereas Congress and many others notice how wealthy corporate campaign contributions correlate with political favors.
Picketing is the poor man’s avenue to free speech; inexpensive and equally available to all. When free speech was a disadvantage to the well to do the Supreme Court made it an unconstitutional interference with property rights. Now that limits on campaign contributions are a disadvantage to the well to do the Supreme Court makes these limits an unconstitutional interference with free speech.
Heads I win, tails you lose. Think of that as judicial precedent at the U.S. Supreme Court.
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