Education Is The Key To Combating Income Inequality So Why Destroy It With A Bad Plan?

It would be difficult to disprove the fact that education helps people move up the income ladder. There are few other better predictors of future income than level of attained education. People with college degrees earn many times more over their lifetimes compared to those who jump off the education train after a high school diploma.

So, in theory, easy loan money to finance a college education should help move all college graduates up the earnings ladder and help alleviate high levels of income inequality.

But now all we hear about is the approaching college debt crisis…

Now that the bill is coming due and millions of people equipped with college degrees actually need to pay for that education there seems to be a lot of whining going on.

What happened?

Simply put all college educations are not equal…

A newly minted computer programmer can earn over $80,000/year while a Political Science major might earn $30,000/year because demand is sort of low for Political Science majors and they may end up in retail, fast food, or making your morning latte a Starbucks.

It is much easier to pay back $25,000 in college debt when you are working as a computer programmer than if you are crafting fine premium coffee beverages. I don’t think computer programmers are whining about their college debt since the return on their loan is about three times their loan amount just in the first year on the job while the valuable yet less employable Political Science graduate is looking at just over a one times return on their college investment.

Yes… Maybe college students should look at their college cost as an investment in their future. The same way they will someday invest in a home, car, or IBM stock.

Maybe before signing on the dotted line for their college loan they should consider how much they might earn after they graduate in their selected field. If these loans were not government guaranteed and their repayment was the sole risk of a bank or educational institution I’m sure future ability to repay the loan would be a key factor and it might be quite difficult to get a loan for a Political Science degree which costs the same as a Computer Programing degree.

Here’s the scary part…

There has been some talk of loan forgiveness. If a college graduate can’t pay back their loan after a few years then the balance will be wiped away. Like magic.

Nice… And very dangerous!

If we start forgiving loans because people made a decision to pursue the wrong education. An education that has a low future earnings potential, then we will just end up with more people earning low future wage degrees that do not help them move up the income ladder.

And that is the goal of the entire education system… To move people up the earnings ladder.

If someone’s passion is to study Political Science, Philosophy, Anthropology, or and of the other less marketable degrees then great. They should pursue their passion. But it is a catastrophe just waiting to happen when a government offers to pay off their debt when that government has not even figured out how to pay for a near universal medical program, social security, or a bloated government bureaucracy.

Taking on a new expense like this will have two guaranteed effects:

Political Science Graduates... Welcome To Your New Office!

Political Science Graduates… Welcome To Your New Office!

1) Add to a national debt that we all will pay for at some point now and in the future.

2) Act as a disincentive for college attendees to choose areas of study that will move them up the income ladder to help alleviate and income inequality trend that is moving in the wrong direction.

There is only one downside to a program where college graduates are made to pay for their debt…

Future students will be incentivized to pick more marketable areas of study and Starbucks will need to raise wages as less people need those low-skilled jobs.

The cost of our daily lattes will certainly rise.  But I am ready to deal with that inconvenience if it will help alleviate income inequality.

Does The US Government Support Income Inequality By Condoning Corruption In Africa?

coruption2I was in an Uber car speeding to an airport last week and as usual I struck up a conversations with the driver. She was an extremely articulate woman from one of those  small non-picture postcard  west  African countries. She was so happy to be safe in America where she could earn some money and send her son to a good school.

Okay…  so I was making a quick escape from Chicago when I was talking to this Uber driver.   That’s the city with one of the highest murder rates and worst schools in the country. There is currently a fight going on to raise the minimum wage from $10/hr to $15/hr as a solution to potentially relieve some of the income harsh income inequality there.

Odd that this Uber driver considered Chicago a garden spot…

Traffic slowed as our friendly conversation turned into a heated lecture as she schooled me on corruption and the resultant hopelessness back in her home country.  Government sanctioned corruption in her country saps the economy of needed resources and challenges people every day. Government officials expect payoffs for everything from a driver’s license to placing your child in a decent school.  And if you dare start a business in one of these countries  there will be a weekly knock at corruption5_0your door by at least one government official looking for their unearned cut of your revenues. And that is if you can afford the under-the-table payoff to get your business license.

That’s corruption… And the toll it takes on education, employment and human spirit keeps the poor below the poverty line and continues to enrich those in political power. Think about this next time you hear someone complain about income inequality in the United States.

According to this Uber driver she makes around $17 an hour. She loves her job, freedom, and how she can provide for her family. This would not have been possible back in her home country in Africa.

So what about the billion or more people still in Africa dealing with these corrupt governments?

ForeignAidJokeTshirtWell it wouldn’t be so bad except our US Government seems to be supporting the corrupt African governments on many fronts.

Over the next few days President Obama will be visiting Kenya and Ethiopia. There will certainly be a multitude of photos with Obama and African government officials smiling, shaking hands, and generally chatting it up. Looking to be the best of friends…

In the meantime the smart people at Transparency International rank Kenya as 145th most corrupt country out of 175 countries measured (the USA is 17 out of 175).  Luckily Ethiopia is not as bad as Kenya. Ethiopia ranks 110 out of 175.

The Obama's with the President of Kenya

The Obama’s with the President of Kenya

The problem is that with all the financial aid we send to the dark continent we really don’t know how much does any good. With corruption this high much of that money may be going into government pockets instead of where it is needed.

Why does the US Government tolerate and even condone this corrupt behavior?

I guess in a more perfect world a bolder US Government could impose sanctions and isolate these corrupt African government officials instead of shaking their hands and making nice.

Unfortunately the formula looks like this… Corruption -> poverty -> hopelessness -> anger -> terrorist radicalization -> terrorist attacks.  Maybe fixing the corruption would reduce the terrorism threat faster than sending money and weapons to corrupt African governments.

Is Obama Missing The Point On How To Actually Do Something About Income Inequality For Black Americans?

OBAMA9214Between an enlightening article on the plight of Black Americans in the Sunday New York Times and Obama continuing his campaign for a higher minimum wage I’m beginning to think our President may be on autopilot of some type.

I will admit that it is probably much easier for him to keep calling for a higher minimum wage but will that really solve the big problems related to income inequality?

Some may think a higher minimum wage is the silver bullet but after seeing the following facts in the New York Times Sunday article I realized what a big problem we are faced with in this country:

• The net worth of the average black household in the United States is $6,314, compared with $110,500 for the average white household, according to 2011 census data. The gap has worsened in the last decade, and the United States now has a greater wealth gap by race than South Africa did during apartheid. (Whites in America on average own almost 18 times as much as blacks; in South Africa in 1970, the ratio was about 15 times.)

• The black-white income gap is roughly 40 percent greater today than it was in 1967.

• A black boy born today in the United States has a life expectancy five years shorter than that of a white boy.

• Black students are significantly less likely to attend schools offering advanced math and science courses than white students. They are three times as likely to be suspended and expelled, setting them up for educational failure.

• Because of the catastrophic experiment in mass incarceration, black men in their 20s without a high school diploma are more likely to be incarcerated today than employed, according to a study from the National Bureau of Economic Research. Nearly 70 percent of middle-aged black men who never graduated from high school have been imprisoned.

And as the article writer says… “All these constitute not a black problem or a white problem, but an American problem. When so much talent is underemployed and overincarcerated, the entire country suffers.”

I totally agree with this! You can’t debate these numbers and what they can mean for the future of the country. Unfortunately Mr. Obama seems to be out of touch with these facts. And especially lacking in any real solutions to get things going in the right direction.

The most interesting fact here is that, “The black-white income gap is roughly 40 percent greater today than it was in 1967.”

This is saying that basically all the government programs and the Trillions of dollars spent over the last fifty years may have missed the mark when it comes to moving disadvantaged people up the economic ladder.

But I guess it’s always easier to just write a check than create, implement, and track real solutions designed to make things better in the long run.  I truly believe that if the people at the bottom of the economy can move up the ladder it will be better for all of us. Unfortunately more and more evidence is showing that the government programs we have been using are just not working. More money alone will not solve the problem.

And… Just raising the minimum wage will probably make matters worse. As I have pointed out in past articles and especially this one where I show how Mr. Obama’s higher minimum wage will actually profoundly hurt the people he wants to help.

So what’s a possible solution?

Instead of just complaining about solutions to this problem or offering some kind of quick fix (that has not worked in the past) checkbook solution I have a simple Four point plan that could get this situation back on track.

 1. Education It is obvious that without an good education there is little hope of a better life. People complain about how these schools are unsafe and how all the teachers are burned out and more… But I say we mobilize an army of one million grandmas. Lets put them in every classroom to be sure the kids behave, are safe, get their homework done, and the the teachers are actually teaching. These Grandmas would be a formidable force. They will do more good than billions of dollars in wasted government funds. They are the key. What made me think about the Grandma factor? Back in the 1980s the Chinese government was failing miserably at controlling their population which was on track to cause a mass starvation. What did they do? They enlisted the countries Grannys to solve the problem and now China is in little threat of overpopulation.

2. Jobs Since the beginning of this country wave after wave immigrants have arrived here with no language skills and no education plus they have been called names and  discriminated against from the first day of setting foot on US soil. No one was ready to give these hundreds of millions of people jobs so what did they do? They started their own small businesses. They sold fruit, built cabinets, sewed clothing… What ever it took to provide for their families. There was no choice. It was either that or go back to a potentially worse (and maybe deadly) situation back in their home countires. My previous article shows how a simple cleaning lady working on her own can make around $90,000/Year. How can people just go out and start a business? First find a need then start a business to fill it. Need more help then take a look at this great resource to help people with the steps to create a small business. This program has been helping people start businesses since 1966 and has a great track record.

3. Personal Finance – Far too often people earn enough money but because of a lack of basic personal finance skills it is wasted or people are floored by some kind of financial calamity that could have been avoided. I’m talking about Budgets, Insurance, Taxes, Retirement Savings and more. Your state forces you to pass a test to get a drivers license. They need a basic class and test to certify that people can handle money. Without it no amount of income will be enough.

4. Clear Out The Jails – Far too many potentially productive Americans are sitting in prisons. Most are not a threat to their neighbors and want to be better people. Identify the ones who should be set free and let them out with the understanding that if they commit crimes that endanger others again they may not be set free a second time.

All of this will not happen by magic. As with my Million Grandmas Education Improvement idea it is going to take grassroots commitment, involvement, and responsibility.  This is how the hundreds of millions of US emigrants worked their way up the economic ladder over the past two hundred years.

And isn’t it convenient that our President started out as a community organizer?

He is just the person we need to head up this unprecedented effort get more people moving up the economic ladder. We will not see results in a week, month or even a year. But I can pretty much guarantee you that with these four ideas put into action with full community support and commitment that in fifty years (probably much less) there will be statistics that we can be proud of.

So what could be holding Mr. Obama back from these kind of positive community based solutions?  He surely does not need permission from a near worthless congress to get going on this right now.

Is Better Education Really The Key To
Solving Income Inequality?

thwTwo interesting articles popped up over the weekend. One article looks at how the trucking industry is having a hard time finding people to take their driving jobs even at $50,000 a year plus benefits.  The other article basically blames most of a persons bad luck and poor choices in life on their parents.

First let’s look a little closer at this Truck Driver shortage…

Because of increased government safety regulations truck drivers are not allowed to drive as many miles as they did a few  years ago hence their income has been capped a bit. These weekly maximum mileage regulations are probably good for any of us who drive on our nations highways because they certainly help reduce driver fatigue and make the roads safer. The downside is that drivers just can’t earn as much money.

Truck Driver GraphThat said… The starting annual pay for entry level long haul truck drivers is around $50,000 plus benefits. Not a bad paycheck and definitely will get a person on their way to a middle class lifestyle.

What kind of education is needed to drive a truck?

Trucking employers do not require a college degree. I don’t even know if they require a high school diploma. To drive a truck you will need to attend a several week driver training course paid for by the trucking company then you are ready to go. No college debt to worry about.

I wonder how many June college graduates wish they had a $50,000/year job waiting and no college debt?

TDI-truck-keys-to-office-rev-DSC00948So this is an example of how piling more public money into education may not really get the desired end result. Unfortunately once someone earns a four year degree they seem to think they are above anything that even looks like physical labor. Unfortunately their high priced college education may have forgot to give them any marketable skills.

Truck driving may not be the most glamorous job you could have but if you can stay sober, don’t have a nasty arrest record, and can read a map it could be a way onto the rolls of the productive Americans earning a solid paycheck. Sure you might have just earned a degree in Political Science, Psychology, or Fourth Century Latin Literature but what’s better, living in your parents basement or a life on the open road?

bad-decisions-tatOn to the second article… The New York Time’s Nicholas Kristof makes the journey back to his childhood home in Yamhill, Oregon and sees so many people with drug and alcohol problems plus long prison records so he comes to the conclusion that no matter what you do if your parents took the wrong path it is pretty much a done deal that your life will be hard.

All you will have to look forward to is addiction, crime, unemployment, and prison.

Not a pretty picture. and it’s sad to think that with all the public money spend on education, according to Mr. Kristof, if your parents had a hard life you are in for more of the same. And your children are destined to repeat the painful cycle.

Prison-barsMaybe it really takes more than a good education system to move up the economic ladder. Educational opportunities could really be just like the cover of the book. Those school buildings, yellow buses, high paid administrators, rows of shiny new computers, and libraries are only part of the story. The part that can be bought with tax dollars.

The difficult part is getting the kids motivated for the hard work of becoming productive citizens. But that can’t be solved with a fatter government check book.

 

 

Are there pitfalls when we let Chinese students take over US graduate schools?

A story in the Wall Street Journal talks about how more and more Chinese students are getting into US graduate schools. Application volume rose 18% last year and that is on top of over 20% increases over the last few years.

Should we be worried about this?

I guess there could be two main problems:

1) When a Chinese student is admitted to graduate school they take a spot that may have gone to a US citizen.

2) When that Chinese student finishes graduate school they go back to China and apply that knowledge so China can become an even bigger economic power.

For our universities to sit back and let this happen is a potential formula for future collapse of the entire system.

Why?

Right now the US has the best universities in the world. If you don’t believe this take a tour of any university on US soil and see how many foriegn students are there. Too many to count.

Take the same tour at any foriegn university and you will see how many US students you might fine. Very few if any.

By admitting these Chinese students our universities are transfering all the needed knowledge required so that in a decade or so the Chinese can set up their own Universities. So while the Chinese are sucking the economic life out of our middle class workers they are gunning for the more advanced workers too. Will we ever learn.

Sure we are forging good feelings about the US by bringing so many foriegn students here, but at what cost?

There are two simple things that could solve this problem and only one needs to be implemented:

1) Greatly reduce the number of Chionese students admitted to US Graduate schools. Give those seats to our own kids who will undoubtedly go on to make the US a better place to work and live.

2) When a Chinese student is awarded a graduate diploma give them automatic US citizenship so they can stay in the US and build companies, careers, and a life here.

Think about this the next time your child or someone you know is blocked from going to graduate school because a Chinese student took their place. THis paticularly stings because in one way or another all US Universities, public and private, were built usinkg a significant amout of taxpayer dollars. That’s your money. Do you want to it help build a stronger China or stronger USA?