Biden Challenge Plenary II – Workforce Dynamics

>>Maria P. Aristigueta: This panel,
which is the second plenary, is going to be addressing
workforce dynamics and I’m so glad that Heather shared with us that the
long commutes do not help opera mobility. For those of you that may be interested in
jobs the University of Delaware has a very short commute and
we have some job openings. So now that we know that we could begin
to address other opportunities that may exist for work, for the workforce and
for making sure that we provide the stability that is needed for
the middle class. With me I have Lisa Servon from
the University of Pennsylvania who will be our first speaker. She will be followed by
Harry Holzer from Georgetown. After Harry, Mark Pisano has
a paper that will be presented by Joe Wholy, Mark with not able to stay and
present his paper. Then we will have Carlos Asarta,
from the University of Delaware, who will be presenting followed by
Joe Wholey who will be the discussant. Joe Wholey is a U.S.C.
merited professor he’s also a visiting professor here at
the University of Delaware. And I did forget to say that my colleague, Carlos Asarta, is here at
the University of Delaware as well. So, welcome Lisa, let me start with you.>>Lisa Servon: Thank you very much. It’s such a pleasure to be here today and the conversation so far has been really
enriching and I hope I can add to it. I want to start by telling
you a story about when I was a kid growing up in South River, New Jersey, a small town where my Polish
grandparents came and worked in factories. And that I ended up growing up in too. And when we were growing up, we went to a bank that looked a lot
like the one on the slide there. That’s not me in the picture but, I used to go out of the bank it was
called Polaski Savings and Loan. There were a lot of other Polish people
that came to South River in those days. And, I would go to Ploaski with my dad
on his Saturday morning errand rituals. We’d go to the barber and he’d get his
hair cut; we’d go to the post office and to Mike the butcher, to get our meat for
the week; and we’d go to the bank to pay bills and do other
things, deposit money to our account. And I have these strong
memories of that building, which is a lot like the one that
you see on the slide there. It was a plain building, we’d walk
over to the teller windows and my dad, who had grown up there, always knew the
teller, and she and invariably knew him, and they would talk about how the football
team was doing and the weather and it felt like a community space. And all of these other places that
we went to on Saturday mornings, we’d run into our neighbors and
people that we knew. And when I was about 7 years old I
got my very first savings account and I think some of you here are old enough,
not all of you, to remember a passbook. How many of you had a passbook when
you were very young? You have to tell the other people at your table
what we’re talking about. But I remember that mine was
green with gold letters and every time I got some money from my
grandparents for my birthday, or later when I made money babysitting, or
my first real job cleaning hotel rooms, not a whole lot of upward mobility there. But luckily my parents were able,
who were schoolteachers, were able to save for me to go to college. A lot of things have changed
about banking since then including the fact that it really
works well for most people. It used to and it doesn’t anymore. I came to this topic and
I’m going to talk about consumer financial services in the link between
consumer financial services and the middle class today because
I started doing work on this notion of whether people
are using banks or not. I started off the seed
was kind of planted for me when I started looking at the F.D.I.C
survey of banks and under bag households, which was an every two year survey
that started in two thousand and nine. And what the F.D.I.C found was that about
eight percent of American households had no bank account at all and another
twenty percent were what they called under banked,
people who had a bank account but were also using alternative financial
services like check cashers and payday lenders and pawn shops and
auto title lenders. And what happened as a result,
the policy world’s concern expressed itself as a sort of astonishment and
rushed to push people into bank accounts. And for everybody who studies policy,
and those of you who teach it, you know that you know the way
that we define a problem very much has a lot has a lot to do
with the way that we try to solve it. So when you start categorizing people
as whether their banked, unbanked, or under-banked, the message clearly is there
are people who are not banked enough, right, they need to be more banked, they need to get out of whatever else
they’re doing and get a bank account. And what struck me as interesting about
that, and I am not a researcher of the middle class I’m a poverty researcher
I study community economic development and have spent most of my career in
very low income communities, but what struck me about that was
that I knew what poor people and how they manage their money and
the implication was that if you weren’t in a bank and exclusively in
a bank you must be doing something wrong. You maybe don’t know enough maybe you’re
too ignorant to know that you should be using a bank and that landed on me
the wrong way because in all of my time in low income communities I heard I knew
that people knew where every dime of their money went and in fact they were more
responsible with their money than people who have more of a cushion
because they had to be, right, and so this implication that
they would be spending so much on financial services in a way
that was almost profligate or ignorant didn’t really square with my
understanding of low income communities. We know that alternatives, so at the same
time that I was looking at that data I was also seeing data that showed that
there was immense growth in alternative financial services in payday lending and
check cashing etc and this is one quick graphic that shows you that there
are more brick and mortar payday lending stores in this country than there
are Starbucks and McDonald’s combined. That is taking into account the fact
that first of all hamburgers and coffee are legal in all fifty states
whereas payday loans are illegal in many states in the United States and
it doesn’t take into account online lending which is
the fastest growing part of that industry. So if those things are growing so
much and we have so many people who are quote unquote unbanked
or under-banked, what’s going on? I really wanted to understand
what was driving the demand for alternative financial services and
if the received wisdom that alternative financial services was really
bad for people, what was going on? So, to cut to the chase, I only have ten
minutes, I got a job working as a teller at a check cashing store in the South
Bronx, one of the lowest income zip codes in the country, I also worked as
a teller making payday loans and as a loan collector in Oakland California
near Lake Merritt, another quite low income community, I staffed a hotline,
called the predatory loan help hotline, that was run out of the Virginia Poverty
Law Center to hear about people stories, and then I interviewed hundreds of people
who were customers of these businesses people who were taking out payday loans,
people who were going to check cashing, many of whom had bank accounts or
had in the past, to really understand what they were
doing and why they were doing that. And what I found out
was really interesting a lot of things that I that I can’t, don’t
have time to tell you about today but, whereas I thought that I was doing
research on poverty, I ended up finding out just how many middle class Americans
were using these services and in fact at one point I got a hold of a data set of
customers from a subprime credit bureau, I didn’t even know there was such a thing
as a subprime credit bureau we know we think of Equifax and Experian but, there
are these other credit bureaus floating beneath that lever that
are showing alternative financial lenders the credit worthiness of
those borrowers, and found that middle class Americans are the fastest
growing group of payday loan borrowers. People who own their homes,
have a college education, make fifty or sixty thousand dollars a year and
that was one of the the most shocking and surprising things that
came out of my findings. And it squares with a lot of the things
that we’ve already heard today that more than half of Americans could not come up
with four hundred dollars in the event of an emergency, I’m sure most of you have
heard that statistic it doesn’t mean that you don’t have four hundred dollars
in the bank, or a mattress, or wherever you keep, it it also means you
don’t even have people you could ask for it, you don’t even have that in any liquid
way, you don’t have a network of people or anything that you could cash in and
I think that’s a shocking statistic that means it’s even worse than the idea
that so many of us are living paycheck to paycheck but when you talk to people and
when you see the populations using these services you wouldn’t really
know that that’s what’s happening. So I want to tell you a few stories that came out of my research because
I think it’s a really good way to sort of put flesh on the bones of
a lot of the statistics we’ve heard. I want to tell you first about a woman
named Crista, who lives in central Florida, and I interviewed her three
times over the last few years. Christa is a nurse’s aide at an assisted
living facility she has an associate’s degree in nursing and ten years of
experience working at that business. She earns less than twelve
dollars an hour and has not gotten a significant
raise since 1990. She also works twenty to thirty
hours of overtime each week but still finds it hard to make ends meet. Interestingly enough the last
time I talked to her which, was just about a month ago,
this is a funny story, well first she said she’d
been let go from her job and the reason was she was accused of
being negligent in her duties. She worked overtime shift, the graveyard
shift with one other person for an enormous group of elderly
people at this facilities and she was accused of negligence and
let go which is interesting when you read about how poorly staffed
a lot of these facilities are. She talked about even before this
happened how impossible it was for her to do her job. So she had to turn to payday loans in
order to pay for every day expenses. She said the cost of everything’s
keep everything keeps going up but wages didn’t and when we talked about
this notion of the American dream, which I think of as a shorthand for what
middle class life is supposed to be like, you know a home, saving for
retirement, being able to save for your kids to go to college, she said it’s
a lie there’s no help for people like me. Teresa, her story hinges on medical debt. Teresa’s from Dallas and she works, she’s also worked for
more than a decade in a public sector job. We talked a little bit earlier about how public sector jobs are not
paying what they need to. She worked for
a truancy court as an administrator and often worked in a shoe
shop to make extra money. She’s a single mother of two and
she had health insurance, as many public sector jobs come with,
but between the time that she had her first child, during which she had to pay
a fifty dollars co-pay for everything, and her second child the insurance changed so that her co-pay her deductible
was thirty five hundred dollars. She couldn’t afford it,
she had to take out payday loans. But from the outside,
it looks like she’s stably employed. She said I’ve got it I’ve
got to have tires but I didn’t want to disappoint the kids, that
was the first time her car was breaking down she needed it to make all
these visits for truancy court but Christmas was coming too and even though
she thought she’d be able to pay it back right away she said things didn’t work
out because life just kept happening and that’s that’s the way life is. I’ll tell very shortly
the story of Ana who works for a large hotel chain, made ten to fifteen
thousand dollars on commissions, and then the commission formula change she
no longer has that extra extra income, and had to move in with
her extended family. When we look at what people do, they
often realize that payday loans aren’t so great and they stop using them but,
Christopher, example, got out of debt by cashing
out her 401K plan entirely. Those things are happening all the time. What’s changed, I think we know from what
people have said this morning already, and in conclusion I just want to say
a few recommendations that we need to shift the conversation from thinking
about who’s banked in un-banked to thinking about financial health. We need to ensure access
to safe financial safe and affordable financial services,
which many Americans do not have, and we have to focus on these big problems
like a living wage and health insurance. Thank you.>>Harry Holzer: [APPLAUSE]
Thank you. Good afternoon,
my name is Harry Holzer, as you know, I’m a labor economist, so a little bit
like Heather but slightly different focus, and I’m going to focus
today on the labor market. The labor market is where
earnings are determined. People’s earnings, earnings
are the single biggest determinant of who makes it into the middle class. And the issue I want to addresses is of
the roughly one third of Americans who by almost any definition are not part of the
middle class, what are the policies right now that could help bump some of those
people up in a sort of very practical way? Like any economist,
I think a lot about supply and demand where supply in the labor
market is, are the workers and the skills they bring to the market,
demand is employers and firms and the skills they’re looking for
and how they compensate them. So I’ve done research on this for
thirty five, forty years I think this problem is on both sides of the market
that I want to talk about a little bit. Now the single biggest determinant
in America today of who makes into the middle class is education and
people who have a B.A. are almost guaranteed to make it into
the middle class over time, you know or some point in their lives. I want to focus on mostly on the sub B.A. folks, many of whom can
still make the middle class. But, I think I think the biggest problem
on the supply side of the market right now is that too few of those people
are actually getting the skills and credentials that the labor market values. And there are a lot of B.A.
credentials associate degrees and certificates that the labor market values
but a lot of folks don’t get them. And on the demand side of the market I
think the biggest problems that employers are not creating good jobs and if anything
the quality of the jobs are getting worse over time and of course this will make
a lot of money while creating bad jobs. So let me focus a little
bit on each of those. So, on the supply side we send a lot of
people to college in America you know because it is so heavily rewarded,
compensated, but if you look at that kind of sub B.A. stratum, completion rates are
extremely low at community colleges and for profit institutions, completion
rates are in the ballpark of twenty to thirty percent,
depending on whom you’re looking at, a lot of the credentials that
people get if you get an associates degree in general studies not a lot
of labor market value to that. And I haven’t got a lot of research in
this area I think this problem is on the student side of the market but
also on the institutional side. On the student side, a lot of folks
are going to community college with really quite weak academic schools skills they
didn’t do really well in high school and they got out of high school with a diploma
but not a lot of the kind of skills you need to make it even at a community
college and other issues people have to work full time and therefore to support
their families and therefore have a much harder time actually making it
through a serious academic program. There’s problems on
the institutional sides too. You know when we ask our community
colleges to where so many different hats an academic hat, a work force hat, several
others, we give them quite a few resources with which to do that a lot of our
most disadvantaged students go to those institutions and the resources
simply aren’t there for the institution to provide the supports they need,
the counseling, things of that nature. But, I also think the incentives
aren’t very strong either for them to really expand the areas
that the labor market values. The community is going to the same tuition
and the same state subsidy regardless of what people study,
regardless of whether they finish. And the fact is, a lot of the high
demand areas health care, I.T., advanced manufacturing,
the cost of that stuff is very high. The equipment changes every couple years,
the instructors are expensive so it’s not the incentives
aren’t really there for the institutions to expand a lot of that
stuff rather than the more traditional liberal arts which in many
cases are cheaper to offer. So I think, I think there’s
resource issues, student issues, and institutional issues. Among employers, what I think right now is
the biggest problem they’re not creating these good paying jobs that they might
have done a few generations, and by the way I’m going to not talk
about issues of race and gender and how employers deal with that
those are very important issues, I’m happy to talk about those during Q and
A. But right now, I mean employers for decades have been fighting unions tooth
and nail and winning those battles that’s a problem but there’s new new issues
coming up that I think that are troubling. First of all, lot of employers are
embracing what we call low road practices and policies because it turns out within
any given labor market you can compete with what we call high road practices,
really investing in your workers and in their skills and in their productivity
performance, or you go low road, just minimize your labor costs no
matter what it takes, don’t worry so much about high turnover and
shoddy work and things like that, more and more employers are figuring out
how to make a lot of money going low road. Secondly, the labor market is
fissuring in a lot of places, that’s a new term by David Weil who used
to work in the Obama administration, under the same roof people have all
different kinds of employers you know some of them work for temp agencies, for
contracting agencies etc, that lowers the incentive the employer to invest in
their skills and in their productivity. And finally, employers are gaining more
power in the labor market and they’re engaging in a set of anti-competitive
practices like non-compete agreements, non-disclosure agreements, which
are really in the competitive you know and really hurt the performance of
the market as well as those workers. So I think those are the issues to really
focus on if we want to move people up fairly quickly into the middle class. And then these additional problems as well
a lot of people are in distressed regions of the country, rural areas, small metro
areas think, of the industrial Midwest where Donald Trump had a lot of support
after manufacturing jobs disappeared. In addition there’s a set of barriers that
keep a lot of people out of the labor market for some groups,
especially African-American men, criminal records might be the single
biggest barrier they face but for other groups opioid dependencies,
we’ve heard a lot about the news recently, I think are a major problem. And I’m going to mention one other thing,
not as popular among progressive audiences, when workers often do
a calculation or they can be better off in an unattractive labor market or on
something else like disability insurance, increasing or
picking disability insurance. I’m not saying everybody on this,
I’m talking about folks that are right on the margin trying to choose
between the two of them and that we need some some disability
insurance reforms to sort of rebalance while we make work pay more and
give people the skills they need. On the education training side what
are the kinds of things I’d like to see? I would like to see really something like
a race the top for community colleges. Really inject some resources
into this layer of education but targeted at expanding the high demand
areas the health care preparation, the I.T. etc, while you also
strengthen the incentives and a lot of states are going to and performance
incentives, not always the right way. I want to see these places put a lot more
emphasis on the earnings people have after they leave and especially the earnings
that are lower income and minority communities and
I think if you create more of those incentives the schools will respond
and use those resources correctly. We should do a lot more on the front of
apprenticeships and sector based training, sector based trainers based on
partnerships between industry and community colleges that often few workers
into those high demand industries. We’ve got to get a hold of the for profit
industry there’s a lot of their numbers are much weaker they’re getting more and
more students and contrary to what Betsy Devos is telling
you they do need to be heavily regulated. And finally, pathways to success, starting
in high school, high quality career in tech ed, there are nice models of
current tech, they’re nothing like old fashioned rogue ed with tracking and all
that that I think could do a lot better. So, that’s all aiming at
the education skills and supply side. On the demand side, besides the things
that we progress as we talk about for a long time, you know protecting
collective bargaining moderate minimum wage increases, by the way I’m not a fight
for fifteen guy more of a fight for ten or twelve guy because I just worry that at
fifteen we’d lose a lot of jobs we could talk about that too, but I really want to
see America embrace a highroad employment strategy and create find new, creative
ways to reward employers who take the high road and who invest more in their work or
skills to share their profits etc. But this could involve changing
the tax code to give them credits, this could have technical assistance, it could involve the federal government
creating a high road jobs fund and then giving grants, competitive grants,
to states who form their own strategies, depending on what their
local economies look like. As Heather said, I’m a strong believer
in working on bottles of universal and portable benefits that would help a lot
with that fissuring problem we talked about and I do believe we need a new
set of regulations to, and yet I worry about the heavy hand of regulation
on the labor market I am a markets guy but I think these non-competing undisclosed
agreements really need to be reined in. Massachusetts and
some other states are doing that and showing us a way forward and
that I think that’s a good thing. Besides that, addressing a few of
those other issues I mentioned before these distressed regions and economists would have economists always
said about that is well people will move to where the jobs are you know,
don’t invest in places that are declining. Promise that’s not happening much, people
like us do move, people with B A’s and above do tend to look at the national
market, people with high school degrees and below tend not to move,
their social ties are very strong. I do think we have to start experimenting
at least with investing in those regions, subsidise jobs,
infrastructure investments, etc to try to boost things
there a little bit. But on the barrier side,
we’ve got to address this the scourge of criminal records,
we’ve got to address opiates. I don’t know that we know that
much about how to do with opiates we’re going to learn a lot soon. The best thing you do at criminal records
is not lock up so many people and we could have many changes in our
sentencing policies and to do that but of the folks who already have criminal
records we could also do a lot more to connect them with especially
in a tight labor market, right, I mean it’s this is the time when we
ought to really be bending over backwards because employers can’t get enough
workers and they’re more looking, willing now to overlook a criminal record
which they’re not willing to do and in a more of a slack labor market. So, we got to step up our efforts
to connect those workers, make the case that they do have some some
skills employers want, and work on that. And then the last things, you know I since
I do believe we need to reform disability insurance, you know think of disability
insurance you have an incentive to take people out of the labor market forever and
I think a lot of these distressed regions a lot of workers have gone that
route and they’re miserable because spending thirty forty years or life on
disability is not a great way to live it doesn’t give people great self-esteem and
not to mention the loss of income. We need to incentivize workers and
employers to stay in the labor market and for employers to accommodate
this disability and I think there’s there’s proposals to
reform disability insurance that could do more of that I think we need to try
them, to pilot them and evaluate them, let me also be clear I am not I’m in
favor of reforming some of these income support programs I don’t support the
simplistic work rules that states are now opposing in Medicaid and food stamps I
think will do vastly more harm than good. You could think about reforming these
programs but still a little bit sensible and evidence based and
not that’s a very ideological direction. I’ll stop there and passed on the other
folks and thank you [APPLAUSE].>>Joe Wholey: [INAUDIBLE] I’m Mark Pisano [LAUGH]. I’m teaching right now at
the University of Pennsylvania. And I’m asking Joe Wholey
to read my remarks. I’m Joe Wholey, good [LAUGH]. So Mark says the following: in
America who fretted over Y2K at the millennium but totally ignored one of
the most significant transformations that has impacted our country, simultaneous
dramatic drop in the fertility rate of women from 3.8 births per
childbearing women to 1.9 and at the same time an over seventy
year increase in longevity. So, we have fewer working age people and
more older people. All these changes occurring globally
have not previously occurred in recorded human history. Given the goal of this conference,
the impact of these demographic, demographic transformations is
at the core of the problem. And Mark says the solution is to
rebuild the middle class by providing opportunities for
all Americans resulting in lowering the political discord that we
are experiencing even today. So the cause, he says, simply put, and I hadn’t heard this mentioned before
although Mart talks about all the, time two thirds of the growth in the
economy is derived from growth in workers, and the other would relate to
productivity growth per worker. But, growth in the working age population
is going to be fifty five percent lower in in the coming three, thirty
years than in the last thirty years. We’re developing
a significant worker’s gap. In the last decade of the twentieth
century, in the Clinton years, we added twenty three
million working age people, in the first decade of this century we
added nine million working age people, contributing in part to
the Great Recession, in the current decade we will
add just five million people and in the twenty twenties working age
population growth could be even lower. Recent immigration policies that
significantly adding to the reduction in the working age population adversely if impacting the most
significant issue facing our country. No wonder our national growth rate
dipped substantially over the past eighteen years, almost half
the growth of the preceding decades. Additionally, the much lauded unemployment
rate of three point nine percent is a direct result of not
enough working age population. And I should throw in also a lot of
working age people who’ve chosen not to be part of the labor market, because
they’re on D.I. disability insurance for example or sitting home playing
computer games on their computers. So, he says our lack of understanding
of the importance of growth in the number of working people and
their skills explains the long and slow recovery of the past ten years and
portends troubling clouds for the future. Help wanted will be the most
frequently used ad of the future. Hoping the economy will grow by just
using expansive monetary fiscal and tax policies alone is wishful thinking. And, he repeats,
the Goldilocks decade of the 1990s was the result of rapid growth in working
age population couple with a very small increase in population
over sixty five years. That decade benefited from
a substantial demographic bonus. Analyzing the economic impacts
of these age impacts so that workers earn more and
consume more and pay more taxes older populations
have just the opposite effect, economic effect they earn less,
consume less, and pay fewer taxes. Since the millennium,
summing these age changes for millions of people in a country generates
a demographic penalty, a reduction in the growth of income, consumption,
and taxes paid by individuals. If the Clinton demographic
profile of two thousand existed today, G.D.P.
growth would be four point five percent. What’s missing in our current
policies is a focus on people we need every able bodied person to work,
including retirees who will comprise two thirds of
the population increase in the country. Automation will not save us,
robots cannot simply replace people. Robots are not consumers. Since consumption is two
thirds of economic growth, the loss of this demand forth, force on
our overall economy could be catastrophic. Technology by itself is not the answer. What can we do to alter the economic and ultimately political course of
this demographic transformation? Douglas North, the Nobel Prize
winner economics, argued that when the economic path you’re in does not work,
change the rules of the game. Change the way that organizations in this
society work together to alter the path. For the worker age issue,
the key is how do we organize a cell so that no one is disposable and
everyone’s part of the economic system? There are over twenty million people who,
for multiple reasons, penal, transfer payments, dropped out,
not properly legalize etc, and not in the labor force right now and
who could be. Add those to add those over
sixty five who could work longer and develop a strategic
immigration framework. This is just the tip of
the iceberg of what we could do if we organized ourselves differently. The essence of this approach is creating
a culture of understanding that all Americans are interdependent. We need all Americans to be
part of the work culture. Our beloved pope Francis suggests
that through work, we provide for ourselves and serve others and give ourselves the dignity that others
have spoken about earlier today. How do we create opportunities for word? Take infrastructure as an example. Provision of infrastructure to regenerate
our existing systems and build for the future becomes possible if we
alter the way that our governmental units as well as sectors work,
particularly the private sector. If those who benefit from
infrastructure investments and increased wealth provided
by zoning changes, for example, become part of
the funny equation value capture, then the financial limitations stalling
these efforts can be overcome. New infrastructure funding authorities,
we have them in a number of states, where that public private partnerships can
be put together and you can also capture non-tax money to help you do what you need
to do so that every win everyone wins. To fix the airport, rebuild the roads etc. New infrastructure funding authorities
could rebuild our aging roads bridges and transit. More importantly, the supply chain
infrastructure networks, ignored for over a half century, can increase our
production and distribution capacity. This will result in opportunities for
all throughout the country in red and blue states, creating opportunities
in the higher in the entire country. In conclusion, the strength of
this nation is our people, and the flexibility and
strength of our governance system. So, let’s use these assets to address
the problems that we face as a nation. North is suggesting that would change
our way organizations work together, governance, and focusing and focus on using all our people
in an interdependent way. Public private partnerships and
a people focus built this country. if we use these strengths we
will overcome the workers get the demographic penalty facing us. In doing this we were we will
rebuild our middle class. Thanks.
>>Carlos Asarta: Thank you [APPLAUSE]. Well thank you for the opportunity
to be here and talk to you, I do have an accent and
I’ll tell you a little bit about that but, I am an immigrant here from
the University of Delaware and another economist so
you’re getting a few of those. Just a great opportunity for
me to be here. My father is here and my father is
a retired major general from the Spanish army and so he provided for
us opportunities that made it so that I went to high school in France, and
then without speaking any French, and then came to the U.S. with a swimming
scholarship, without speaking any English, and I know by the time we’re done you’re
going to still think that I don’t speak any English but, I’ll try to make
make you change your mind on that. Many opportunities and
the fact that growing we struggled to make it to the end of
the month so I think I grew up in a middle class family I remember my dad always
doing numbers home and so I can tell you that while I was not born in the
eighty’s, I was born a little before that, I do know that I make more money than my
dad made when when we were growing up. So I guess I’m one of that fifty percent
that has been able to beat their parents in terms of the income that came forward. But what I do here at the University of
Delaware as my secondary appointment but really what I do the most is focus
on personal finance, economic and entrepreneurship education. And what we do is we train teachers
in the K through twelve system on how to teach that properly. This is just an info graphic that you can
see just to let you know that last year with more than one hundred trainings for
teachers taught more than two thousand teachers and
reach over one hundred thousand students. And so
I was thinking about the presentation, trying to figure out
what is the middle class. I think I grew up in a middle class
family but what is the middle class? I figured quickly that there is
no such thing as a definition for the middle class. You ask an economist we’re going to be
looking at income, at economic resources, you ask a sociologist they’re going to be
looking at the type of jobs that you have, some people look at culture and
how you self perceive yourself. So this is an article that just came out
a couple of days looking at the data, the data is not from two days ago,
but the article is. Seventy percent of Americans
consider themselves middle class. Right, there are people who may be earning
twenty thousand dollars a year and they think they’re middle class and people
who are earning two hundred thousand dollars a year and
they think they’re middle class. All right, and so what I did is I went
to the Occupational Outlook Handbook, a great resource I make my freshman
students go there the first day of classes they have to write an assignment the first
week because there’s a difference between what they think they want to do and
what they actually end up doing is really important for them as freshman to say I
want to be this in the future how about I get some information about what
the expectations are for this type of job. So I went out and I just found five jobs that I think fit
what we would think as middle class. Or you have high school teachers, you have
information about the median pay, typical entry level education and so on and
you’re going to see why I’m doing this. So this is high school teachers, here is
police and detectives all right you can look at the median pay is sixty
two thousand nine hundred sixty. Here’s registered nurses about seventy
thousand dollars also different levels of education and so on. One more for you, plumbers,
fifty two thousand dollars medium pay. The distribution clearly it’s quite
dispersed but the median pay fifty, fifty two thousand dollars and I have
interior designers fifty one thousand and of course all of them have a job outlook
which I think is really important for people to look at. What is going to be the demand of
what you want to do in the future? But the question I have for you here and
for myself is what do they have in common? And the reality is that they
don’t have a whole lot in common. You can say well the median income
is pretty similar; I would argue that having fifty thousand
dollars a year and seventy thousand dollars a year
is significantly different. You could say well the level of education
is somewhat similar; I would argue that having a high school degree and having a
college degree is significantly different. And if we’re looking at trying to move
people from or to the middle class one thing that we can do and we should do
is encourage them to get an education. This comes from the Bureau of Labor
Statistics clearly showing that there is a strong direct correlation
between the level of education and the median usual weekly earnings;
that’s not us at the mix and this is data that actually shows so
and that there’s a strong and negative correlation between the level of education
and your chances of being unemployed. So they don’t have a whole lot in common
but they do have one thing in common and them and everybody else and that thing
in common is that we have to make personal finance and
economic decisions daily, regardless of where you are and
that’s where I think the importance of when we get people to the middle
class the aper or the lower part of it. Are they able, do they have the tools to
not only contribute to their own futures but also the future of the nation because
how they do is also going to affect us. All right so they’ll have to be making
decisions about as a building budgeting, credit, housing investment and so
on that’s what they all have in common and that’s what we do at the center,
we try to focus on making sure that we train individuals on how to properly
approach all of these decisions. And so what I would like to propose is to
make sure that we start early teaching students about personal finance and
about economics. There are many people in here who
have taken an economics class and I am certain that when if I ask you how is
your economics class experience most of your going to be, eh no good and I know
that because I travel a lot I’m fortunate to have a textbook with McGraw Hill on
principles of economics and so I get a chance to do that like most everybody
here and when people ask me what do you do and I say I’m an economics professor their
typical response is [MUTTERING] right? That’s the typical response there’s
no the way to go about that. Right, but what we need to do start
early and provide those tools so a couple of statistics for you for
the middle income households, this is one from the global financial
literacy excellence center, and they were looking at the national
financial capability study and what they actually report thirty percent
of middle income households are unable to come up or struggle to come up with
two thousand dollars in thirty days and when they do they tend to rely on
friends of the family or coworkers or somebody that they know to get money. That also correlates with
the level of financial literacy. Here’s another one for
you from the St Louis Federal Reserve. Thirty five percent, thirty five
percent of all households have no money saved for any type of retirement and
I understand that you think well before we can teach about all these things people
have to make the money, they have to have this possible income and so on but, thirty
five percent and for those who do have retirement savings the median amount
is eleven hundred dollars right. If my T.I.A.A.
craft email that I get every so often is right apparently I’m going to
need more than a million dollars to retire what are you going to do
with eleven hundred dollars? If they’re right I don’t know if they’re
right, I’ve read some research looking at a couple that retires needs about two
hundred eighty thousand dollars for retirement. It seems like a low number for me but,
I don’t know where people are, it’s difficult to determine
that plus long term care. So, we propose that we have
to teach economics and personal finance in the K
through twelve system. We have a program here, in Delaware,
offering twenty eight high schools in Delaware offer, doesn’t mean everybody
takes it, called keys to financial success and we have done economic research
showing that it is effective. So there are a number of papers but let
me show you what we teach in this class; we teach about goals in decision making,
about careers, about budgeting, about saving and investing, and
in credit and housing and so on. We make high school students think about
this before they get to college so that they know the types of
decisions that they have to make and that they are informed citizens when
it comes time to make the decisions. Think about these decisions. I’m going to tell you that in some states,
and somebody might probably get upset I
mean this, we require in the k-12 system education about organ donors and that
is important is extremely important but you only have to worry about
that once in your life. This you have to worry about
every day of your life. All right, and so we’ve demonstrated that
it is effective that it increased through publications that increase the knowledge
of students in personal finance and some people tell me when we go out and we try to fundraise to continue to do
this they say well it’s the knowledge how do we know that the knowledge
then translates into actions? And so there’s research out there too as
well looking at mandates to teach personal finance in different states and the idea
that they improve credit scores and that the probability of delinquency for
young adults goes down. Why don’t we did students
about credit scores? What affects your credit score or what impact is going to have the decisions
you make today if you want to get a mortgage because you’re sixteen,
you’re not thinking about that. But if we can show you the difference
between having a credit score of 760 to 850 and 620 to 639, what you would pay in interest in a thirty
year mortgage, I think that’s important. It’s impactful; it’s something
that you will remember. And you may not remember
exactly all of the details but, enough to make you think about
it when you’re making decisions. Look at gender as well. If we could teach it in the k through
twelve system there is enough research out there showing that there’s
a gender disparity when it comes to personal finance and
economic knowledge. That seems to be eliminated when
we tackle the question in the K through twelve system properly. And then we look at age too,
I get this question all the time, what students are too young
to learn about this stuff? No, they’re not; we have research showing
that if they’re freshman in high school the freshman has, have less personal
finance knowledge and economic knowledge than the seniors entering, but at the time
they’re done with the course they have exactly the same, there’s no
significant difference between them. And we should start
even earlier than then. All right, what are we doing in Delaware? In Delaware in two thousand and
eighteen, we just passed the K through twelve financial literacy standards in the
state are going to have to be implemented in the school system and as you can see
the Delaware Center, the University of Delaware Center for Economic Education
and Entrepreneurship is being charged with actually developing the materials and
training the teachers in the state. We’ve been doing this for
over forty six years so we’re very proud of this; it’s a first
step is not the final solution, the solution that I see is that
we require students to take it. Now that we offer it,
now that we mingle it in the curriculum, that we require them and so what are some
of the things that we’re doing because you’re thinking ugh an economic
class right ugh an economics class, can we really teach economics
to kindergarten kids? Yes we can and yes we do actually. So we have a program like economics for
kids where we take readings for students, develop lessons that may
talk about savings for savings for example or allocation of resources and then provide the lessons to the teachers
to do them in the classrooms. We have meaningful economics competition
knowledge and entrepreneurial thinking. We have something called mini society
where students create their own societies in the classrooms, their own businesses,
their own currency and then they sell products to each other and understand
the importance of competition for example. We have something called Teach Children
to Save the Day this is like when I was a little kid, and
I don’t know how much time I have, but in Spain we had the dentist come
every year to the school and tell us that it was important
to brush our teeth, and to this day I brush my teeth every day
once or twice and typically twice right. Exactly the same thing, we partner with
a community we go in the classrooms and we explain to students with a lesson
the importance of saving or any other personal finance lesson. We have the stock market game fourteen
hundred and eighty six students from three hundred twenty four teams participating
in a ten week program where they have one hundred thousand dollars of virtual
money and they get to invest it, learn about the companies their returns
and so on we need to do this early. Nationally I’m not going
to going to details here, all the white states are states
that you can you can’t actually you’re not required to take
a course in economics to graduate. We have people here have never taken
an economics class yet you’re in panels where I’m an economist I’m an economist,
I talked about economics and so on right. This is for personal finance, all of these states that don’t require
you take a personal finance course. And so as I conclude here, and I was trying to put the presentation
together and I look at the charts which I may have modified a little bit
to engage in public policy in service, to ensure that the American middle class
prospers and continues to be relevant. Where I’d like to propose that we need to
make sure that we provide the middle class and all students the tools to
be successful financially, not just for them but also for
everybody else in this nation. I would go further to say that
the University of Delaware could be one of the first institutions to require every
graduate to actually take that course because if states in the U.S. are not
doing it maybe we have a chance to do it here at UD, in college to require
a course on personal finance. Alright, and that’s it, thank you. Thank you, Carlos. So, Joe, we have been less disciplined
in the budget group, I’m sorry to say. I’d like to thank Lisa, Harry, and Mark
Pizzano and Carlos and Carlos’ father. Where is he? He is right there sitting in the back,
sir. There he is. So here are a few things I
gleaned from the four papers. However we define the middle class, the middle class is financially insecure. Working age population is not growing and
too many are not even in the labor force. Education, economics, personal finance,
and entrepreneurship is important. What should we do? I had put the word encourage in but Harry’s word is we should
spur community colleges and employers to help workers increase
their skills and credentials. Incentive systems for the community colleges to do
a better job in credentialing. Mark Pizzano had talked about infrastructure funding authorities,
they have the many states, but I think simply to say public
private partnerships can be used to draw in on tax money to
rebuild infrastructure and to actually rebuild parts
of American communities. We should reform our disability insurance
programs to incentivize workers and we should encourage people to
have the dignity of a job. Pope Francis had said: Giving people money is OK
as a short term solution, but everybody needs a job for
their human dignity. Can’t always use money, money is tight. Use regulation to raise the minimum wage- I had incautiously written down
to fifteen dollars an hour but I crossed that out- to ten
to twelve dollars an hour. But raise the minimum wage and
also expand earned income tax credit programs,
which that’s my favorite program of all. Democrats and Republicans,
Federal government, State government, so forth like the Earned Income Tax
Credit Program, it makes sense. And reform the disability insurance
program, did I say that already? One more, to help people work,
we need to expand child care as well. So different ways that we can help
people to be in the labor force and to be contributing members of our society. And to put it in Mark Pisano’s words,
we are all in this together, we all need to be in this together,
and that sounded to me also like the Vice President talking this morning,
we all need to be in this together. Thank you. I think we can take one or two questions,
anybody have a question for the panel before we go into
our discussion groups? Thank you. Do you see a link between
protecting consumers and the increased financial wellbeing
of middle class workers? If yes, what entities would be
best suited for this this role? And I’m particularly interested in hearing
your response considering your past role on the Advisory Board to
the Consumer Financial Protection Bureau. Thank you, yeah I was fired last spring by Mick Mulvaney from
the Consumer Advisory Board of the CFPB, which was an amazing experience
being on that board. But yes, I think consumer protection
is really important for two reasons, I could say a lot about it, but what I
will say is the short answer is that what I didn’t go into is how much more complex
consumer financial services have become. And so it gets to your point, Carlos, about financial literacy and
being able to wade through that but it also gets to being protected to make
sure that people know what they’re doing when they’re signing onto a product
and it’s hard to wade through that now. The other thing that I think is really
important about consumer protection is that it has kind of created a way for people to know that what
the services that they’re using have passed some sort of a test, and
also to make sure that other actors aren’t entering the industry
that would be doing people harm. So I think the Consumer Financial
Protection Bureau was doing a terrific job with that. My up close experience of serving
on that board for two and a half years was that there were
really smart people in that agency who were really trying to do the right
thing and the director, Cordray, was also running a great
organization that was returning money to people that was pushing hard on
the complaints that consumers raised. And I worry that, you know, it took
from the depression to eradication of Glass Steagall basically, decades to kind
of return us to that unsafe era that was before the first crash and now we’ve
gone from the crash of 2007-8 only ten years when we’ve really kind of chipped
away at Dodd Frank and and the agency, the CFPB, it’s a concern that it’s
becoming completely defanged. Sure. One last question. Thank you. Dr Holzer, I was interested in some
of your policy recommendations and in particular the race to the top for
community colleges and perhaps as it relates to policies in distressed regions,
I’m wondering if you’re seeing a couple of models in these older industrial
communities where this is happening in a way that where you can see a shift
in the labor economy in a positive way. Thank you.
That’s a good question, I haven’t looked at carefully those regions of
the community colleges in those regions. So there are there are models out there, I think of them less as being in
distressed regions and more as being in certain states where the education
the workforce policies or are creative. And not to leave any states out, but I think for instance about Kentucky,
especially under Governor Steve Beshear, was very good at doing apprenticeships and
supporting advanced manufacturing and training people for very good paying
jobs in advanced manufacturing. I think of Tennessee, which is
actually got a very good job of luring manufacturing companies from Germany and then having a set of creative
policies in place to train them. South Carolina, very interesting you
don’t often think of us as a state but actually South Carolina is expanding
its apprenticeship, they pay one thousand dollars tax credit per head for
every new apprentice and very heavy marketing and
technical assistance for employers. So there are states that are doing
interesting and creative things, and while I always believe in doing is
looking at all these state experiments and also how they’re using
accountability incentives and evaluating to see which models work
the best for which groups of people, and then on that basis maybe try to figure
out what would what would best serve. But the problem there is distressed
regions is that they are so weak on the demand side of the market on
the job side that any strategy that’s only about skills it’s not going to do a huge
amount, I think they do need whether it’s infrastructure or other ways to build
more demand, subsidize jobs, and then in combination
with the skills policy. And again, we could experiment and
then evaluate like crazy, create jobs for all of us in the room who
are social scientists, and then try to learn really what works best. Just wanted to say one other thing that
I forgot in my initial answer which is the other thing that’s really
changed is the need for financial credentials to
participate in the economy and civil society, like a credit score so
you know my parents, there were no credit scores back there now it’s really
critical to get a job to get housing. And one of the things the CFPB
was working on was whether the the formula the FICA score,
whether that really works for everybody. I think there’s a lot of evidence that
it’s biased in favor of certain kinds of Americans, it doesn’t take into account,
for example, whether you pay rent or not and so
thinking about those new requirements for financial citizenship,
those become a barrier now. Thank you so much, let’s thank our panel.

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