BS explanation for rising inequality?

by Chris Bertram on July 21, 2010

Chicago economist Raghuram Rajan offers the following explanation for the long-term stagnant real incomes of Americans at the 50th percentile of the income distribution (compared to their compatriots at the 90th):

bq. A number of factors are responsible for the growth in the 90/50 differential. Perhaps the most important is that technological progress in the US requires the labor force to have ever greater skills. A high school diploma was sufficient for office workers 40 years ago, whereas an undergraduate degree is barely sufficient today. But the education system has been unable to provide enough of the labor force with the necessary education. The reasons range from indifferent nutrition, socialization, and early-childhood learning to dysfunctional primary and secondary schools that leave too many Americans unprepared for college.

I really find this difficult to believe. My guess is that, in terms of the real skills objectively needed to do the job, a high school diploma is more than adequate for most office work. Of course, it may be that, because of competition for those jobs, you need a higher level of qualification to get one. But that’s a different story.

{ 250 comments }

1

Matt 07.21.10 at 10:56 am

I think you’re probably right about a large amount of office work, especially if minimal training were provided. (On, for example, the more commonly used computer applications that people might not have used on their own in high school, but that are not intrinsically complicated. It’s worth noting that while people might well come to learn these things, and other office skills, in college, it usually won’t be part of a formal class.) But more importantly, it seems that the sorts of reasons he offers as to why the educational system hasn’t been able to meet demands (assuming it hasn’t)- poor early nutrition, poor early education opportunities, poorly functioning primary and secondary schools, etc., are exactly the sorts of things that someone who cared even modestly about inequality might think could be directly tackled by more or less straight-forward government involvement. Very odd.

2

Jonathan 07.21.10 at 11:10 am

“Who’s not working and why : employment, cognitive skills, wages, and the changing U.S. labor market” by Frederic L. Pryor and David L. Schaffe (CUP, 1999) provide a wealth of evidence to support CB’s scepticism – graduates increasingly going into jobs previously done by high school leavers without any clear evidence that graduate level skills are actually required for this. There’s also an extensive literature on over-education, particulalrly graduates doing jobs that don’t really require their skills, in the UK and elsewhere in Europe.

3

FuzzyFace 07.21.10 at 11:16 am

And part of the “companies are hiring college graduates to do what only needs a high-school diploma” thing can probably be attributed to the presence of “Human Resources” departments at most companies, who have the task of filtering through resumes for job openings. Naturally, they are going to be credentials-based, since they really don’t know the work, and have to pore through hundreds or thousands of resumes. It’s just easier to assume that a higher-degree is a better predictor of results than a lower one – not correct, mind you, but easier.

4

Ombrageux 07.21.10 at 11:39 am

This has been the (inner-)Party line for some time. Alan Greenspan is fond of this excuse and uses it in his “Age of Turbulence”. He claims it is because the U.S. public school system is “broken” and wage stagnation will be solved by its dismantlement into private entities, access to which will be harshly rationed by wealth.

Nevermind most office jobs don’t need more than a high school diploma. Nevermind that education has NEVER CEASED EXPANDING to the point where the industrialized world is facing a massive GRADUATE GLUT. Grade and diploma inflation is the norm now.

5

NomadUK 07.21.10 at 11:50 am

It’s just going like clockwork, isn’t it? Destroy industry by shipping it overseas and engineer the collapse of the economy, reducing the opportunities for both highly-trained university graduates and skilled and unskilled labour, forcing the more highly-educated to seek employment downscale, artificially inflating the ‘requirements’, forcing the lower classes even further out of the running, and down and down and down it goes….

It was such a great joke: socialism was never the road serfdom, capitalism is. Maybe someday people will get it.

6

CA 07.21.10 at 11:59 am

Just a couple of thoughts. First, it’s interesting that this explanation is attractive to the same people who attack higher education in the US. Second, the unemployment numbers by educational attainment are interesting in this connection. Even now those with a BA have an unemployment rate below 5% (and during the previous upswing in employment a few years back it was essentially full employment (2.3% or so). Finally, I think the frustration with the lack of preparation for college among incoming freshmen should be considered. At most non-elite schools a significant portion of the incoming student body has (a) no real grasp of how to study for anything other than memorization (b) can barely write a coherent sentence (c) can barely read a short op-ed piece for example and identify thesis and argument (d) has atrocious oral communicative skills. This, I suspect, is the real skill set that a college degree now provides, some reasonable likelihood that a person can function in a collaborative, knowledge based, highly communicative social environment. But, one reason to doubt the explanation is that it seems unlikely that income stagnation hasn’t affected a significant portion of these college educated workers as well, which it seems this fellows hypothesis would need to explain–though I’m not an economist so perhaps I’m wrong.

7

Hidari 07.21.10 at 12:00 pm

Surely someone can write a short piece of code for CT that would automatically replace the phrase ‘Chicago economist’ with the word ‘twat’?

It would save us all a lot of time.

8

herr doktor bimler 07.21.10 at 12:10 pm

So one of the mechanisms used to impose income inequality and a class structure also works as an excuse for that income inequality? That’s economical, anyway.

In fairness, without arbitrary qualifications to keep out the outsiders, just anyone might become a Chicago economist.

9

engels 07.21.10 at 12:18 pm

I think Ombrageux is right. It may be ‘BS’ but this idea has been central to New Labour (and similar ‘Third Way’) thinking for most of the last two decades. It helps to justify the 50% HE target and, more generally, the focussing of one’s egalitarian enthusiasms on giving ‘everyone’ the ‘skills’ to ‘succeed’ in the ‘labour market’ more generally rather than anything so Pleistocene as progressive income tax, improving benefits or support for organised labour…

You can also find it parroted ad nauseum in the writings of right-wing economics popularisers.

10

engels 07.21.10 at 12:18 pm

I think Ombrageux is right. It may be ‘BS’ but this idea has been central to New Labour (and similar ‘Third Way’) thinking for most of the last two decades. It helps to justify the 50% HE target and, more generally, the focussing of one’s egalitarian enthusiasms on giving ‘everyone’ the ‘skills’ to ‘succeed’ in the ‘labour market’ more generally rather than anything so Pleistocene as progressive income tax, improving benefits or support for organised labour…

You can also find it parroted ad nauseum in the writings of right-wing economics popularisers.

11

Steve LaBonne 07.21.10 at 12:27 pm

I think Ombrageux is right. It may be ‘BS’ but this idea has been central to New Labour (and similar ‘Third Way’) thinking for most of the last two decades.

Which is one of the reasons why some of have been pointing out that Obama is just as much our enemy as Bush was. Going to hell a little bit slower and with a smoother ride is NOT a meaningful improvement, pace the wishful thinking of co-opted progressives.

12

chris y 07.21.10 at 12:29 pm

Of course, it may be that, because of competition for those jobs, you need a higher level of qualification to get one.

If a high school diploma is sufficient qualification for the job – and it usually is – there is no reason to suppose that a degree makes one better qualified. Demanding a degree for a school leaver level position is much the same as sifting out all the applications written in blue ink – it makes HR’s job easier, but doesn’t help you to hire the most appropriate candidate.

13

AcademicLurker 07.21.10 at 12:30 pm

I see Hidari beat me to it, but really…

A Chicago economist spouting BS to justify increasing inequality? I’m shocked.

14

Steve LaBonne 07.21.10 at 12:32 pm

Hidari, I would prefer the gender-neutral “asshole”, or maybe “flaming asshole”. But the basic idea is very sound.

15

P O'Neill 07.21.10 at 12:39 pm

On the topic of strange explanations, there’s a theory circulating on the right building on the earlier one that the poor caused the financial crash by getting huge unaffordable mortgages — now they have the temerity not to leave the houses.

16

CMK 07.21.10 at 12:58 pm

Eh, is it not a bit odd for academics to decry the degree educated office worker trend?

Less undergraduates means less academics, means smaller and less universities.

Surely HE is about more than equipping people to do a job?

If that were the case we should just shut down most humanities and social sciences faculties immediately. When the undergrads return in September I’m sure someone can explain to them that in all likelihood those who can get jobs will be working in offices, and an degree is not really required to do those kinds of jobs. The kindest thing, therefore, is draw the experience to close now.

17

Steve LaBonne 07.21.10 at 1:00 pm

The degree IS required, not rationally but in the (rather important!) sense that employers do in fact demand it. So is CMK advocating lying to students and sabotaging their employment prospects?

18

steven c. 07.21.10 at 1:03 pm

As a college dropout myself, this is a very sore subject for me. I’m not overly sure what qualifications my friends who are Reedies and Swarthies and Obies have that I don’t, other than the sheet of paper – and yet the only jobs I can get a foothold in are unskilled-labor positions.

19

Matt McIrvin 07.21.10 at 1:04 pm

Uh-huh. And what’s the reason why the 99th percentile has been gaining relative to the 90th, and the 99.9th relative to the 99th? Not the need for higher education, surely. Educated professional wages are getting the squeeze as well, though not to as great an extent.

20

Irrelephant 07.21.10 at 1:08 pm

Mr. Labonne,

Since you are speaking of Chicago economists, I would prefer the accurate *and* precise term “clenched butthole” or “tightly clenched butthole”. “Flaming” indicates an imaginative passion that does not/cannot exist. “Asshole” is not severe enough.

21

Steve LaBonne 07.21.10 at 1:11 pm

I have absolutely no objection. ;)

22

Irrelephant 07.21.10 at 1:14 pm

“Clenchpoop” is also a wonderful term, but doesn’t provide quite the proper sense of urgency in identification. I suppose the best term would require our all conversing in Russian. Pound for pound, their more information dense profanity is hard to find.

23

CMK 07.21.10 at 1:22 pm

@Steve LaBonne.

No, I’m not advocating lying to students or sabotaging their prospects. I’m just venting my irritation at academics getting sniffy about degree holding office workers. If it’s a real bugbear then they should be advocating a drastic reduction in student intake with places only going to those who will actually use their degrees in whatever career they follow. That would likely mean the end of large scale humanities and social science provision. Should undergraduate education in philosophy be limited to those who will be become professional, academic, philosphers? Likewise with history, sociology etc, etc.

Over-education, over-qualification and non-vocational education, are keeping many, if not most, academics in jobs at this time. Just an observation.

24

Steve LaBonne 07.21.10 at 1:26 pm

I’m just venting my irritation at academics getting sniffy about degree holding office workers.

That might have some justification if that’s what they were doing. But reading comprehension is difficult, I guess.

The point is that expanding educational access, while simultaneously making every other area of policy more and more regressive, is hardly a useful recipe for combating inequality. Perhaps when you get over your irritation you might deign to address this, the actual topic of the post.

25

Sebastian 07.21.10 at 1:26 pm

What Matt (16) said – as Hacker and Pierson have just described (and as anyone who has even looked at the Piketty & Saez data should know), the main driving force in inequality in the US are the incomes of the top 1% and the top .1% – and it seems reeeeeallllly hard to make a technology induced skill premium argument about those.
Thankfully for Rajan, Politics & Society have made the volume freely accessible:
http://pas.sagepub.com/content/current
highly recommended even if you aren’t a Chicago Economist
(btw. why turn one insult – Chicago Economist – into another – twat, asshole, whatever?
That seems silly, no?)

26

Steve LaBonne 07.21.10 at 1:32 pm

That seems silly, no?

Not as long as there are still people in the world who are foolish enough to believe that “Chicago economist” is an honorable appellation.

27

ejh 07.21.10 at 1:50 pm

#21 – is there any need to behave like a Chicago economist?

28

Steve LaBonne 07.21.10 at 1:52 pm

#21 – is there any need to behave like a Chicago economist?

No, so please stop.

29

jc 07.21.10 at 1:53 pm

I wonder whether the various commenters have actually been in positions where they have had to hire administrative/clerical staff. I have (in several different ones, not just my university) and my observation is that at least in larger organizations the problem is that a typical person with only a high school education often does not have the needed skills, and more importantly struggles with adapting to an increasingly technological workplace. (We take using the web, work processing, etc for granted…these are not skills that are routinely developed in a typical US high school). To be sure, the needed skills are probably not those of a typical college graduate either, but one is much more likely to hire successfully if one selects from the college pool. So I would not be quite so dismissive of the “Chicago hypothesis”

One problem in the US, in my opinion, is that the typical high schools are no longer geared toward imparting valuable workplace skills. Good community colleges do this, as to top quality vocational colleges (which can be found in some states), but after that it is rather hit or miss.

30

Ken Houghton 07.21.10 at 2:00 pm

“Chicago economist Raghuram Rajan…”

Well, I didn’t need to read any further to know that BS was coming. But I’ve seen Rajan give a presentation to a stunned audience that reached correct conclusions for all the wrong reasons–and his audience (economists) was stunned by the conclusions, not the reasons.

31

daveWI 07.21.10 at 2:02 pm

The College Diploma is the new High School diploma.

32

CMK 07.21.10 at 2:17 pm

@ Steve LaBonne.

I can read fine, but thanks for the gratuitous insult nonetheless.

‘The point is that expanding educational access, while simultaneously making every other area of policy more and more regressive, is hardly a useful recipe for combating inequality.’

Well, that’s true. What do you suggest should be done?

33

Chris Bertram 07.21.10 at 2:19 pm

If anyone takes me to believe that people should only be educated to the level necessary to do the paid employment they end up in, then let me assure them that I don’t believe that. Of course, only a “Chicago economist” would have read me that way.

34

PHB 07.21.10 at 2:21 pm

Yes there is a graduate glut. But there is still a skills shortage.

We have a massive glut of arts graduates. We are desperately short of engineering graduates and science graduates capable of learning engineering skills.

Most office workers use tools such as photoshop and excel but they use them at a very low level, in large part because they don’t have the intellectual framework to understand more advanced approaches. The abysmal nature of Excel and its ad-hoc scripting scheme does not help, but the reason it is so bad is that so few people make use of it it does not need to be good.

With the exception of degrees in the graphic arts – an engineering degree in my view rather than an ‘arts’ degree, arts degrees are dispensable because they are not meant to be a training for a career. Arts degrees were originally designed as training for the clergy and were later repurposed to be preparation for the leisure class. The only employment utility in an arts degree is to teach courses in arts.

Most politicians are arts students, in the UK it is even narrower, PPE. So they conflate the skills shortage in engineering with a general demand for more graduates. But what the economy is lacking is not a more plentiful supply of English Lit graduates. They need engineers.

It is even more specific than that, demand for chemical, mechanical and civil engineers is pretty much the same as it was ten or twenty years ago. The skills shortage is in information engineering.

You could not have a Microsoft or a Google based in Britain, both would require the entire output of UK comp sci grads. Even in the US they can only survive by pulling in huge numbers of workers from India.

And here is the point where I think we reach the question of whether philosophy is really an art or like mathematics, a foundation for everything else. Because the reason really skilled computer experts are so highly sought after is that they can perform a very wide range of tasks given the right tool. Give an engineer Microsoft Project for a week and they have learned more about management than most MBAs from Harvard business school know on graduation. Give them solidworks and they become a draftsman, give them the analysis modules and the right training and they become a mechanical engineer.

The bigger problem here is that only a small proportion of the population has the ability to handle abstract concepts on this scale and it is not something that most people can learn. Most people when they approach a computer start off by telling themselves, this is going to be too hard for me to do.

35

rv 07.21.10 at 2:23 pm

Utter nonsense. I spent little time at a very high end wealth management firm where the principals making $20 million per annum had no more than high school degrees and the occasional bachelor’s degree across the board. I believe the entire staff had no more than two advanced degrees among them. I leave you to draw your own conclusions as to what this implies about the skills required to master financial management and the correlation between value and remuneration.

36

Walt 07.21.10 at 2:28 pm

Pay computer science graduates like lawyers, and see how many graduates computer science programs produce.

Though I’m not sure the percentage in arguing with someone who argues “Give an engineer Microsoft Project for a week and they have learned more about management than most MBAs from Harvard business school know on graduation.”

37

Steve LaBonne 07.21.10 at 2:29 pm

What do you suggest should be done?

For starters, read engels’s list @8.

38

engels 07.21.10 at 2:32 pm

Cmk, so are you saying that if something is to someone’s (presumed) material advantage then she is forbidden to criticise it? Even granting that (faintly ludicrous) principle, academics might well object, in a purely self-interested vein, to the changes in the character of Higher Education that go along with such an agenda.

39

Josh G. 07.21.10 at 2:39 pm

PHB, you’re full of it. If there really was a shortage of engineers, it wouldn’t be next to impossible for any engineer (especially in the IT field) over age 50 to get a job. And pay levels for engineering grads would have risen, not stagnated.

40

mpowell 07.21.10 at 2:49 pm

Well, we all know the degree is for signaling purposes. And it is quite valuable for that purpose. Office work isn’t about having mad skills of some sort, it’s mostly just about showing up and doing your job consistently. And if I were an office manager, I’d probably be looking primarily at college graduates. Failing to get through state college suggests a disappointing lack of resolve.

Ironically, I suspect that Rajan is largely correct in his identification of the problems with our educational system, but I don’t think they lead to the income inequality that he has identified. (that probably comes more from the monetary policy of the last 30 years which has been specifically targeted to put the clamps on economic growth as soon as wages show any sign of growth- it’s been remarkably effective) But even if he were right, the solution would be obvious: more progressive income tax to fund better education and childhood nutritional programs.

41

Bunbury 07.21.10 at 2:53 pm

The odd thing is to hear the argument put like this by an economist.

First of all, if degrees are largely about signalling as many economists like to say, how would getting everyone to make a signal help anything? “I’m Spartacus!”

Secondly it isn’t clear whether the pie is smaller than it ought to be because of the lack of graduates or whether the sizes of the slices are irregular because of inadequate competition.

Finally he seems to be implying that more than 50% of USians are malnourished and undereducated. Some of the things he is talking about seem more likely to explain the 50/10 ratio rather than the 90/50 ratio.

42

CMK 07.21.10 at 2:54 pm

‘Cmk, so are you saying that if something is to someone’s (presumed) material advantage then she is forbidden to criticise it? Even granting that (faintly ludicrous) principle, academics might well object, in a purely self-interested vein, to the changes in the character of Higher Education that go along with such an agenda.’

No, not at all. First of all, I don’t think anyone should be forbidden from criticising anything. My point is that there’s a disconnect between one stating that a high-school education is enough to do most jobs, particularly office jobs, while occupying a job educating people way beyond high-school level (and possibily paying substantial fees), knowing full well that many of these people will end up doing jobs that one believes only require a high-school education.

43

engels 07.21.10 at 2:55 pm

Well, we all know the degree is for signalling purposes.

We do?

44

mpowell 07.21.10 at 3:16 pm

Do we really need to have a debate as to why office managers require a bachelor’s degree (of any sort) from job candidates? Well, I thought that point was clear by now, but I guess we can have that discussion instead.

I just think that it’s more interesting that this explanation for income inequality is not much of a defense of it.

45

engels 07.21.10 at 3:24 pm

42 Why is it clear? Because they all do and if you were one of them you’d do the same? If I were in Steven C.’s position (above) I have a feeling I wouldn’t find your explanation of why I’m debarred from doing a job I’m perfectly able to do completely persuasive…

46

mpowell 07.21.10 at 3:37 pm

Any particular person may have any different reason for not completing a degree. But the ability to complete a degree is one piece of evidence that managers use to weigh your fitness for the job. And it is an easy to apply filter. This issue has been discussed before, sometimes with accompanying research. It’s impossible to get inside every hiring manager’s head, but this it seems likely that this is what they do. Maybe if acquiring a HS diploma were more challenging they wouldn’t do this. But as it is, a HS diploma does not show much of anything. And as a potential hire, you have to consider not just what skills you have, but what skills you can prove you have to an employer (on a resume, without requiring much of their time). I don’t really understand the complaining about this. It’s not the first point of contact in our education/employment system that needs fixing.

47

engels 07.21.10 at 3:47 pm

So it’s a common practice (in the US anyway) so it must be okay. Plus there are more serious problems in the world and we have to solve them all before we can think about this.

48

Sam 07.21.10 at 3:54 pm

Bertram and others should consider the broader literature in economics on the causes of increasing inequality before they dismiss Rajan’s explanation. I think you will find that most economists believe that technological change that increases the returns to skill is the primary culprit, along with the school system’s inability to keep up. This is hardly something that only Chicago economists believe. For example, see Goldin and Katz’s work. Here is a summary:

http://www.voxeu.org/index.php?q=node/3640

Perhaps this work is incorrect. And there are competing explanations of increased inequality. But it is ridiculous to dismiss it based on anecdotal evidence or what “sounds right” to us.

49

Gene O'Grady 07.21.10 at 3:57 pm

I have spent the greater part of my working life (almost fifty years now, hard to believe) doing office work, sometimes moderately high level (budget analysis, editing), other times not (data entry, reception, phones — although it’s hard to be a good receptionist).

Any other commenters have much real life experience or are we all talking out of theory and/or anecdote?

50

Barry 07.21.10 at 4:02 pm

Seconding josh @37 – anybody in the USA/UK who states that there is a shortage of engineers/programmers/scientists can be dismissed as a liar from the start.

51

Barry 07.21.10 at 4:05 pm

mpowell 07.21.10 at 3:37 pm

” Any particular person may have any different reason for not completing a degree. But the ability to complete a degree is one piece of evidence that managers use to weigh your fitness for the job. And it is an easy to apply filter. ”

And that’s the sort of filter one drops like a rock if there is actually a shortage of skilled people. It’s the sort of filter one uses if one assumes a glut of people with college degrees.

52

SusanC 07.21.10 at 4:05 pm

I can (just about) believe that office workers need to be more skilled than 40 years ago, due to the increased use of computers. I’ve seen plenty of people struggling to complete a business task on a computer. For that matter, I’ve had difficulty myself on plenty of occasions.

But that’s not the same as needing an undergraduate degree. Most of what you learned in University won’t help you all that much when you’re struggling to get your employer’s buggy computer system to do what you need to do. (General problem-solving skills plus a substantial amount of background knowledge on how to interpret computer error messages is what you need here).

Even a computer science degree is not primarily about knowing how to work around bugs in poorly designed office automation systems. (Although, to be sure, a CS student will learn more than they ever wanted to know about solving that kind of problem, on the way to getting to grips with the course material).

As other posters have said, the degree is probably acting as a signal.

53

Barry 07.21.10 at 4:06 pm

Sam
” Bertram and others should consider the broader literature in economics on the causes of increasing inequality before they dismiss Rajan’s explanation. I think you will find that most economists believe that technological change that increases the returns to skill is the primary culprit, along with the school system’s inability to keep up. This is hardly something that only Chicago economists believe. For example, see Goldin and Katz’s work. Here is a summary:”

Well, many economists also believed and still believe that Greenspan is God; perhaps we should look at that field much critically. BTW, Krugman (Mr. Correct) has also pointed out the widening span of inequality in the top 10%, top 1%, and top 0.1%.

If it’s education, it seems to manifest itself strangely.

54

Tim Worstall 07.21.10 at 4:10 pm

“What Matt (16) said – as Hacker and Pierson have just described (and as anyone who has even looked at the Piketty & Saez data should know), the main driving force in inequality in the US are the incomes of the top 1% and the top .1% – and it seems reeeeeallllly hard to make a technology induced skill premium argument about those.”

Globalisation.

Almost all of us are competing in national labour markets…there’s a very few (Tiger Woods, Spielberg, etc) who are competing in a global one (as individuals that is). More globalisation means an increasing difference between those who are picking up dimes from a couple of hundred million people and those who are picking up nickels from a couple of billion.

Note that there’s nothing here about whether these people are “worth it” or not. Whether they’re rent collectors or entrepreneurs, sports stars or business people. Not even anything about whether it’s a good or a bad thing that this is happening. Just, simply, some people are collecting nickels from billions in a way that no one was a couple of decades back: thus the increasing disparity between top 0.1% and the 99th percentile.

55

engels 07.21.10 at 4:11 pm

‘As other posters have said, the degree is probably acting as a signal.’

Yes, for ‘people like me’.

56

engels 07.21.10 at 4:19 pm

Sam 48 that’s fair enough. Personally I wasn’t trying to prejudge the substantive issue (though I think what you call an economic consensus is more like a neo-liberal consensus). I was pointing out how central this claim is to New Labour (and neo-liberalism more generally).

57

L2P 07.21.10 at 4:27 pm

“I think you will find that most economists believe that technological change that increases the returns to skill is the primary culprit, along with the school system’s inability to keep up.”

The rise in inequality isn’t between the marginal difference between the the guy who learns how to use computers, making $25 an hour, and the guy who doesn’t, making minimum wage. The rise in inequality is between the guy making $25 an hour, and the guy making $100,000 an hour.

Those economists are simply studying the irrelevant. Yes, there may be some marginal increase in inequality because of increasing gains to education. Those are largely irrelevant to the huge increase to structural inequality in the US and elsewhere.

58

Joshua Holmes 07.21.10 at 4:29 pm

My grandfather worked as a bureaucrat in a large corporation. I do today. He dealt slightly more with numbers, I deal slightly more with people. They called him a “clerk” and they call me something with four words.

The difference? My grandfather was a bright high school graduate. I have seven years of post-high school education, including a graduate degree, and six figures of education debt. None of that education helps me do the job in the least: the other person working the same job is a college drop-out.

My grandfather raised five boys in a large house in a nice small town on his salary; Mom Mom never worked. I struggle to make my loan payments. This country has lost its fucking mind.

59

engels 07.21.10 at 4:32 pm

‘Almost all of us are competing in national labour markets… There’s a very few (Tiger Woods, Spielberg, etc) who are competing in a global one (as individuals, that is).’

Try telling that to a computer programmer whose job has just been outsourced to Mumbai.

60

someguy 07.21.10 at 4:33 pm

Can you believe that Raghuram Rajan! He is concerned about income inequality! He is against remedying income inequality via easy credit! He thinks education might be the answer!

I say a 1000 deaths to to the people’s enemy Raghuram Rajan!

61

engels 07.21.10 at 4:37 pm

Thanks SomeGuy, that’s really informative.

62

Omega Centauri 07.21.10 at 4:41 pm

My initial reaction was similar to Bunbury’s, I thought it might make sense if applied to the 20th percentile, but the 50th seems inconcievable.

And when I first entered the real workforce, with an ABD (All But Doctorate) I found myself in quite a pickle, overqualified for anything that didn’t require the (advanced)degree, but seen as a flight risk to anyone hiring for something I was formally qualified for. [By flight risk, I mean the hiring managers assumption was that I would soon find a better job and leave]. Does this mentality apply to office managers vis a vis college graduates? I suspect if I were a hiring office manager that I would be looking for community college graduates, and upper tier HS graduates for that very reason. And maybe I would accept college educated houswives, if I thought they weren’t ambitious enough to look for something better.

63

SWNC 07.21.10 at 4:44 pm

Like Gene O’Grady, I am also an office worker, albeit one in academia. In addition to computer skills, my job requires that I write and speak clearly, communicate effectively with students, faculty, staff, parents and administrators (and there are different methods for communicating most effectively with those different audiences), manage a budget, etc. A person without a college degree can possess all of those skills, but my degree (in history) helped hone most of those skills. There tends to be a perception among some academics that administrative work is easy and doesn’t require much intelligence. Frankly, if I’m doing my job well, you’ll never know all that it entails.

64

Dukester 07.21.10 at 4:44 pm

The college degree has become an important credential because it signals that a person’s SAT scores were above a certain admission threshold. Scores on the SAT and other standardized tests correlate tightly with IQ scores. Thus, a college degree usually indicates a person’s IQ falls on the right side of the bell curve. (The more elite the school, the higher the minimum SAT score required for admission). The above-average IQ is the sought-after asset for the modern workplace, where learning and adaptation have become increasingly important.

I think it’s quite feasible that part of the economic crash is due to a correction based on the accelerating cognitive stratification of the workforce. As machines take over more and more of the menial labor, we’ll soon be facing a massive social conundrum: Those in the lower cognitive classes will have no value on the labor market.

Agreeing with the other commenters here: It’s silly to use college as a credential for employment. It’s inefficient and expensive, when the score from a 1-hour IQ test could serve as an equivalent predictor of on-the-job performance.

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Milton Recht 07.21.10 at 5:06 pm

There are many problems with the BLS data used to measure inequality, but because it is readily available and free, it is used in many income studies.

The number one problem is that it does not measure or include the employer paid value of any benefits to the worker, such as health care, vacation, sick days, etc.

For example, where I live, bedsides having a Starbucks, there are other, non-national brands, local, multi-site coffee shops. Both pay the same nominal wage, but only Starbucks offers its part-time (minimum 20 hrs per week) and full-time employees health insurance. Clearly, Starbucks pays more than the other coffee shops.

Imagine two workers, one making $100,000 per year and one making $50,000 per year. The income ratio used in inequality measures is 2 to 1. Suppose the employer adds a health insurance benefit and pays $6000 per year per employee. The true wages of the employees is $106,000 and $56,000 per year, or a ratio of 1.89 to 1. When one compares going from a no benefit to a benefit employment, or as benefit costs increase (such as health care), one sees income inequality declining and big gains for the 50 percent wage brackets and for college graduates.

Prior to this recession, over the last 10, 20, or 30 years, employers added and employees demanded more benefits, such as health care, dental care, more vacation days, sick days, etc.

When benefits are included, college graduates probably are doing very well prior to this recession.

It is misleading to make any statements about wages and wage inequality unless one looks at the total compensation, including benefits, paid to employees.

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mpowell 07.21.10 at 5:19 pm


So it’s a common practice (in the US anyway) so it must be okay. Plus there are more serious problems in the world and we have to solve them all before we can think about this.

I still don’t understand the problem. At worst, this is a proxy for other issues. Either, a) there is a glut of semi-skilled office worker types and businesses are applying filters that allow them to cut out a portion of the potential workforce with minimum effort (although costing us a lot in requiring people to get degree’s if they’re serious). Okay, but I think the greater than market demand for that type of worker is the problem and you need to focus on something else to solve the problem. Or b), completing a HS degree has gotten so absurdly easy that employers really do need to require a college degree as a decent signal of competence. So do we need to start failing people out of HS? I don’t see that’s helping much of anything.

By the way, engineers in the right field are picking up nickels from billions and earning in the 90th percentile and higher. And the need for high level skills is a very significant discriminating factor. But how do you find the right field? Get lucky. That’s the bitch of the free market.

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Steve LaBonne 07.21.10 at 5:28 pm

He is against remedying income inequality via easy credit!

And I’m against strawmen.

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someguy 07.21.10 at 5:45 pm

engels ,

You didn’t feel the need to comment about the informative nature of the stream of comments ridiculing Raghuram Rajan and calling him all sorts of nasty names because he thinks education and not easy credit is the solution to stagnant real wages.

You did feel the need to comment when I poked a bit of fun at those comments.

Why?

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engels 07.21.10 at 5:46 pm

I’d say that it’s a problem partly because one’s opportunities of acquiring academic credentials of any kind beyond high school tend to be strongly shaped by how deep one’s parents’ pockets are, in the US and increasingly in other places. When these credentials have little to relevance to the job at hand it starts looks less like ‘signalling’ and more like the fairly transparent reproduction of inherited privilege.

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mds 07.21.10 at 6:09 pm

Going to hell a little bit slower and with a smoother ride is NOT a meaningful improvement, pace the wishful thinking of co-opted progressives.

Speaking from my own slice of the left, I must disagree. I believe that going to hell a little bit slower and with a smoother ride IS a meaningful improvement, because I no longer believe that anything better is possible for the foreseeable future. There are comments on this very thread that help confirm this view. And I’m selfish enough (and concerned enough for my offspring) to want to postpone as long as possible the total collapse apparently required for a Better World(TM) to arise. I briefly thought the implosion of the global financial system and the blatant discrediting of virtually everything espoused by freshwater economics would do the trick, but instead the crisis has become yet another opportunity for the usual suspects to wield the lash with abandon. Up next: Ph.Ds in engineering should be mandatory for cashiers at McDonald’s, since cash registers are so freaking complicated.

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roac 07.21.10 at 6:12 pm

someguy — Did someone on this thread propose “easy credit” as a solution to the problem of stagnant real wages? I missed that. (I suspect “progressive taxation” might be more likely.)

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Steve LaBonne 07.21.10 at 6:14 pm

Collapses tend to get worse the longer they’re postponed, though. But your point is certainly an arguable one, and I won’t quarrel with anyone who based on such a rationale votes “lesser of two evils”, as long as they do it with their eyes open and in the full awareness that they’re rewarding bad behavior.

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Alison P 07.21.10 at 6:33 pm

going to hell a little bit slower… to postpone as long as possible the total collapse

And to increase the chances that ‘something will turn up’, for example some new technology or collective determination, which solves the problem. I still hope for this. Like the detective stories where the prospective victim is persuaded to write his suicide note ‘because while you are writing it, something might happen, someone might interrupt us…’.

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Steve LaBonne 07.21.10 at 6:38 pm

I would also point out “lesser of two evils” is a pretty damn poor motivator for getting out the vote in large numbers, even if some of us are individually persuaded by it. The Democrats are really playing with fire- unfortunately on behalf of the whole country, not just themselves- by doing so little to help most of their core voters.

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chris 07.21.10 at 6:40 pm

@Steve LaBonne: If all the candidates on the ballot are bad, then any form of voting or nonvoting will reward someone who is behaving badly. In such a circumstance rewarding less-bad behavior may be, er, not so bad. At least, if enough people do it, it raises the bar.

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Tomboktu 07.21.10 at 6:49 pm

I haven’t read Rajan yet, but I wonder if it would be true, but that he misses the bigger point?

So, technological change might account for the change in ration of those at the 9o and 50 points, but noticing that misses the bigger change that was referred to in the Politics and Society issue (referred to here a few days ago) and in Lane Kenworthy’s update yesterday: the 99.9 to [60 | 50 | 40 | 20 | whatever] ratio.

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Steve LaBonne 07.21.10 at 6:51 pm

If all the candidates on the ballot are bad

But the tough case is when there’s a GOOD candidate who isn’t on either of the major party lines.

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mds 07.21.10 at 6:59 pm

Collapses tend to get worse the longer they’re postponed, though.

Outside of, e.g., The Sky Road and its “Otoh schemata,” how much theoretical or empirical evidence is there for this? I mean, it squares with my own intuition, but my intuition has not been a universally successful guide, to put it mildly. For instance, if the Roman Empire in the West had collapsed in the crisis of the third century instead of muddling on, would this have made things better or worse? And for whom?

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Joshua Holmes 07.21.10 at 7:12 pm

The Democrats are really playing with fire- unfortunately on behalf of the whole country, not just themselves- by doing so little to help most of their core voters.

Steve, the Democrats aren’t playing with fire. They’re arsonists.

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someguy 07.21.10 at 7:14 pm

roac,

Yes. mpowell did.

But I wasn’t referring to that.

Did anyone read the link?

A concise summary would be ->

Raghuram Rajan is concerned about income inequality. He thinks easy credit was the cynical political solution to this problem and was a disaster. He thinks education might be the answer to remedying stagnant real wages.

I don’t agree with him. I think Greenspan’s low rates in response to the .dot com bubble pretty obviously triggered the housing bubble.

But the policies of Freddie Mac Fannie Mae were certainly a disaster and easy credit or loose monetary policy is a poor way to battle income inequality.

I am not certain if education is the answer to stagnant real wages. [I think total hourly median compensation has been trending upwards.] But I certainly favor better education for everyone.

I am amazed by the abusive reponses to Raghuram Rajan’s tame conjecture.

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PHB 07.21.10 at 7:17 pm

@various

No, someone who is 50 and wants to coast on their COBOL and JCL skills is not going to be able to get a job as a Java code jockey. The issue is not the age of the person, it is the age of their skills. I know plenty of 50+ engineers whose services are still in high demand because they kept their skills current and were willing to learn new ones.

The pay incentives for engineers and lawyers are really not very different. I earn more than most lawyers do. There is a much wider variation in the skills of the people calling themselves engineers. And the lawyers have post-graduate degrees and the accompanying loans to pay off. There are far more engineers who are self-made millionaires at 30 than lawyers. The average 50 year old lawyer earns more than the average 50-year old engineer.

Comparisons in pay scales are irrelevant because the best engineers do not go into engineering for the money. And the way that you make the real money in any profession is by exploiting juniors in any case. A senior partner at a law firm does not spend most of their time thinking about law, they spend their time thinking about acquiring clients and business development. For every dollar they make from their own labor they will take in five or more from renting out juniors. Engineering partnerships work in the same way. So do the Sopranos (the money flows up).

The difference is that in the law there is a fairly low upper limit to how large a firm can grow due to conflict of interest issues. So it is much easier to reach the top in the law. In engineering the top is Bill Gates, Larry Ellison and co.

Regardless of who makes most money, a person of average talent and industry is going to be better off in engineering than law. We do not need as many lawyers and they can afford to be very selective. But if you compare elite engineers against lawyers, we do considerably better.

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Steve LaBonne 07.21.10 at 7:21 pm

He thinks easy credit was the cynical political solution to this problem and was a disaster.

His proposed alternative does less than nothing to explain or address the income and wealth drain to the very top, and carefully and deliberately avoids the obvious (but unpopular among Chicago economists and their paymasters ) non-credit-bubble-based remedies for actually reducing inequality rather than temporarily masking it. That makes him a cynical, lying asshole in my book- in company with his colleagues.

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Doug K 07.21.10 at 7:23 pm

Using the same Econ 101 analysis that is being applied in Rajan’s narrative, the skills mismatch story cannot be true: if the skills are in short supply, then wages for those with the skills would be rising. This is not the case in any industry that I know of.

The ‘education is failing’ story is also demonstrably false. See this article on the real science gap:
http://www.miller-mccune.com/science/the-real-science-gap-16191/
In particular, see the Urban Institute study that is cited there, from which a quote:
“The pool of science and engineering-qualified secondary and postsecondary graduates is several times larger than the number of annual job openings. ”
This comprehensively contradicts PHB’s narrative above, with actual data.

I’ve worked in IT for thirty years, during all of which time we’ve been bludgeoned with the claims of a ‘skills shortage’. See http://dkretzmann.blogspot.com/2008/05/it-skill-shortage.html
It has always been both false and true: true, there is a shortage of Java skills when defined as: in 1999 there was a Java skills shortage, since there wasn’t anyone to hire with five years of experience (the only person qualified was James Gosling, the inventor of Java in 1994); false, there is no shortage of Java skills because human beings trained in software can learn a new language quite easily.

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roac 07.21.10 at 7:34 pm

Yes. mpowell did.

I went back and read all of mpowell’s posts. I saw none in which he talked up easy credit as a remedy for income inequality. He did, at 40, propose more progressivity in the tax system. Like I said.

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roger 07.21.10 at 7:34 pm

That’s the fave explanation of the U Chi set, when they aren’t trying to explain that inequality is an illusion cause plastic tat at Wallmart has gone up way less than your average yacht price, so the rich aren’t really getting richer.

It leaves unexplained the obvious. Why has upper management not been automated? As we saw with BP, executive decisionmaking, nowadays, could much more easily and efficiently be done with the help of expert computer programs and a few secretaries to feed in data. But the upper management tier, the ultra-plutocrats and predators, etc., all have purchased wonderful guild-like protection from that sort of thing, and they have economists to bless it with theology. As one noticed in the slump, all the companies went down at the same time, and they rose at the same time in the 2009 market. However, the legend of chivalry lives on when the economist turns, dewy-eyed, to the ‘entrepreneur.” It is funny, actually. And Americans at least are stupid and servile enough to buy this bogus story.

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Dr. Hilarius 07.21.10 at 7:37 pm

One problem for aspiring office workers is that those jobs are scarcer. Less and less paper to be filed as electronic data takes over. But this isn’t the real problem. As earlier posters have suggested, income inequality is driven by the enormous amounts of money being made in the upper percentiles. Who are these people? The are not engineers of any description. The real money is in money management. While some of the brokers, hedgers, and assorted scammers have degrees in quantitative analysis most have MBAs from a few select schools. Entry level stock brokers can make more than most engineers. Their “skill” is in getting the job.

By the way, engineers may be in short supply but the demand for specific types of engineers waxes and wanes. Aerospace engineers get dumped onto the unemployment roles in large numbers at regular intervals. Boeing, being tired of dealing with unions, is now aggressively moving to shift production to non-union states and overseas. And if an engineer is out of work for any length of time employers prefer to hire a recent grad with the latest skills for less pay.

If you want a well-paying job that can’t be outsourced, forget all those graduate degrees. Become a plumber. Toilets can’t be sent to India for repair. I know plumbers who are self-employed and make six-figure incomes. A couple have college degrees but couldn’t find work with them.

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someguy 07.21.10 at 7:43 pm

roac,

I wasn’t referring to what mpowell said.

But in post 40 ->

“Ironically, I suspect that Rajan is largely correct in his identification of the problems with our educational system, but I don’t think they lead to the income inequality that he has identified. (that probably comes more from the monetary policy of the last 30 years which has been specifically targeted to put the clamps on economic growth as soon as wages show any sign of growth- it’s been remarkably effective)”

88

mpowell 07.21.10 at 7:46 pm


I went back and read all of mpowell’s posts. I saw none in which he talked up easy credit as a remedy for income inequality. He did, at 40, propose more progressivity in the tax system. Like I said.

I was slightly confused at first as well. He is talking about my post

89

mpowell 07.21.10 at 7:52 pm

Oops- hit enter button to soon.

He is talking about my post at 40 where I mention monetary policy. For the most part, it has been very tight over the last 30 years overall, though Greenspan did goose the economy to get Bush re-elected in 2004. But it is not reasonably to equate looser monetary policy with easy credit. Easy credit implies consumer credit. The problem by the mid 2000s was that the income inequality was already baked into the system. The only way to drive demand was through consumer credit. But looser monetary policy earlier (which translates into business credit really) might have meant better bargaining power for employees in the 80s and 90s time frame, higher wage scales and more consumer demand backed by income instead of credit in the 2000s.

But that is backwards looking. Forward looking we should be applying additional tools to address income inequality and it would not be honest to describe my earlier post as wishing to address income inequality through easy credit.

90

lemmy caution 07.21.10 at 8:01 pm

I could understand :

percentage of college graduates declining -> payoff to college graduates increasing

That is basic supply/demand.

I don’t understand:

percentage of college graduates increasing-> payoff to college graduates increasing

which is apparently what is happening.

The increase in the percentage of college graduates is decreasing. But, so what, the percentage of college graduates is increasing. The percentage of college graduates will plateau at some level anyway.

91

guthrie 07.21.10 at 8:05 pm

My own experience here in the UK is that there is a shortage of specialists in some narrow specialised areas of science simply because many companies are unwilling to spend the time and money training people when they think they can poach them from elsewhere, or alternatively, the narrow specialism is growing so, like with java coders with 5 years experience in 1999, there is a shortage of experienced engineers/ scientists. Moreover there seems some difficulty in cosntructing career paths for the majority of individuals. Sure, the talented elite won’t lack jobs, but the majority of people would like to have careers but can’t, because there are either not enough openings for them to get the necessary experience, or because there are no career paths open any more, with companies shifting production and R&D abroad, with downsizing and the relentless use of universities as cheap labout for R&D without the company employing its own people to do it, thus cutting off another possible career path.
Finally all these old geezers filling positions and hanging about for their pensions doesn’t help.

92

someguy 07.21.10 at 8:08 pm

mpowell,

Not not fair at all, very unreasonable, and dishonest to boot.

http://www.answers.com/topic/monetary-policy

“But it is not reasonably to equate looser monetary policy with easy credit. Easy credit implies consumer credit.”

So you see no connection between say the rate I as a consumer can get say a mortgage and monetary policy?

93

Steve LaBonne 07.21.10 at 8:17 pm

Finally all these old geezers filling positions and hanging about for their pensions doesn’t help.

Which makes this just a terrific time to raise the retirement age, as is likely to happen in the US (and already has for many state and local employees). It’s also just peachy for those laid-off 58 year olds who will never have a decent job again.

94

Steve LaBonne 07.21.10 at 8:20 pm

someguy, please read- slowly, and moving your lips if necessary- mpowell’s #89. As many times as necessary until you get it. Unless of course you’re not being ironic in accusing yourself of dishonesty and unfairness. Far be it from me to disagree in that case.

95

steven c. 07.21.10 at 8:37 pm

mpowell @ 40:

screw you. you don’t know my situation.

i did in fact drop out of Directional State University. there were a multitude of reasons. then again, if i had gone to Fancy Private University, as i wished to (and had the bona-fides coming out of high school), i’d likely have finished.

i still consider myself lucky – i managed through word of mouth to get a barely-tolerable unskilled-labor job working in a warehouse for a medium-sized publisher paying a living wage with decent benefits. after a year and a half of toil pushing 700-lb carts of books around, the warehouse computerized and aptitude plus naked ambition allowed me to put skills to work.

there was a strong element of right place/right time luck at work, though. all the un-degreed intelligence and skill i have would not have gotten me anywhere if the company were larger with a more rigid HR department (or unionized), rather than a place where top management visits the warehouse floor regularly where untapped-potential labor can offer to do the tedious parts of their job for them.

don’t talk to me about resolve. you work a 90-degrees indoors warehouse in the summer, where you’re the only white person who isn’t management and all your co-workers think you’re a cop, a fag, a snitch for management, or all three (and vocally tell you about it in no uncertain terms) and see how long you stick around.

resolve. that’s laughable.

96

rickstersherpa 07.21.10 at 8:44 pm

I found Rajan’s primary argument poorly supported and and ideologically driven (the basic message was that it was all the Government’s fault to let poor brown and black people buy homes, thereby supporting the underlying ahistorical and utopian argument that “markets are alwasys perfect and nothing would every go wrong but for Governments,” something Adam Smith would have found very strange as he was very well aware that markets and a capitalist system could not exist but for strong government (see Somalia at the present moment, see China’s history during the last half of 19th and first half of 20th centuries, for what happens to an economy when a strong central goverment disappears and is replaced by local war lords and anarchy). He also evades the fact that financial crisis seems to be an inherent part of the capitalist system, having reoccurred at regular intervals from the 17th century to the persent (tulip bulbs to houses). The event that just occurred was a complicated event with lots of contributing causes, but the primary proximate cause in the period 2002-2007 was not any Government policy, but a sudden movement of a vast amount of money into mortgage back securities and collateralized debt obligations tranches made up of MBS, which created a demand for even more mortgages, with lots of money to made by fees generated from those mortgages. And a classic Minsky bubble formed and head for its Ponzi moment.

As for the education level in the U.S., as a whole the population of the U.S. is still much better educated than the population of China or India where half the populations are still illiterate. In regard to Germany and Japan, both of those countries have far more social democratic policies in place than the U.S. and I also wonder about the level of comparative education. Technology has risen in those countries as well, but inequality is not as great in most other OECD countries as it is in the U.S., which is now approaching 3rd world level. Rajan’s raises his opinions to the level of factual statements and I find them unproven and based more on his ideology than any evidence.

97

John Quiggin 07.21.10 at 8:55 pm

I disagree entirely with Chris’ main claim about education (inequality is a much more complex story). I’ll need to spell out my arguments in more than a comments box, but for the moment I’ll just try a reductio ad absurdam.

Chris argues that “in terms of the real skills objectively needed to do the job, a high school diploma is more than adequate”. This is true, and we can spell out “more than adequate” to say that “an elementary school diploma is adequate”. That is, the average office job requires no math beyond elementary school level, no reading or writing skills that are (explicitly) taught at the secondary school level, and no particular knowledge of history, science, literature or languages other than English. So, it would seem, it’s only (outmoded?) prejudice against child labor that stops us lowering the school leaving age to 12, or even less.

I’ll try to fill in what’s wrong with this later, but I will note that various people have taken this argument to its logical conclusion

http://en.wikipedia.org/wiki/Ivan_Illich
http://en.wikipedia.org/wiki/John_Taylor_Gatto

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Steve LaBonne 07.21.10 at 9:01 pm

So, it would seem, it’s only (outmoded?) prejudice against child labor that stops us lowering the school leaving age to 12, or even less.

Non sequitur. It is in fact a point not in dispute that child laborers were often good at their jobs. Their lack of efficiency was not the reason for banning child labor. I suppose an ethical aversion to the use of child labor could be described as a “prejudice”, but that seems rather… tendentious.

I hope your longer explanation makes more sense than this.

99

John Quiggin 07.21.10 at 9:07 pm

To spell out my (probably unwise) aside about outmoded prejudice, there isn’t that much difference between a schoolroom and an office. On average, I’d say the office is a more pleasant environment.

100

someguy 07.21.10 at 9:13 pm

Steve LaBonne,

I went to google. I typed loose monetray policy easy credit. Something like 4th link down.

http://www.answers.com/topic/monetary-policy

Search for easy credit.

“Monetary policy can be characterized as being either tight credit or easy credit.”

It seems that I am not the only person who thinks easy credit and loose monetary policy are at least somewhat similar phrases.

But I guess the folks at answer.com are just a bunch of unreasonable conservatives and being dishonest when they use the term easy credit to describe loose monetary policy.

101

Steve LaBonne 07.21.10 at 9:15 pm

What I’m saying is that the banning of child labor was in fact due to what we’ll agree not to call “prejudice”, and not to their lacking necessary skills. So it still doesn’t support your argument at all. Your “reductio ad absurdum” is in fact true and not absurd at all.

A lot of semi- skilled office work could be done perfectly well by a moderately intelligent 7th grader. Remember that once upon a time there were many jobs, including clerical ones, that didn’t even require a high school diploma. I think that constant inflation (and I do mean that in the sense of currency debasement) of educational requirements for jobs is a pretty obvious and incontrovertible fact.

102

guthrie 07.21.10 at 9:15 pm

Steve LaBonne #93 – I’m not sure if you were taking umbrage at my slightly tongue in cheek use of the term old geezers. What I also see as a problem (Which I don’t really know if it is widespread or not) is that beacuse the pool of jobs has contracted and older people are staying in their old jobs, or getting turfed out for replacement by cheap youngsters, is an information and experience gap, such that newbies don’t learn from the old hands experience. Add this to a culture which values management more than expertise and you end up with know nothing managers getting rid of experienced people and employing new people who don’t know so much, and as a result things don’t work so well.

103

Steve LaBonne 07.21.10 at 9:16 pm

someguy still hasn’t actually read mpowell’s comment for comprehension rather than quote-mining, I see. Whatever.

104

Steve LaBonne 07.21.10 at 9:18 pm

guthrie, my comment wasn’t directed at you at all, but at the irony that proposals to raise the retirement age are increasingly popular just when they would do the most harm.

105

Chris Bertram 07.21.10 at 9:19 pm

John, I’m not sure where your disagreement lies, but I would ask you to note my #33 above. I don’t see the justification of education as lying only (or even mainly) in equipping people with the skills strictly necessary to do the jobs they’ll end up in.

106

L2P 07.21.10 at 9:25 pm

PHB, you should stop talking about lawyers. The industry you’re talking about is “accounting.” Maybe. Not that it matters much, but the “upper limit” on the size of a law firm has less (or nothing) to do with conflict issues (which are waived for 99% of clients) than the sheer impossibility of managing those firms and finding clients willing to pay a blended rate over $400 an hour. They tend to break up from inertia, not “conflict issues .” After a while, as many partners leave any give year as are made or lateral in.

Plus there aren’t any patents or copyrights for lawyers, and no ethical code of conduct for engineers. Bidding is very different, costing is very different, retainer agreements are very different. You’re also pretty off on partner payscales (the words “I wish!” come to mind – junior partners would be making over $2 million). Again, the industry you’re thinking of is accounting.

107

John Quiggin 07.21.10 at 9:26 pm

Steve, I’m happy we’re in agreement at least on how we disagree. That is, the question is not whether “higher” education is ( from a strictly instrumental labor market viewpoint) an exercise in signalling with no relevant effect on skills, but whether this is true from the 7th grade onwards.

108

mpowell 07.21.10 at 9:27 pm

95: steven c, I don’t know you or your situation. Based on my experience/observation, the path through generic State U in the the US is not that overwhelmingly difficult for 80% of the population. Generic filters are not designed to work in every case. Just most cases.

Someguy: I don’t see the point in carrying this argument on any further. If you want to argue that looser monetary policy leads to easier consumer credit, you are free to do so. Probably there is some connection. But banks, not consumers, are the entities immediately impacted by monetary policy so you need to do more than just link to a definition. Furthermore, the article itself (which you have allegedly read) discusses specific legislative actions to increase consumer credit within the last decade distinct from monetary policy itself. So what Rajan is talking about is almost assuredly different than what I was talking about.

109

Steve LaBonne 07.21.10 at 9:31 pm

And again, I think the history of increasing education requirements in jobs that haven’t really changed that much answers that question with a resounding “yes”. As for arguments involving the necessity of using computers nowadays, ask almost any parent of pre-teens and young teens who is the go-to person in the household for computer problems. ;)

110

John Quiggin 07.21.10 at 9:33 pm

Chris, I’ll spell out my point at greater length, but for the moment I’ll observe that a large proportion of the population don’t much like either school or post-school education, and only go because they can’t get a job otherwise. If education requirements for jobs (legal in the case of school leaving age, market-driven beyond that) aren’t actually necessary, then we should be doing our best to get rid of them, as with other forms of unjustified discrimination. (As a side-effect, this would make it much cheaper to provide free, high quality education to those who desired it for its own sake).

I don’t believe this, and I’ll argue why at greater length when I get some time.

111

Steve LaBonne 07.21.10 at 9:37 pm

John, if your argument – as it seems to be from your penultimate sentence- is that if we legislated away those credential-based barriers to employment we would no longer need to educate most people, that too is a non sequitur. The original and best justification for universal education was never economic, but rather the requirement of a democracy for an informed citizenry.

112

PHB 07.21.10 at 9:41 pm

@ Hilarious

“As earlier posters have suggested, income inequality is driven by the enormous amounts of money being made in the upper percentiles. Who are these people? The are not engineers of any description. ”

You don’t half say some stupid stuff. I am an engineer and I am in the top percentile. And that is with the stock market in the tank and none of my companies likely to go IPO.

Some money managers have certainly been overpaid. But the typical ‘financial adviser’ working for a bank or brokerage makes considerably less than their clients who are doctors, lawyers and engineers. The wall street firms and the high flyer traders are a tiny minority even within that industry. And they don’t usually make all that much over their careers since most traders careers are rather short.

As Taleb points out, a successful trader earns many times what a compliance officer does in a year. But over a career a compliance office can expect to earn considerably more as their careers last 30+ years rather than 30 months.

The engineers on Wall Street who code the flash trading systems don’t earn as much as traders either, but they earn more than compliance officers. The other highly paid group are the quants – hey look! more engineers.

113

ScentOfViolets 07.21.10 at 9:42 pm

I haven’t seen productivity gains mentioned specifically yet. The argument here is that if income inequality is due only to the premium placed on the so-called “knowledge workers”, then gains in productivity would be associated almost entirely with these best of the best of best elites.

But that’s just not true, according to sources like this one. Here are a few facts:

Real median wages were basically flat for men, up only 1.1% over six-and-a-half years, though the median female did considerably better, up almost 5.0%. Both high school and college workers gained about 2.5%, a finding explored in greater detail below. Yet the wages of all of these workers—the median worker and those with either high school or college degrees—have been flat or falling since 2003.

And:

Despite the oft-cited strong demand for more highly educated workers, the wages of college-educated workers have not grown particularly quickly in the 2000s (Figure D). After rising in the first year of the decade, college workers’ wages were relatively stagnant for the next five years, though men is this category got a jump in the first half of this year.

And:

Men with some college or less (71% of the male workforce in 2006) have seen only small wage gains since 2000 (see Table 4). Interestingly, high-school dropouts experienced faster wage growth than those with higher attainment levels. The real wages of women with less than a high school education, for example, grew by just under 7%, more than three times that of more highly educated women

And as far as the relationship between productivity and wages is concerned:

Changes in real compensation result from a broad set of factors, including:

• workers’ bargaining power, which is closely related to the tightness of the job market and the strength of unions and other labor market institutions, including the minimum wage;

• changes in the rate of inflation;

• the cost of fringe benefits, including health care; and

• productivity growth.

Of these, especially in a productivity-rich recovery like this one, bargaining power is dominant, since it determines how the benefits of productivity growth will be distributed. In a labor market like the United States, where unions are unfortunately relatively scarce, the fit between labor supply and demand needs to be awfully tight—we need full employment conditions—if workers are to share broadly in the recovery. We discuss these issues more fully below.

There’s ton’s of this sort of stuff out there. The bottom line is that there is no particularly strong correlation between education and productivity gains[1], nor between productivity gains and income. As always (as someone as already noted), when someone is referred to as a “Chicago economist”, to a good first cut you can safely assume they’re going to be wrong until otherwise proven so. Really, the Chicago School of Economics doesn’t seem to be much more than a propaganda studio these days, and I’d say that most people tacitly agree with the sentiment.

And PHB? Spoken as another person with experience in the tech and science fields, when employers say that “there aren’t enough engineers/scientists/IT techs”, you should know as well as the next person that the unspoken ending to that sentence is “who are willing to work for the wages I want to pay”. Same as it ever was, and I hear a lot of reports from former students on how tough the job market is for just those types of degrees. They also report that while few are hiring, when they do, they prefer the h1-B visa types to the homegrown employees ;-)

[1]Speaking as a math teacher person, I haven’t seen anybody around me becoming noticeably more productive; nevertheless, a lot of us have seen our salaries increase at a rate somewhat greater than inflation.

114

Chris Bertram 07.21.10 at 9:43 pm

John, making people do what’s good for them may be paternalistic, but I’m not sure why it is discriminatory.

115

guthrie 07.21.10 at 9:56 pm

Fair enough Steve. You also suggest an interesting point in #110 – how much education or on what topics is required for the ideal good citizenry of a democracy?

Plus I was under the impression that the gains from universal compulsory education did fall off after something like high school age but before university, but I’ve no idea where I got that impression. It makes sense given the lack of jobs which actually require university education. Of course you then have to ask how much university education is about turning out well rounded people with useful knowledge and how much it is about turning out cogs for the machine equipped with the specialist knowledge required by some employers.

116

ScentOfViolets 07.21.10 at 10:08 pm

And again, I think the history of increasing education requirements in jobs that haven’t really changed that much answers that question with a resounding “yes”. As for arguments involving the necessity of using computers nowadays, ask almost any parent of pre-teens and young teens who is the go-to person in the household for computer problems. ;)

I suspect that there is a bit of path dependence on this requirement. My parents tell me that back in the day (say 40’s to 50’s), prospective employers would require a high school diploma, and that this would frequently cut the applicant pool in half or more. In fact, my dad says that recruiters would come sniffing around the schools trying to get kids to drop out and take a decent-paying factory job and that they didn’t have to worry about any fancy high school diploma in the real world.

Of course, after enough parents discovered that pressuring the school administration to pass their kid was an easy way to get an advantage, standards started to slip and the natural incremental reform was to require some sort of post-high school training. And so while the earlier requirement of simply graduating high school may have been a very valid one, the new standard as it became ever more elevated became much less so.

117

piglet 07.21.10 at 10:38 pm

I am not sure what JQ is getting at, really. Isn’t the issue of this thread the following. Rajan claims that rising inequality is a function of the masses not being sufficiently educated. Simply put, if more people had educational credentials (especially college degrees), there should be less inequality. Does anybody believe this? It doesn’t make sense, of course. It’s sufficient to look at the disparity within the group of college graduates, which is also growing.

Further, college graduates as a group only seem to have done well in recent decades because a certain subgroup has done extremely well whereas many are struggling. And further, while there is a growing disparity between college graduates as a group and the rest, that is more due to the rest doing worse than to college graduates doing better.

118

John Quiggin 07.21.10 at 10:48 pm

Given that we are focusing on the explicit content of the curriculum, it’s hard to see much in the typical school curriculum that contributes to the requirement of democracies for an informed citizenry.

Let’s take, say, the need for US citizens to take an informed view of the debate over health care reform. That needs at least some economics, some demography, some idea about how the health care sector works, and some understanding of US political processes – the major parties, the rules of the Senate and so on. Ideally, you’d want some ideas from political theory and sociology to put the debate into a broader context.

As far as I can see, the intersection of these requirements with the content of a typical high school education* is approximately zero, and there are plenty of college degrees for which the same would be true.

So, in exactly the same way that an intelligent 7-th grader could in principle do the average office job, an intelligent 7-th grader with access to the New York Times could be at least as well-informed a citizen as a high school or college graduate.

In reality, I agree, there are all sorts of indirect ways in which education promotes a more informed citizenry, but that’s my point. These are exactly the same ways in which education promotes a more productive workforce.

* I think some US high schools teach classes in civics which might cover the basics of US political institutions – Australia didn’t even have this when I went to school, and look how I turned out.

119

John Quiggin 07.21.10 at 10:51 pm

Of course, you could point out that the course of the debate over US health care reform suggests that we are wasting our time as far as thinking about an educated electorate goes, especially given that the Tea Partiers are on average, more educated than the population as a whole.

120

John Quiggin 07.21.10 at 10:54 pm

Piglet, I agree that, as an explanation for growing US inequality, stagnation in educational attainment doesn’t do well (though I think it is a contributing factor). I’m responding to the view, shared by most commenters here that this explanation can’t possibly be right because education is unrelated to productivity.

121

piglet 07.21.10 at 10:55 pm

Dialectics?

122

piglet 07.21.10 at 10:59 pm

(My 120 refers to 118)

123

mpowell 07.21.10 at 11:04 pm

116: Wow, slowdown. It’s not a refutation of Rajan’s point that increasing credentialism wouldn’t lead to less income inequality. I think it’s the actual quality of the education that Rajan is concerned about.

124

piglet 07.21.10 at 11:07 pm

119:

“I’m responding to the view, shared by most commenters here that this explanation can’t possibly be right because education is unrelated to productivity.”

Chris Bertram:

“My guess is that, in terms of the real skills objectively needed to do the job, a high school diploma is more than adequate for most office work. Of course, it may be that, because of competition for those jobs, you need a higher level of qualification to get one. But that’s a different story.”

Don’t think these positions are mutually exclusive. Employers may rationally prefer college grads for certain types of work that traditionally didn’t require a degree, but the question is whether employers would be willing to hire more college grads at good salaries and conditions if only they could find them. And that I think is just not the case. They may choose to fill the few slots they have with more educated applicants (and pay them like unskilled workers) but that doesn’t mean there is a shortage of college educated applicants. It is precisely a consequence of there being plenty of college grads willing to take whatever job they can get.

125

piglet 07.21.10 at 11:11 pm

mpowell 122:

“It’s not a refutation of Rajan’s point that increasing credentialism wouldn’t lead to less income inequality.”

Rajan argues that because skill requirements are higher, those lucky enough to be better educated are reaping greater rewards. It follows that if more of us were better educated, more should reap greater rewards and there should be less inequality. What do you think I am missing?

126

mpowell 07.21.10 at 11:14 pm

You are mixing up two things: better credentials and better education. They are not necessarily the same thing. Rajan is not really addressing the credentials aspect of the equation. It’s part of the weakness of his argument, but you should be careful there.

127

ScentOfViolets 07.21.10 at 11:17 pm

It’s not a refutation of Rajan’s point that increasing credentialism wouldn’t lead to less income inequality. I think it’s the actual quality of the education that Rajan is concerned about.

If I understand you correctly, this would be yet another unfalsifiable hypothesis generated by the Chicago School of Economics. Pretty much of a piece with the nutty notion that people are paid the wages that they are “worth”.

128

piglet 07.21.10 at 11:24 pm

I am not sure about your point. Rajan:

“…technological progress in the US requires the labor force to have ever greater skills. A high school diploma was sufficient for office workers 40 years ago, whereas an undergraduate degree is barely sufficient today. But the education system has been unable to provide enough of the labor force with the necessary education.”

It sounds like Rajan is saying we need more college grads because they are better office workers. You may attack the second part of that statement but the first part also seems wrong.

129

piglet 07.21.10 at 11:41 pm

And in case this be misunderstood: I am not at all objecting to more people getting a college education if that is what they wish and it satisfies their curiosity and makes them happy. But I do not think that the standard economic arguments are valid. I don,t think there are significant numbers of open positions that can’t be filled for lack of college graduates, nor do I believe that increasing the educational level of an already well-educated population will automatically make an economy more “competitive”, create jobs, reduce poverty and solve society’s problems.

To put it differently, the standard advice “get more formal education” is usually valid from the perspective of the individual, because it provides a competitive advantage for the individual. But from the perspective of society as a whole, the situation is different. It is unlikely that society would be better off if everybody had a PhD, because there wouldn’t be PhD-level jobs for all of them.

130

someguy 07.22.10 at 2:49 am

mpowell,

Roac asked –

“someguy—Did someone on this thread propose “easy credit” as a solution to the problem of stagnant real wages? I missed that. ”

I pointed out that you had. Since I consider easy credit and loose monetary policy to be fairly inter changeable terms. The sole purpose of the link is to show that lots of people think easy credit and loose monetary are fairly inter changeable terms. Given that a very fair and reasonable interpetation of your post at that point, before you explained that you no longer felt monetary policy would get the job done, was that you felt that easy credit ie loose monetary policy was a solution to stagnant wages.

You responded that –

“But it is not reasonably to equate looser monetary policy with easy credit. Easy credit implies consumer credit. ”

“and it would not be honest to describe my earlier post as wishing to address income inequality through easy credit.”

That just isn’t true. My characterization your post at the time was reasonable and honest. See above.

131

bread & roses 07.22.10 at 3:29 am

Or b), completing a HS degree has gotten so absurdly easy that employers really do need to require a college degree as a decent signal of competence. So do we need to start failing people out of HS? I don’t see that’s helping much of anything.

This conundrum crossed my mind too, but I think part of the solution is more vocational schools, and vocational schools for more vocations, and more apprenticeships. I’ve never heard of an apprenticeship program for paralegals or secretaries, but surely that is how most paralegals and secretaries learn their jobs, isn’t it? If it were part of a structured program, with requirements, oversight, and a credential at the end, the paralegal or secretary would have greater job mobility, and a handy signal to employers that he or she is qualified.

Oh, and stronger unions. Which we will get by *magic* /waves wand futiley….

132

Omega Centauri 07.22.10 at 5:16 am

125 I think what you are missing is the difference between the incremental effect on an individuals economic prospects of an incremental increase in his education, versus what the effect on the entire system would be from an incremental increase in the educational level of the entire population. In the former case, the ability to outcompete his lesser educated cohorts will boost your choosen individual at the expense on his cohorts. I.E. the gain might be to one player in a zerosum game. In order to affect the overall statistics, we must change the economic output of the nation as a whole. Now, I strongly suspect that other things being equal, we could magically improve the educational attainment across the board, that productivity -or more likely productivity growth would probably improve. But, I suspect it would be a fairly weak effect. I also don’t see it having much impact on relative income distribution (which was Rajan’s argument).

133

Robert 07.22.10 at 7:18 am

If “someguy” really thinks he is reasonable and honest, he is just dim. One would like the Federal Reserve not to ensure the reproduction of the reserve army of the unemployed. This is vastly different than wanting the Fed to blow bubbles.

134

alex 07.22.10 at 7:31 am

In education, more could be done with the concept of ‘Flucht nach vorn’, or the Red Queen, or doubtless some other clever guy’s recent book-title. Anyway, it’ll always be a loser’s game for the USA, as for much of the West, so long as India, China, etc have such a long way to go to catch up to our wage-levels, and such a large capacity for educational productivity.

135

Chris Bertram 07.22.10 at 9:21 am

omega @132 – yes, that’s exactly it.

136

Current 07.22.10 at 9:31 am

The point that Chris and Omega are making here is that education is a normal good. As such it’s subject to diminishing returns. I agree about that.

However, is it really the case in the US that employers require more qualifications than they need? In Ireland and Britain it’s sometimes difficult to get people who can do simple filing.

137

engels 07.22.10 at 9:46 am

I suppose teaching them how to do it is out of the question.

138

ejh 07.22.10 at 10:01 am

In Ireland and Britain it’s sometimes difficult to get people who can do simple filing.

I really doubt this. I’ve applied for jobs like this in the past – there’s no shortage of candidates.

139

Coder 07.22.10 at 10:43 am

A lot of focus on titles and credentialism here. Maybe some low-level details would help clarify things.

We really do need more, and better engineers. There are a lot of job titles and tasks that fall under the overbroad title of “Engineer” (or “Analyst”). On the job training is not anywhere close to a realistic solution for this.

Replying in part to ScentOfViolets and others who commented in a similar vein – asserting that there isn’t a supply problem with engineering and technical workers:
The real skills taught in engineering and applied sciences are too rare (I can only speak for the US). Similarly, in Software Engineering (my career) the supply of *actually hire-able* and productive programmers, testers, designers, and managers who are good at software design is quite low, given the potential of the industry. It really is a limitation of skills and talent in the pool (and I wish the pool were a lot bigger.) There may be a lot of people who went through degree mills (educational inflation anyone? I see it first hand.) and who have Something-Engineer on their resume, but that doesn’t make them any good at what they claim to do, or very productive, or useful. Age isn’t a factor (though the commenter who mentioned the perishability of skills was partly right). In fact, I interview and meet a lot of young-ish people who simply woudn’t be very good hires for a lot of software engineering jobs.

I welcome a flood of brilliant, skilled engineers from other countries – if only the USA would realize that its immigration laws are harming it in this regard. We need to open the gates to people on the right side of the bell curve.

140

zamfir 07.22.10 at 10:57 am

Coming from a country with a strong system of vocational schools, I can say they are a double-edged sword. They do help to make sure that nearly everyone can get some or even a lot of training, even if they no interest or capabilities for intellectual schooling.

on the other hand, they become low-status no matter what you do. educated and otherwise in-the-loop xpeople try to keep their kids out of them, and by and large they succeed. Also, decision makers everywhere in the system did not attend vocational school themselves, or at most the ‘higher vocational school’ type that really is more like a basic US college. Some vocational schools do manage to achieve a relatively good status reputation, like schools for laboratory assistants for a while., And then they manage to attract students would could have gone to other parts of the system.

But this never lasts long. Either the school rebrands itself as non-vocational, or it gradually loses its best students until its reputation is middling again.

You could argue that there is plenty of need for basic schools for people who do not intend to make ‘being good at school’ a major facet of their personality, but the risk is always there for a class divide: vocational students send their children to vocational schools, the rest do not

141

Barry 07.22.10 at 12:23 pm

Coder, we hear that a lot – so far, we see no proof.

I have no doubt that employers wish to see a vast, desperate pool of MIT-level people, begging for the privilege of working 14-hour days/7 days per week, in return for 3 hots and a cot. That’s always been the case, and always will be.

142

engels 07.22.10 at 12:27 pm

Is the judgment that there is a shortage of engineers also based on the assumption that engineering is intrinsically more worthwhile than other jobs? Certainly one could easily get this impression from reading comments like PHB’s.

143

Steve LaBonne 07.22.10 at 12:40 pm

To echo Barry, there’s a big shortage of skilled workers of all kinds who are willing to work for peon wages and generally to be treated like serfs by their pointy-haired lords and masters. No surprise there.

There’s also a big shortage of employers who are willing to spend even a few bucks to give anybody any kind of training- they want their skilled employees already trained as well as cheap and docile. The MBA class in the US is about as intelligent, far-sighted, and generally useful and competent as the political class (never forget that George W. Bush is the proud possessor of a Harvard MBA), and yet it feels very, very entitled.

144

bianca steele 07.22.10 at 12:52 pm

Barry,
MIT caliber people are a pain in the you know what. More likely they want people who are so desperate to rise to the top–or to form an emotional bond with their superiors–that they’ll do whatever is necessary.

145

bianca steele 07.22.10 at 12:57 pm

If it takes a month to find someone, I don’t call that a shortage.

146

chris 07.22.10 at 1:41 pm

Let’s take, say, the need for US citizens to take an informed view of the debate over health care reform. That needs at least some economics, some demography, some idea about how the health care sector works, and some understanding of US political processes – the major parties, the rules of the Senate and so on.

ISTM that even more important are some idea of how to think about heterogeneous groups without reducing them to their “typical” members, statistics, and how to think critically and spot bullshit. The lack of those skills is, IMO, how we wound up with the systematically misinformed citizenry we have right now. I don’t know if Australia is any better off, but I bet not much.

@engels 137, Steve 143: In a primarily capitalist society you can’t really pin that failure on the employers, I don’t think. An employer who voluntarily undertook that kind of avoidable cost would be outcompeted as a result, and that’s how cherrypicking the already-trained becomes the dominant strategy. Individual volition is irrelevant from a societywide perspective, since society will always be made up of different people who make different choices and the societal outcomes are the results of that diversity of choices.

Rather, an educated workforce needs to be recognized as a public good and provided accordingly, which brings us back around to the educational system. We really need to get the financial weight of education off the working class — they just don’t have the resources for it, and the result is undereducation. But that’s just my hopelessly liberal (by US standards) view.

147

roac 07.22.10 at 1:45 pm

Bread & Roses wrote @ 132: I’ve never heard of an apprenticeship program for paralegals or secretaries, but surely that is how most paralegals and secretaries learn their jobs, isn’t it?

In my office, most paralegals work for two or three years and then go to law school; in effect, the job is an apprenticeship for being a lawyer. The arrangement has a lot to recommend it, not least as a cost-effective way to find out that a lawyer is not what you want to be. I would like to see it formalized; two years of apprenticeship, two years of law school, bar exam. (Everybody knows, by the way, that two years is the right length for law school. The third year was tacked on, in the 1920s IIRC, purely to compete with the doctors for professional prestige. Justice Cardozo was at Harvard when they switched, and refused to come back for the third year.)

(Further interesting fact: As late as the 1970s, it was possible in Virginia to become a lawyer purely by apprenticeship. The last person to do it, AFIAK, was the husband of Sally Mann, the photographer.)

148

Steve LaBonne 07.22.10 at 1:46 pm

An employer who voluntarily undertook that kind of avoidable cost would be outcompeted as a result

No, in many cases an employer who isn’t smart enough to understand the value of investing in training (and in then treating trained workers well enough so that they stick around) is outcompeted. In fact that’s exactly what’s happening to us vis a vis the global economy.

149

roac 07.22.10 at 1:48 pm

In last sentence of preceding, read “AFAIK,” of course. AFAIK, “AFIAK” doesn’t stand for anything.

150

engels 07.22.10 at 1:48 pm

We really need to get the financial weight of education off the working class—they just don’t have the resources for it, and the result is undereducation.

When you put it like that it sounds eerily like common sense. It’s just a pity that policy in the UK is taking us in precisely the opposite direction…

151

Steve LaBonne 07.22.10 at 1:50 pm

Adding, owners and managers who don’t understand that it’s their employees, not themselves, who make money for the company fail in the long run.

152

roac 07.22.10 at 1:52 pm

Oh, dear. Further corrections to 147 are called for. Cardozo went to Columbia not Harvard, and the switch to three years happened about 1890. Why do I not look these things up before posting rather than after?

153

mpowell 07.22.10 at 2:36 pm


I pointed out that you had. Since I consider easy credit and loose monetary policy to be fairly inter changeable terms. The sole purpose of the link is to show that lots of people think easy credit and loose monetary are fairly inter changeable terms. Given that a very fair and reasonable interpetation of your post at that point, before you explained that you no longer felt monetary policy would get the job done, was that you felt that easy credit ie loose monetary policy was a solution to stagnant wages.

I can see why you interpreted my post the way you did initially. But you should recognize that although you think of easy credit and looser monetary policy as being fairly interchangeable, other people do not and have good reasons for it. Especially since Rajan was specifically talking about legislative actions to increase the supply of consumer credit.

Along the lines of my thinking about US monetary policy in recent decades is this post by Yglesias. I think we do need an explanation for how wages could stagnate while worker productivity has been increasing and I think monetary policy is one possible culprit.

154

engels 07.22.10 at 2:54 pm

‘John Stuart Mill says in his “Principles of Political Economy”:

‘“It is questionable if all the mechanical inventions yet made have lightened the day’s toil of any human being.”

That is, however, by no means the aim of the capitalistic application of machinery. Like every other increase in the productiveness of labour, machinery is intended to cheapen commodities, and, by shortening that portion of the working-day, in which the labourer works for himself, to lengthen the other portion that he gives, without an equivalent, to the capitalist. In short, it is a means for producing surplus-value.’

155

Josh G. 07.22.10 at 3:09 pm

You think there is a shortage of engineers? OK – offer secure, tenured, 40-hour-a-week jobs with six-figure salaries and good benefits to all qualified candidates. Make being an engineer competitive with other high-brainpower careers like law, medicine, and finance. Until and unless that happens, people talking about a “shortage” really mean that there is a shortage of people smart enough to do advanced math, but stupid enough to be willing to work 80-hour weeks for $50,000 a year. As long as being an engineer is like being a monk (complete with vows of poverty, obedience, and chastity) the most intelligent young Americans will continue to stay away from the field. And we will continue to be out-competed by China, where technical skill is respected, and financial scam artists are put in front of a firing squad rather than given eight-figure bonuses.

156

bianca steele 07.22.10 at 3:48 pm

@148
There’s no way to prove it. If the employees were good they wouldn’t have left. If they were good the company wouldn’t be failing. If they were good they wouldn’t have complained about their treatment. I’m not saying people don’t complain for insufficient reason or that they don’t make similar mistakes in some cases.

As far as training, on the one hand you need a cushion (of time and money), which is impossible given Wall Street demands for quarterly profits that consistently exceed projections by more than the amount they were projected to exceed projections (I am not making this up), and for appropriate measures to ensure costs are continually minimized. And on the other hand, there are sometimes other substantive issues, too complicated to explain.

157

Omega Centauri 07.22.10 at 3:54 pm

If you talk engineering remuneration (I work at such a place), I think engineers are generally in the 80 to 95th percentile income wise. The numbers that can get above that level are quite small and usually involve management track ore entreprenerialism, which is why I’ve seen some of the best go back to school to get an MBA. As a purely technical person, your odds of reaching the top one percent are quite low, although your odds of falling into poverty are also pretty low -so I would consider it as a low risk medium reward career choice. Those who want to play the odds for a chance at the big bucks go elsewhere.

So if you compare an engineers rank IQ wise versus his rank income wise, he is uinderpaid.

158

kthomas 07.22.10 at 4:06 pm

When I want to be mentally assualted, I just read an article or study from any Professor from Chicago.

That entire university should be burned to the ground.

159

y81 07.22.10 at 4:28 pm

“offer secure, tenured, 40-hour-a-week jobs with six-figure salaries and good benefits to all qualified candidates. Make being an engineer competitive with other high-brainpower careers like law, medicine, and finance.”

I don’t know much about medicine, but I can assure everyone that law and finance do not offer secure, tenured, 40-hour-a-week jobs.

160

engels 07.22.10 at 4:31 pm

I love the idea that apart from engineers the US economy sorts everyone into an appropriate ‘rank’ based on his or her IQ.

161

Barry 07.22.10 at 4:54 pm

Josh G. 07.22.10 at 3:09 pm

(re: engineers) “Until and unless that happens, people talking about a “shortage” really mean that there is a shortage of people smart enough to do advanced math, but stupid enough to be willing to work 80-hour weeks for $50,000 a year. ”

And to be pushed out by age 50, if not sooner.

162

mpowell 07.22.10 at 5:02 pm

Engineer is simply too broad of a class to talk about this way. You can get tied up in this kind of debate with people talking past one another, but nothing much useful happens. It is the problem of arguing while pretending anecdotes=data.

163

Josh G. 07.22.10 at 5:17 pm

y81: “I don’t know much about medicine, but I can assure everyone that law and finance do not offer secure, tenured, 40-hour-a-week jobs.”

That’s not the point. My point is that there is no such thing as a “shortage” of engineers; if we really needed more engineers, we could get pretty much every smart person in the U.S. into the field by offering above-average compensation. When businesses say there is a shortage of tech workers, what they really mean is that there aren’t enough Americans willing to do this demanding, high-skill job at the prices and working conditions they currently impose.

But, since you brought it up, let’s look closer at those other professions. No, financial jobs generally do not offer 40-hour weeks, but they also pay far higher salaries than engineering jobs. Your average Wall Street trader is earning at least mid-six-figures (250K a year and up) and many of them are earning millions per year. With those kind of wages, they don’t need job protection or limited hours; they can work a few years, save up enough to live on, and then retire.

As for doctors, they must go through a bizarre hazing ritual (the “residency”) after medical school, with absurd hours and bad pay – but this is strictly limited in time. Once they’ve passed this obstacle, they can pretty much write their own ticket. Many, if not most, doctors are running their own practices, and can therefore set their own hours – and very few doctors make anything less than six figures. Specialists can make substantially more, and there is virtually no upper limit. The average pay for anesthesiologists is over $245,000 a year. And doctors sure as hell aren’t unemployable after age 50, like engineers are.

The problem with engineering is that it combines the worst aspects of all the other high-brainpower professions. Being an engineer is basically like being a medical resident, but it never ends. It’s like being in a Wall Street pressure cooker without Wall Street pay. If we as a society need more scientists and engineers – and I think we do – then we need to start acting like it.

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bianca steele 07.22.10 at 5:42 pm

And @151, isn’t that exactly Hayek’s position: that the money is made by the man who knows how to move workers and materials (equally kind of natural resources) around to where someone will pay $$$$ for them? I suppose in preindustrial societies this was true, and it may be true again.

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chris 07.22.10 at 6:01 pm

Adding, owners and managers who don’t understand that it’s their employees, not themselves, who make money for the company fail in the long run.

In the long run we’re all fired. And the short-sighted managers fail upward.

Anyone who tries that kind of old-school company building these days will have his company pillaged faster than you can say “hostile takeover”.

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Chris Bertram 07.22.10 at 6:18 pm

_if we really needed more engineers, we could get pretty much every smart person in the U.S. into the field by offering above-average compensation._

Only someone really _gripped_ by a particular view of the world could write such a thing.

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Steve LaBonne 07.22.10 at 6:20 pm

Anyone who tries that kind of old-school company building these days will have his company pillaged faster than you can say “hostile takeover”.

Which is why our economy is in shambles and likely to stay that way for the foreseeable future. We are de-skilling and de-experiencing our way into the Third World.

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bianca steele 07.22.10 at 6:22 pm

Then (and more relevant to the OP) there’s the misguided idea that if person P directly or indirectly supervises several individuals including Q, P has at minimum (at his/her fingertips) all the information possessed by Q and the others P supervises. After all, P is at a higher level than Q, therefore is better than Q, therefore Q may not know anything P does not know.

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Dr. Hilarius 07.22.10 at 6:48 pm

PHB @ 112: I really have no idea what your point is apart from a self-description of being successful and an engineer.

Your definition of “engineer” is overly expansive. @ 81 you describe Bill Gates as an engineer. He was able to write code (self taught at the exclusive Lakeside School and Harvard) but his fortune comes from his business skills (such as retaining the rights to the DOS system he sold to IBM).

Your comments about the incomes of Wall Street high flyers are incomprehensible. Average starting pay for a Wharton, Stanford or Harvard MBA grad is over $125K. Bonus pay at major firms adds significantly to base pay. As for length of career, most rational people would prefer to earn a lot of money in a short career rather than the same amount over 30 years.

And , as another poster stated, your statements about law firm size limits are simply wrong. Splits in large firms often are due to partners forming their own firms to increase their incomes.

You should also consider avoiding personal attacks and insults. You have more than enough “half-stupid” ideas of your own.

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Josh G. 07.22.10 at 7:49 pm

Chris Bertram: (regarding engineer pay and supply) “Only someone really gripped by a particular view of the world could write such a thing.”

Do you really think that paying engineers more would have no effect on the number of young people who decide to become engineers? If the government set a minimum pay level of $250,000 a year for graduates of Caltech, MIT, and Georgia Tech, it would have no effect on the number of people trying to get into those schools? What if they prohibited corporations from paying any non-engineer a higher salary than the lowest-paid engineer in the company? (Note: I’m not actually advocating these things – this is pretty much a reducio ad absurdum argument.) Sure, there would still be some people who pursued other fields, but most people are going to go where the money is. Most people do not go into law, finance, or medicine because they have a deep and abiding love for those fields. They go into those fields because they are some of the few remaining that can pretty much guarantee an upper-middle-class lifestyle for someone who is sufficiently intelligent and driven.

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engels 07.22.10 at 7:59 pm

Maybe we could address the US ‘engineer shortage’ on the demand side? Slash the US defence budget by 90% (bringing it into line with the next biggest spenders, like China, UK and France.) Hey presto: the US suddenly has plenty of spare engineers…

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DaveL 07.22.10 at 8:54 pm

#169: Do you really think that paying engineers more would have no effect on the number of young people who decide to become engineers?

The interesting question is not this, but rather whether it would increase the number of good engineers available. It is not “engineers” that are in short supply, but rather engineers who are skilled and effective and have current skills (at least where software engineers are concerned). The idea, expressed earlier in the thread, that “anyone can learn to code in Java,” is somewhat true, but not relevant. There is far more to being a good software engineer than knowing how to write Java code (or C++, or any other popular language). The level of skill required to design and write good code and to keep up with the many skill sets needed to do so in a rapidly changing field is high. Not everyone has that level of skill. In fact, few do.

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Chris Bertram 07.22.10 at 9:17 pm

_Do you really think that paying engineers more would have no effect on the number of young people who decide to become engineers? _

I don’t have to believe any such thing to believe that what you wrote:

_if we really needed more engineers, we could get pretty much every smart person in the U.S. into the field by offering above-average compensation._

is false. There’s a rather big gap between “no effect” and “pretty much _every_ smart person”.

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Josh G. 07.22.10 at 9:19 pm

Chris, my original statement was hyperbole. The underlying point still stands, I think.

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chris 07.22.10 at 9:22 pm

Do you really think that paying engineers more would have no effect on the number of young people who decide to become engineers?

I can’t put words in his mouth, but personally I think that that number would still stop well short of “pretty much every smart person in the U.S.” Not all people are primarily motivated by money.

This also conceals an assumption that smartness is fungible, or even unitary; that someone who makes a competent lawyer would also make a competent engineer if they had that training instead. I think that is not proven, at best. Law is a very persuasion-oriented field and its skillset is almost orthogonal to engineering, in which the ultimate judgment of your performance is rendered by inanimate objects immune to rhetoric.

Most people do not go into law, finance, or medicine because they have a deep and abiding love for those fields.

Finance I’ll grant you, but for the other two, it should be noted that “most” is not “all” (and even “most” might be questionable for medicine).

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piglet 07.22.10 at 9:33 pm

171-171, I guess hyperbole is now on the list of rhetorical figures banned from CT.

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Chris Bertram 07.22.10 at 9:35 pm

Piglet, that has to be the most deranged comment ever on this site.

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piglet 07.22.10 at 9:58 pm

Very funny, Chris ;-)

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Salient 07.22.10 at 10:46 pm

[Aside to piglet : You can tell CB is a philosopher. Even his attempt at hyperbole is crafted with the narrowing phrase “on this site” appended. :) ]

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Lyle 07.23.10 at 4:02 am

As noted one of the skills that one acquires a bit in a 4 year degree, is how to communicate both in writing and orally. If you read reports its clear that the average High School Graduate can not write very well. Also you are looking for evidence that a person can learn and if possible to teach themselves. So a big piece of the reason is both the better communication skills and then the ablity to learn (which then means in a lot of jobs what you learned in college is less important than that you demonstrated that you can master a significant unit of knowledge.
As an example once I left Grad School in Geophysics, I hardly used much advanced math and definitly did few proofs. (My Grandfather who got a EE in 1916 observed the same in his career)

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Tim Worstall 07.23.10 at 8:21 am

That higher pay (and or status) for engineers would lead to there being more engineers seems unexceptionable. But the numbers being bandied about for engineers’ pay do seem a little low. These are the 2008 numbers:

http://www.bls.gov/oco/ocos027.htm

It appears to be the lowest 10% which get $50k or so. Median looks more like $75 or $80k. That’s on the borderline of the top 20% of the *household* income distribution let alone individual income.

Also, while really high incomes don’t appear to come from an engineering job, according to the Bureau of Labor Statistics “Starting salaries are among the highest of all college graduates.”

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Coder 07.23.10 at 8:23 am

Way to fail to grasp my point, which was that we are not producing (culturally + through the educational system) enough good-to-excellent engineers.

Don’t get sidetracked by the “how many engineers get into the top 0.5%” argument – a career engineer who is good out-earns the vast majority of other workers. It’s a great and desirable job. There are positions sitting open for 6 months with good salary and benefits (well above the median) that need either an excellent graduate, an experienced industry candidate, or an immigrant candidate on H1-B (big hassle for all involved) to fill them. There are plenty of applicants, and the salary is very elastic and negotiable (upwards). But not very many of them are excellent, and it’s a damn shame.

If you think employer-sponsored training is going to turn anyone with a reasonable IQ into a productive engineer, you are high, and/or a communications/business graduate. These are highly intelligent and trained people, not stem cells.

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Coder 07.23.10 at 8:25 am

Tim Worstall gets it. A young wo/man can build a career and afford a family this way.

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alex 07.23.10 at 9:36 am

The main problem of this discussion seems to be the assumption that anyone ought to be able to earn in the top 10%, to do so straight out of college, and then be in the top 1% within 10 years. That, of course, is not going to happen. Coming to terms with one’s own mediocrity may be a life’s work, but it looks to me as if quite a lot of people should be starting in on it rather sooner.

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Steve LaBonne 07.23.10 at 12:27 pm

Coming to terms with one’s own mediocrity may be a life’s work

The Carly Fiorinas of this world are nothing if not mediocre and yet they end up in that top 1%. I’d say something’s a little bit wrong with your implied model of how economic rewards are distributed.

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Steve LaBonne 07.23.10 at 12:29 pm

If you think employer-sponsored training is going to turn anyone with a reasonable IQ into a productive engineer, you are high, and/or a communications/business graduate.

Perhaps deserving of an award for Strawman of the Month. Well, if there weren’t so many other candidates.

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bianca steele 07.23.10 at 12:49 pm

Those numbers are for current employment in engineering occupations, not graduates of programs, some of whom move into management, sales, support, recruiting, and so forth.

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alex 07.23.10 at 1:16 pm

I made no implications about merit. Regardless of the mechanism by which rewards are distributed, only 1% of the population can be in the top 1% of anything. If we return to the original discussion, then it might well be observed that there are many things wrong with how the US economy distributes rewards at the moment. But that was not where the discussion seemed to have proceeded, being more concerned with whining about how much ‘engineers’ get, or should get, paid. To which I might retort that ‘engineers’ are all very well, but you wouldn’t want to actually put them in charge of anyone else. For a start, they’re quite likely to be jihadists. Or Nazis, apparently.

http://www.guardian.co.uk/commentisfree/2010/jan/02/extremism-engineering

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bianca steele 07.23.10 at 1:16 pm

My memory of interviewing and working with recent graduates, years ago, for systems software positions, is that there is a stark difference between a candidate who took Operating Systems and paid attention and someone who didn’t. IMNSHO someone who hasn’t taken Data Structures and Algorithms, the non-math part of the standard sophomore sequence, is next to useless. There’s some difference between more experienced candidates with and without explicit object-oriented experience (which it would be rare to have at university before the mid-1990s), but nowhere near as great as with someone who doesn’t know what an Abstract Data Type is. A graduate who can’t program a linked list will never be able to learn it.

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bianca steele 07.23.10 at 1:18 pm

I meant to add that my advice, especially to women (who tend to do the opposite), is to the “hardest” specialty you can do. If you can do embedded systems work, you probably won’t be out of work unless the economy really collapses.

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Steve LaBonne 07.23.10 at 1:22 pm

To which I might retort that ‘engineers’ are all very well, but you wouldn’t want to actually put them in charge of anyone else.

Which of course, is true of lots of MBAs as well, hence my example.

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Josh G. 07.23.10 at 1:33 pm

Coder: So, in your opinion, virtually every engineer above age 50 is incompetent? Because these people just can’t get jobs. And how is someone supposed to start a family while working continuous 80-hour weeks?

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Robert 07.23.10 at 1:34 pm

Alex, I think the main problem of this “discussion” is that very little has anything to do with the topic of the post.

I’ll continue off topic.

Bianca, a good Data Structures and Algorithms course should be math. You want to learn that, for instance, quicksort takes O(n log n) operations for the average case, and that that is the worst case performance for heap sort. You want to learn how to specify invariants for an Abstract Data Type for queues and stacks. You want to know how to trade off performances for insertions, deletions, etc. for various implementations.
The point isn’t just to have these facts down cold, but to know that these kind of considerations can be important in design and implementation. You might want to even learn about formal methods for proving an implementation correct.

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Josh G. 07.23.10 at 1:37 pm

alex: “The main problem of this discussion seems to be the assumption that anyone ought to be able to earn in the top 10%, to do so straight out of college, and then be in the top 1% within 10 years.”

No, but the smartest people in the country should be able to do so. The problem is that engineering is a strange outlier in this regard: it requires an extremely high IQ (not to mention lots of studying and hard work), yet the pay, prestige, and working conditions are far beneath any other similarly demanding job. A further issue is that a lot of very stupid people can earn lots of money in fields like finance and management, despite doing nothing productive whatsoever, and that allocation of such sinecures has a great deal to do with the existing class structure in America. The Wharton MBA is the modern-day title of nobility: it permits its holder to obtain massive income derived from the labor of others, without regard to knowledge or merit.

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Josh G. 07.23.10 at 1:45 pm

Lyle: “As noted one of the skills that one acquires a bit in a 4 year degree, is how to communicate both in writing and orally. If you read reports its clear that the average High School Graduate can not write very well.”

The high school diploma was once America’s basic credential of overall competence. It could, at one time, reasonably be assumed that a high school graduate was able to read fluently, write well, and handle basic math. That is no longer the case. What happened was that well-meaning social reformers pushed for universal high school graduation, and the only way to accomplish this was by watering down the standards. There are many people who just aren’t intellectually and/or temperamentally cut out for any kind of higher education; society needs to provide good, well-paid blue-collar manufacturing jobs for these people so that they can live in dignity and raise families, but we shouldn’t pretend that they have attained an academic achievement they really haven’t. There are many others who might be ready for advanced education some day, but first need to go out in the world for a while and see for themselves what they’re missing. The idea that everyone at age 15-18 should be spending most of their time in a structured, desk-in-a-row educational environment is silly. As a result, most high schools add virtually no value at all. I would go as far as to say that if we abolished high school entirely, and students went straight from middle school to college, educational outcomes wouldn’t be any worse than they are now. The smartest and/or most driven people would be ready for the more open and intellectual environment of college, those in the middle of the pack would struggle through remediation in college as they already do now, and those at the bottom simply would not attend.

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ScentOfViolets 07.23.10 at 1:46 pm

IMNSHO someone who hasn’t taken Data Structures and Algorithms, the non-math part of the standard sophomore sequence, is next to useless.

I got out of the biz a long time ago, but I really didn’t need to know more than a few basic types of structures, the stack, the queue, the tree, etc and some sorting stuff. What are you thinking of when you say this? Bear in mind that I was basically a code monkey and that we were using a version of C++ in a DOS environment.

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alex 07.23.10 at 2:00 pm

@193 – Josh, the entire structure of your assertions appears to reflect a desire for some sort of technocratic utopia in which people with ‘extremely high IQs’ are in charge, and tell the ‘stupid’ people what to do. Perhaps you don’t actually mean that, but you seem to. That is a problem. I am willing to listen to an argument for why people who are very good at manipulating electronic systems, or building gas-turbines, ought to be paid more than anyone else, but your assertions are not one. They read more like, if I may say so, somebody with a chip on his shoulder about living in a culture which doesn’t take his skillset as seriously as some others trying to explain to people why that’s just plain wrong, dammit. But you are amongst academics here. We all feel that way, and we are all slowly coming to terms with the fact that it doesn’t matter how we feel, we’re still not going to be paid any more, and we’re certainly not going to be let into the circles of power. Come the revolution, maybe you, or we, will have our chance. But I expect some lying sneaky weasel of a lawyer will shaft us both.

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Coder 07.23.10 at 2:04 pm

Bianca makes good points. Deep understanding of tough material, and the ability to *produce* something will take you far.

Josh: 80 hour weeks? I guess I can’t respond with data, but smells like bullshit to me. Plus, if we’re going by “hours” worked, I’d prefer to be a professional working 40-60hr weeks than an unskilled wage earner hammering out at least as many hours with very little job security. Anecdote time – I know a bunch of top notch software engineer folks under 40, who have recently started families. I am certain that none of them are chained to their desks/laptops cranking out 80 hour weeks. There are empty desks in our building – we simply can’t find enough good people (and not for lack of competitive salary. Six figures and reasonable working conditions are a probably a decent deal for a middle class family )

As upset as I am about rising income inequality (largely an effect of out-of-control earnings for finance industry types, entertainment types, and peak-level exeutives who have their compensation packages designed by their own friends), I’m frustrated by the low skills and poor educations of most of the people younger than me, and my own age — and I’m not exactly a highly credentialed supergenius. I’m also really frustrated by an educational system that seems to be more of a social networking tool than creating hard-boiled intellects, and enabling them with skills to go further in academia/industry/home life, invent things, design important life-saving (or planet-saving) technologies, etc. So bring on the immigrants.

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engels 07.23.10 at 2:05 pm

For what it’s worth, it’s not actually true that ‘regardless of the mechanism of how rewards are distributed’ only 1% of the population may receive earnings within the top 1% of the distribution. Under a strictly egalitarian distribution of earnings, for example, 100% of the population would receive earnings in the top 1% of the distribution (and in the bottom 1%, since these will be equal).

Alex, I fear, you are demonstrating how a lack of basic numeral is holding America’s school leavers back.

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ScentOfViolets 07.23.10 at 2:06 pm

The high school diploma was once America’s basic credential of overall competence. It could, at one time, reasonably be assumed that a high school graduate was able to read fluently, write well, and handle basic math. That is no longer the case. What happened was that well-meaning social reformers pushed for universal high school graduation, and the only way to accomplish this was by watering down the standards.

If by “well-meaning social reformers” you mean “parents determined to see that their kid get every advantage possible”, you might have a point. Otherwise, not so much.

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chris 07.23.10 at 2:32 pm

The high school diploma was once America’s basic credential of overall competence. It could, at one time, reasonably be assumed that a high school graduate was able to read fluently, write well, and handle basic math. That is no longer the case. What happened was that well-meaning social reformers pushed for universal high school graduation, and the only way to accomplish this was by watering down the standards.

The easiest way, the cheapest way, certainly. The *only* way? I don’t think so. We *choose* not to improve education for the children of the poor because (a) that would cost money, which has to come from taxes, which everyone hates, and (b) then they might outcompete the children of the well-off and nobody wants that, or at least the well-off don’t and they’re in charge. Instead we debase credentials and pretend that it is improvement of outcomes.

But, as already noted several times in this thread, that whole issue is a sideshow. The rising inequality of the post-Reagan US is occurring all along the distribution, but the strongest divergence is *within* the upper class. The gap between the rich and the extremely rich is the fastest-growing, and that has nothing to do with debasement of high school diplomas because neither one is relying on them.

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Steve LaBonne 07.23.10 at 2:58 pm

The gap between the rich and the extremely rich is the fastest-growing

I wonder if there’s any way out of our situation without an (unlikely) revolt against the top 1% by the next 9%. God knows the rest of us have little say nowadays.

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Josh G. 07.23.10 at 2:58 pm

chris: “The easiest way, the cheapest way, certainly. The only way? I don’t think so. We choose not to improve education for the children of the poor because (a) that would cost money, which has to come from taxes, which everyone hates, and (b) then they might outcompete the children of the well-off and nobody wants that, or at least the well-off don’t and they’re in charge. Instead we debase credentials and pretend that it is improvement of outcomes.”

We absolutely could be doing more to provide good education to people in lower income brackets, and it’s an outrage that we do not. There are countless smart, talented young people who will never realize the full measure of their talent because of poverty and maladministration. However, no matter what we do, there will always be people who are not intellectually or temperamentally cut out for higher education. And, problematically, many of these people come from middle and upper class families – which means it is going to be hard to tell their families that they don’t make the cut. I know this would be virtually impossible to do, but it is what should be done. It is primarily America’s history of racism that makes it impossible to run a decent tracking system. In Europe and most of the Asian Tigers, tracking works quite well.

George W. Bush should never even have been allowed into high school, much less Harvard.

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engels 07.23.10 at 3:13 pm

There’s also a danger that if you educate people too much they might not want to do the jobs you’ve got lined up for them anymore.

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hix 07.23.10 at 3:18 pm

How do you know so well that Bush was to stupid for University or something like that? He became president. That tends to indicate hes damn good, far better than the average Havard graduate, regardless of all the family connections.

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Tim Worstall 07.23.10 at 3:26 pm

“is a strange outlier in this regard: it requires an extremely high IQ (not to mention lots of studying and hard work), yet the pay, prestige, and working conditions are far beneath any other similarly demanding job. ”

Are we back talking about academia again?

207

mpowell 07.23.10 at 3:31 pm


I wonder if there’s any way out of our situation without an (unlikely) revolt against the top 1% by the next 9%. God knows the rest of us have little say nowadays.

Yeah, but that 9% can actually see themselves in the top 1%. Unless they actually believe they are more likely to fall than to climb, they won’t be doing anything. As someone on the cusp I can tell you that universal health care sounds like a good idea (risk minimization) but it would probably not personally benefit me to agitate for more change than that.

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engels 07.23.10 at 3:32 pm

So if I may summarise. The big money in America goes to the smartest people. How do we know they are the smartest? Because they managed to get their hands on the money.

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Hidari 07.23.10 at 3:37 pm

Is it my imagination or is the thread above starting to resemble this thread?. It seems to me that the same basic ideas are returning on us like an undercooked TV dinner.

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alex 07.23.10 at 3:57 pm

engels, I said that “only 1% of the population can be in the top 1% of anything”. If there is no top 1%, because there’s no distribution, then there’s no “there” there, is there?

Anyhoo, since the likelihood of incomes in the USA being distributed entirely equally is slightly smaller than that of the Second Coming, the whole point is rather moot.

211

Steve LaBonne 07.23.10 at 4:38 pm

Unless they actually believe they are more likely to fall than to climb, they won’t be doing anything.

Precisely that is my (very very very very faint) hope. Obviously I’m not holding my breath. But the rest of us might as well be on Mars for all the account the government takes of our interests, so nobody else can do it barring a very major upheaval (which would likely look rather more like Kristallnacht than the fall of the Bastille, so I’m not exactly rooting for it.)

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engels 07.23.10 at 4:47 pm

Under an egalitarian distribution of everyone’s earnings would fall within the first percentile (and within the 99th percentile.) Perhaps more significantly, under a distribution which is _close_ to egalitarian everyone’s earnings would be _close_ to those at these points in the distribution.

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JEG 07.23.10 at 4:49 pm

Is it possible that growing amounts of social, technical, regulatory and other forms of complexity are making it close to impossible for real productivity gains to be registered at virtually all levels and within virtually all sectors of the economy? And that incomes are rising only for the very small subset of individuals who can adequately navigate this complexity?

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engels 07.23.10 at 5:12 pm

The ‘bottom’ 90% of people in the US have in fact got plenty of power. Try carrying on economic production or fighting a war without them. I think you would struggle, even with a few hundred thousand members of the high IQ society on your side. Maybe one day they’ll realise they have it.

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Josh G. 07.23.10 at 5:17 pm

engels: “The ‘bottom’ 90% of people in the US have in fact got plenty of power.”

Not as long as they keep listening to Glenn Beck and Rush Limbaugh. If they stop doing that, maybe.

216

bianca steele 07.23.10 at 5:29 pm

Robert,
In my day, Data Structures/Algorithms was a one-year sequence. The math was in the second semester and a lot of the programming exercises were duplicated. A fair number of people cannot learn to do the programming exercises after having them presented to them two or even three times. I love the abstract stuff (never got to attempted proofs of code though) and it’s a great exercise to try to get a design as close to the ideal ADT form as possible, but the principles behind ADTs or whatever you call them are important. Learning Java first doesn’t give you them for free, especially if your first language was Visual Basic or Perl.

SoV,
What Robert mentioned w/r/t knowing there are different algorithms to do the same thing is one thing I have in mind, and knowing there is a way to do it that will be horrifically inefficient, another way that isn’t much harder that will have reasonable performance, and another way that in the limit case is amazingly efficient but isn’t usually worth the trouble it usually gives. Twenty-five years ago, you didn’t have the tools that come with Java and C++ now. We expected a first-year hire to be able to code, for example, a linked list from scratch. But occasionally you’d find a graduate who had to have dynamic memory allocation explained to him using a diagram like the one in the TRS-80 manual.

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bianca steele 07.23.10 at 5:32 pm

I know people who worked for startups (60+ hrs/wk) during times when they had small children. I don’t know couples who both worked in startup environments when they had small children. Other than startups (or working closely across a 12-hour time zone difference), I think the hours probably start to become a serious issue when you get promoted and have to deal with upper management, people who themselves work 80 hour weeks and have more ability to delegate than you do.

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bianca steele 07.23.10 at 5:40 pm

Incidentally, though this is getting off-track, in the mid-1980s we recruited at places like UW-Madison and Penn State. A few years later, we were hiring fewer people and not spending money on travel and relocation expenses, so students in those places simply didn’t get the chance to come work for us in Massachusetts.

219

piglet 07.23.10 at 5:55 pm

alex: “I made no implications about merit. Regardless of the mechanism by which rewards are distributed, only 1% of the population can be in the top 1% of anything.”

Totally correct. Bur the starting poiont of this diascussion was not so much who is in the top 1% but why the disparity between the top 1% and the rest of the income distribution has increased so much. And that is not due to engineers earning outlandish salaries.

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piglet 07.23.10 at 6:03 pm

“A graduate who can’t program a linked list will never be able to learn it.”

That is a strange statement. How else would they know how to program a linked list than by learning it. Besides, only a tiny percentage of software programmers actually need to program a linked list. I understand you are probably saying that one should understand the nuts and bolts even without having to directly tinker with them but this statement is pretty narrow and somewhat arbitrary.

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bianca steele 07.23.10 at 6:28 pm

piglet,
No, even if you’re right about who needs to know this, I’m using “linked list” to mean “a well defined problem of moderate difficulty, involving a variety of useful subskills”: a weed-out exercise. (Also, people who don’t know important things because their education was based on an assumption that there would be other people somewhere in their workplace who could take care of that for them happens to be one of my pet peeves.)

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Steve LaBonne 07.23.10 at 6:40 pm

(Also, people who don’t know important things because their education was based on an assumption that there would be other people somewhere in their workplace who could take care of that for them happens to be one of my pet peeves.)

It is not the purpose of education to provide on the job training, but rather the intellectual ability to absorb on the job training. It’s not possible in academic coursework to teach everything any graduate might need to know in his or her first year on the job.

However your other point is quite compatible with what I just said and makes sense.

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piglet 07.23.10 at 6:46 pm

I don’t necessarily disagree with your job selection criteria but let me ask you a hypothetical. Suppose you need to fill a programmer position but the available applicants haven’t taken a proper data structures course. Let’s say it wasn’t part of their course of study. Would you rather not fill the position, try to lure more educated candidates by offering higher salary, or hire one of the suboptimal candidates and give them extra training?

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bianca steele 07.23.10 at 6:49 pm

It is certainly possible in academic coursework to convey an impression (accurate or not) about the discipline being taught, or to teach the material in such a way that graduates will be able, for example, to code to others’ designs but not modify the designs or create new designs. (Forty years ago it could be assumed that large numbers of programmers would do nothing but write tiny, simple bits of code to others’ well-specified designs, under close supervision–see The Mythical Man-Month.)

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chris 07.23.10 at 6:52 pm

I understand you are probably saying that one should understand the nuts and bolts even without having to directly tinker with them but this statement is pretty narrow and somewhat arbitrary.

In fact, I thought that modern trends in software design were in the opposite direction: unless you’re the one doing the nuts and bolts implementation of something, you *shouldn’t* know how it works under the hood, or shouldn’t care whether you know that, but only deal with it through the standardized interface it exposes. That allows someone else to come along later and change the under-the-hood parts without breaking the whole rest of the program.

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bianca steele 07.23.10 at 7:00 pm

piglet,
I’m not sure how relevant your question is because I don’t know who is hiring recent bachelor’s candidates these days, and no recent CS graduate would not have Data Structures. A CS graduate without good programming skills would probably go into a nonprogramming related job in the industry, like Quality Assurance or Customer Support.

Ramp-up time to learn object-oriented design from scratch, for example, especially without a good CS grounding, would probably involve months of dedicated study and practice. But I have often not found experienced people who had the skills I wanted, or argued with others and with HR about what skills and experience were actually mandatory. Some things can be taught on the job, but learning through making errors is not always feasible. In most cases, if no one could be found, we would leave the position open and a current employee would do the extra work, which would take less time than training and otherwise dealing with someone unqualified.

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ScentOfViolets 07.23.10 at 7:25 pm

However, no matter what we do, there will always be people who are not intellectually or temperamentally cut out for higher education. And, problematically, many of these people come from middle and upper class families – which means it is going to be hard to tell their families that they don’t make the cut.

There seem to be a few ill-defined terms here! But really, what do you mean when someone is “not cut out either intellectually or temperamentally” for higher education? If all you mean by the latter is that you have to have the ability to sit still, concentrate for long periods of time, and have the self-discipline to work towards long-term goals with little immediate reward, well, maybe.

Otherwise, not so much. And that these aptitudes are generally applicable, not specific to higher education or any activity that requires an advanced degree.

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Josh G. 07.23.10 at 7:33 pm

ScentOfViolets: “There seem to be a few ill-defined terms here! But really, what do you mean when someone is “not cut out either intellectually or temperamentally” for higher education? If all you mean by the latter is that you have to have the ability to sit still, concentrate for long periods of time, and have the self-discipline to work towards long-term goals with little immediate reward, well, maybe.”

Yes, that’s pretty much what I mean by not being temperamentally suited. Some people will never have these traits, and others might at a later time but not when they are in their late teenage years. In fact, a majority of teenagers (especially teenage males) don’t have these traits. Science shows that the human brain does not completely mature until age 25, and teenagers all throughout human history are known for their recklessness and inability to think straight. Yet we construct our systems of higher education in flagrant disregard for the facts of human biology.

To some extent, I am speaking from personal experience here. Despite high SAT scores and a good degree of intellectual curiosity, I did very poorly in high school, and struggled through college for several years. I was intellectually prepared for the work, but not yet emotionally or temperamentally ready. When I went back to college at age 26, I had a far easier time and graduated with little trouble.

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ScentOfViolets 07.23.10 at 7:43 pm

So if I may summarise. The big money in America goes to the smartest people. How do we know they are the smartest? Because they managed to get their hands on the money.

I suspect that this is indeed what Rajan’s thesis comes down to, sprinkled with obfuscatory intermediate steps that allow one to wrangle them interminably. This ability to argue in a circle seems to a requirement. Here’s something that Scott Aaranson over at Shtetl Optimized had to say about these sorts of rules of inference:

Here’s an example. I got Kurt to admit that certain Bible passages — in particular, the ones about whipping your slaves — reflected a faulty, limited understanding of God’s will, and could only be understood in the historical context in which they were written. I then asked him how he knew that other passages — for example, the ones condemning homosexuality — didn’t also reflect a limited understanding of God’s will. He replied that, in the case of homosexuality, he didn’t need the Bible to tell him it was immoral: he knew it was immoral because it contradicted human beings’ biological nature, gay couples being unable to procreate. I then asked whether he thought that infertile straight couples should similarly be banned from getting married. Of course not, he replied, since marriage is about more than procreation — it’s also about love, bonding, and so on. I then pointed out that gay and lesbian couples also experience love and bonding. Kurt agreed that this was true, but then said the reason homosexuality was wrong went back to the Bible.

What fascinated me was that, with every single issue we discussed, we went around in a similar circle — and Kurt didn’t seem to see any problem with this, just so long as the number of 2SAT clauses that he had to resolve to get a contradiction was large enough.

And he goes on to posit that there is a certain type of person who is very comfortable with “bounded inference”:

Inspired by conversations with Kurt and others, I hereby wish to propose a different theory of fundamentalist psychology. My theory is this: fundamentalists use a system of logical inference wherein you only have to apply the inference rules two or three times before you stop. (The exact number of inferences can vary, depending on how much you like the conclusion.) Furthermore, this system of “bounded inference” is actually the natural one from an evolutionary standpoint. It’s we — the scientists, mathematicians, and other nerdly folk — who insist on a bizzarre, unnatural system of inference, one where you have to keep turning the modus ponens crank whether you like where it’s taking you or not.

Are these Chicago school types fundamentalists? I’d have to say yes, and you see this cockeyed justification in the service of all sorts of pet rationalizations: CEO’s deserve the money they make because ipso facto that’s how much someone is willing to pay them. Why are these people willing to pay these munificent sums? Because that’s how much they are worth. Of course, you can include a few more steps in this strange loop which makes it less obvious, as in the case with Kurt above. But that some people are perfectly comfortable with this procedure, seem reasonably intelligent and educated, and are held in positions of esteem by their peers just makes my head explode.

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piglet 07.23.10 at 7:45 pm

Ramp-up time to learn object-oriented design from scratch, for example, especially without a good CS grounding, would probably involve months of dedicated study and practice.

In my experience, nobody graduates who doesn’t need months of practice on the job to understand object-oriented design, even if they took relevant courses, and many never will. Not that the courses are useless but you seem to rather underestimate the relevance of on the job experience. Incidentally, I started in software engineering without having learned either database theory or OO. I did study serious computer science, mostly theoretical stuff, and learned everything I really needed on the job. I’m not arguing that this is the best way to start a career in the field, though. One pecularity of software engineering seems to be that nobody agrees on what it really takes to be a good programmer. Everybody has their own pet theory and every hiring manager uses different criteria.

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Josh G. 07.23.10 at 7:48 pm

piglet: “One pecularity of software engineering seems to be that nobody agrees on what it really takes to be a good programmer. Everybody has their own pet theory and every hiring manager uses different criteria.”

A good programmer is someone who has written good programs. Any other criterion is, at best, a flawed heuristic designed to approximate this. “By their fruits ye shall know them.”

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ScentOfViolets 07.23.10 at 7:52 pm

engels, I said that “only 1% of the population can be in the top 1% of anything”. If there is no top 1%, because there’s no distribution, then there’s no “there” there, is there?

I’m not following you on this one. Are you saying that only the top 15 of the population can be in the top 1% of any measurement (test scores, track times, etc) if you are ranking them by relative performance, say as is the case with IQ scores? Because I’ve had both more than 10% and less than 10% of my students receive 90% or more of all possible points awarded during a semester.

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pdf23ds 07.23.10 at 7:56 pm

The problem with programming is that it isn’t very teachable. It’s much more a performance skill than it is knowledge. A slightly better programmer can see a bug in a few seconds that it would take 10s of minutes for a slightly worse one, and days for a substantially worse one. The same difference applies to designing code well, at the large and small scales, and to learning new languages or frameworks. The most productive programmers are 20X more productive than the average programmer, where in most other fields the multiplier is more like 3-4X.

And AFAIK, we know nothing about how to teach someone to be more productive programmers than they’re disposed to be. So there’s a small, fixed pool of good programmers that education can’t make a dent in.

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ScentOfViolets 07.23.10 at 8:00 pm

We expected a first-year hire to be able to code, for example, a linked list from scratch. But occasionally you’d find a graduate who had to have dynamic memory allocation explained to him using a diagram like the one in the TRS-80 manual.

Auuugh! Pointers! I hate pointers. That’s were most of my debug time was spent :-( Anyway, a question: when you talk about coding up a linked list from scratch, does it have to work the first time around? Or do you just have to get the general algorithm and variables right? There’s a big difference there, I would think. A lot of guys I knew back then would just do a cut-&-paste of some old linked list code and progressively modify it, and this seemed to make the work go quicker than doing it from scratch.

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piglet 07.23.10 at 8:19 pm

“A good programmer is someone who has written good programs.”

Well most programmers don’t write whole programs, only fragments of a bigger whole. Also, even on the question of what is a good program there’s a lot of disagreement. I pride myself with my code having a very low bug incidence but at one of my last positions in the field, I got into trouble for not 100% literally following the code conventions (you know, there has to be a getXyz() even if it’s never needed) and that attitude seems to have become ever more widespread.

Anyway this is really off-topic to this thread and none of this sheds any light on the causes of inequality. It is interesting though how many of us have coding experience.

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engels 07.23.10 at 8:35 pm

#232 It’s really not that interesting, but I thought the original claim was that if 100 students take a test then only 10 of them can score within the top decile of scores for that test, regardless of the distribution. I said that is false, because, eg., if they all get full marks they have all scored in the top decile of the distribution (and in the bottom decile, etc). Alex’s response, as I understand it, was that you can’t refer to this distribution as a ‘distribution’ but I think most mathematicians, not to mention ordinary speakers of English, would disagree.

Anyway it is perhaps more noteworthy that someone who advises everyone who isn’t among the super-rich to ‘com[e] to terms with [their] mediocrity’ then goes on to claim that he ‘made no implications about merit’.

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ScentOfViolets 07.23.10 at 9:05 pm

Alex’s response, as I understand it, was that you can’t refer to this distribution as a ‘distribution’ but I think most mathematicians, not to mention ordinary speakers of English, would disagree.

Speaking as just one mathematician, yes, I would disagree. I had thought the significance was that there can be only one . . . even if the absolute scores for the highest and lowest are with 0.1% of each other. Saying that “merit-based” advantages should be based on first, second and third place in instances like this would thus seem to be inappropriate.

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piglet 07.23.10 at 9:37 pm

guys, you are not being fair to alex. His point, taken not as a mathematical proposition but as an observation about US income distribution, is totally valid. And it is important to understand the fallacy in Rajan’s argument. Cf. 219.

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bianca steele 07.23.10 at 9:43 pm

SoV,
Back in the days when I worked for Fairly Large Corp., and they still existed and could afford to hire a few dozen new graduates each year, give them a month for training, another month for a training project, and about six months where they might start real work but any level of productivity was expected, we had a low attrition rate in the first year, and very few people left the profession entirely in the first few years when they were doing the most coding. That wasn’t enough time to teach someone to program who only had theoretical knowledge (whatever that means), so they must have been able to program already in college, which isn’t surprising because we asked them about it before we hired them. (You can call me a shrew if you like, but if I was interviewing a college senior and he indicated that programming and debugging were the part of school he liked least, my vote was no.)

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ScentOfViolets 07.23.10 at 9:48 pm

Bianca, I am not sure which question of mine you’re answering.

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piglet 07.23.10 at 9:57 pm

“That wasn’t enough time to teach someone to program who only had theoretical knowledge (whatever that means) so they must have been able to program already in college” oh sure. How many months do you think those graduates had spent programming while in college? One, two? If you gave them eight months of training, that is likely to be much more than they had ever programmed in their lives. It may have helped to have taken classes but chances are, those who survived would have survived anyway.

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Omega Centauri 07.23.10 at 10:52 pm

I know its off topic (the original one anyway), but there are many paths to SW development. The one I am familar with is hard-science or engineering types who are handed a computer manual, and told -“now go solve your/our research problem”. Most of these people had little to no formal training in CS or software engineering, and yet they routinely outperformed CS majors.
I remember helping a good friend make a career change, he was a theoretical physicist, but the geographical place he wanted to come to needed computer/software designer types. I had to teach him what the compiler/computer hardware did with his code, as he had no idea how it worked. Within a few years he became a toplevel computer architect.

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yoyo 07.24.10 at 6:17 am

The problem isn’t ‘overeducated’ workforce. It is that there is little incentive for automation when you can hire people to do dull jobs for a minimum of pay. Low wages especially at the bottom discourage investment. Just take the opposite of what “supply-side” says and you will be on the right path.

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Ed 07.24.10 at 8:31 am

Scent of Violets #229, fascinating post, but what I think you are describing is best summarized as “doublethink”. There are a number of examples on this thread and on the “creative class BS” thread, not as pristine.

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alex 07.25.10 at 7:32 am

Dear engels, you can come to terms with your mediocrity either before or after the revolution, it’s all the same to me; but even after the revolution, not everyone is going to be General Secretary of the Supreme Soviet, or even Second Assistant Deputy Manager of the Chipping Sodbury District Refuse Recycling Collective.

I had been under the impression that one of the core problems of US political culture was the purblind inclination of many people to believe that one day, they too would be amongst the super-rich, and to resist equalising change on that basis. Coming to terms with mediocrity, in that context, is an argument for embracing structural change, not resisting it. But then, you’re not really happy unless you’re snarking about someone that you’ve decided is an Enemy of the People, are you?

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engels 07.27.10 at 12:47 am

Those straw man Communists have declared you an Enemy of the People? Oh dear. Maybe you should follow your own advice in #184.

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Barry 07.27.10 at 4:56 pm

bianca steele 07.23.10 at 6:28 pm

” No, even if you’re right about who needs to know this, I’m using “linked list” to mean “a well defined problem of moderate difficulty, involving a variety of useful subskills”: a weed-out exercise’

IOW, you’re using term A to mean something else, without saying so.

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bianca steele 07.27.10 at 5:08 pm

Barry,

1. I was saying that “linked list, which is a well defined problem of moderate difficulty, involving a variety of useful subskills, and incidentally a useful thing to know about if you are going to design, code, or debug programs of more than minimal complexity, is a weed-out exercise widely employed in undergraduate computer science degree programs, and an exercise I think it’s important to be able to do if you’re going to be employed as a software engineer, inability to do which exercise would not only negatively impact grades in the sophomore year but would probably keep a student out of any advanced course that was programming-intensive (i.e. does not impact your ability to pass cryptography and other math-heavy courses but does impact your ability to pass software-design and -architecture courses).”

2. I was responding to piglet, who made a complaint along the lines of “why should we bother teaching kids to factor quadratic equations or what the First Amendment is, most of them will never need to use the knowledge.”

If you’re saying I neglected to write a phrase-by-phrase demolition of a comment with which I disagreed, sure.

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piglet 07.27.10 at 7:07 pm

“I was responding to piglet, who made a complaint along the lines of “why should we bother teaching kids to factor quadratic equations or what the First Amendment is, most of them will never need to use the knowledge.”

Let me make it clear that I did NOT make “a complaint along the lines of “why should we bother teaching kids to factor quadratic equations or what the First Amendment is, most of them will never need to use the knowledge.” What I did (220) was object to the statement “A graduate who can’t program a linked list will never be able to learn it.”

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DHFabian 08.18.10 at 5:38 am

America is much poorer than it was 30 years ago. People can’t afford college, and evidently, the government doesn’t consider higher education to be worth the cost of making it available to all qualified Americans. I know that there are some who are exceptional students and able to earn enough scholarships to cover most of the cost of of college; my own daughter did this. But most of us are, by definition, average.

Young people know that if they can’t find a way to pay for college, they’ll almost certainly remain locked into poverty for the rest of their lives. I think this is why so many young people are dropping out of high school today. A high school diploma means nothing today, so if one has no way to pay for college, there really isn’t much point in finishing high school.

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