The Chinese Skills Disconnect: An Opportunity for Us?

The New York Times headline read “Degrees, but No Guarantees.” However, the story was not about the students graduating from American universities this season. Instead, it was about Chinese grads. It seems that Chinese businesses are swamped by job applications from graduating students but have few jobs to offer. At the risk of seeming to express schadenfreude, I want to point out that as bad as our economy seems for our own grads, their prospects are better than China’s.

The problem is not just that growth of the Chinese economy has slowed from its fever pitch of the previous several years. More fundamental is the nature of that economy. Like the postwar United States economy, it is growing mainly from manufacturing. You only have to prowl the aisles of your local Walmart to see the fruits of that manufacturing prowess. However, in an economy that has a very large share of low-tech manufacturing, such as the plants that produce plastic toys, rubber tires, kitchen utensils, or even iPads and other high-tech devices that are assembled by hand, there is a limited need for college-educated workers.

In the postwar American economy, millions of workers with only a high school diploma or even less education were able to find low-tech work in manufacturing plants and earn middle-class incomes. But more and more young people are getting college degrees now, despite the fast-climbing expense, because those low-skill jobs have largely vanished, exported to China, and the low-skill service jobs that remain are very low-paying.

But consider the implications for China. Think of it this way: We have not only exported the 1950s-style manufacturing capability, but also the accompanying 1950s-style skill requirements. Chinese universities are capable of churning out hordes of graduates, having quadrupled the number of college students in the past decade. But at this point in its development, China’s economy does not particularly need these grads.

A survey released last winter of Chinese young people age 21 to 25 found 16 percent of the college grads unemployed, but only 4 percent unemployment among those with only an elementary school education. This is the reverse of what you’ll find in the United States, where the May 2013 unemployment rate was 11.1 percent for those with less than a high school diploma and only 3.8 percent for those with a bachelor’s degree or higher.

There certainly is a case to be made that China is preparing human capital for the economic transition that will occur as wages rise, as manufacturing shifts to still lower-paying countries, and as their economy starts looking more like ours does now rather than our 1950s model. But what will the young grads pouring out of the universities find to occupy themselves until that shift occurs? And if that shift is somehow accelerated—for example, if China’s government invests very heavily in research and development activity—what will happen to today’s huge cohort of low-skilled Chinese workers?

America’s “greatest generation,” which prospered during the postwar period, has already left the workforce. They had several decades in which to enjoy the match between their skills and their nation’s economy. Among the baby boomers, who got their start in that postwar economy, many now are suffering from the shifted economy but at least had many good years of opportunity. What about China? With worldwide economic development now moving so fast, will millions of Chinese factory workers have the rug pulled out from under them as their 1950’s-style economy disappears? Or will China find some way to slow this transition and continue to disappoint the college grads? Either of these alternatives promises to cause social unrest.

There is still one more possibility: that China will do what we did with community colleges in the 1970s, only on a much bigger scale—that is, invest heavily in adult education and retool the hordes of low-skill workers for the inevitable economic shift. Online courses, in particular, could facilitate a golden age of Chinese adult education in the next decade. But consider that the online lessons won’t need to be based in China. Thousands of Chinese students are now coming to brick-and-ivy universities in the United States because of our sterling reputation for higher education. We are now pioneering online education. If we play our cards right, perhaps Chinese-language online education can be one of our hottest export industries in the next decade.

A New Order in the Court?

The practice of law in America may soon undergo drastic changes. Early this month, the Law School Admissions Council reported that applications for law school were down 20 percent since the same time a year earlier. If this trend continues throughout the application season, the number of applicants will have fallen by 38 percent since 2010. Those who would have applied in previous years are finding other career paths to pursue, turned off by reports of unemployed law-school grads who are unable to pay off the huge debt they have run up in pursuit of the law degree. The American Bar Association found that only 55 percent of 2011 grads had landed full-time, long-term jobs as lawyers nine months after graduation. Only a dozen law schools, out of a total of 198, had a 2011 job-placement rate of better than 80 percent.

It seems likely that the tough job market for new lawyers will continue to get worse as computer technology advances. Computer programs are being used to do much of the research that lawyers used to do; these apps can rapidly chew through reams of documents to retrieve relevant information for purposes such as pre-trial discovery. Many consumers turn to services such as LegalZoom to create routine legal documents such as wills. And some legal research, contract negotiation, and intellectual property services are being offshored to low-wage countries such as India.

In response to this crisis in the profession, the American Bar Association created a task force to recommend changes to the system that educates lawyers, and it’s a measure of the seriousness of the situation that the commission seems likely to issue its report this fall, well in advance of the original deadline of the following summer.

Some of its possible suggestions are already being aired. Prominent among these is the idea of reducing the core of law school to two years from the current three to lessen the tuition debt that law students incur. Another tuition-saving idea is admitting college juniors directly into law school.

Ironically, at the same time that lawyers are not finding jobs, many Americans are having trouble getting legal aid to navigate the courts and have their rights represented. We are all entitled to a defense lawyer in a criminal case, whether or not we can pay for one, but no such public legal help is guaranteed in civil disputes such as evictions, divorce, and child custody cases. The problem is especially acute in immigration courts, where the availability of professional legal help is known to make a huge difference in outcomes.

So perhaps there is merit in one of the most radical ideas being discussed by the ABA task force: the creation of a new occupation, limited-license legal technicians. In practice, these workers would serve a role vis-à-vis lawyers roughly analogous to the role that advanced practice nurses play vis-à-vis physicians.
This occupation already exists in Washington State, where it was created by the state’s Supreme Court this past June. The occupation is regulated by a Limited License Legal Technician Board. The outlines of how the LLLTs are to be educated and what they will be allowed to do are specified in the Supreme Court’s ruling (PDF).

LLLTs will need to hold an associate or bachelor’s degree in an approved paralegal or legal assistant studies program, together with two years of work in this field. Alternatively, candidates for the license may hold a post-baccalaureate certificate from an approved program in the same field, together with three years of work experience. In both entry routes, at least one year of the work experience must be under the supervision of a Washington lawyer, and candidates must practice at least 20 hours of pro bono service in Washington within the two years before they take the licensing exam.

The work LLLTs do will be limited to civil proceedings. It will largely consist of selecting and completing court forms, informing clients of applicable procedures and time lines, reviewing and explaining pleadings, and identifying additional documents that may be needed in a court proceeding. The technicians will not be allowed to represent clients in court or act on the client’s behalf to contact or negotiate with opposing parties.

The amount of pay that LLLTs will earn is not, of course, something that the Supreme Court can specify. The job market will determine this. I’m curious to see whether the cost-benefit tradeoff for entering this occupation will prove more attractive than it presently does for attorneys.

We're Eating Our Seed Corn

The most troubling news article I have seen all week was on the front page of this morning’s New York Times, with the headline “Where the Jobs Are, the Training May Not Be.” The article notes, “As state funding has dwindled, public colleges have raised tuition and are now resorting to even more desperate measures--cutting training for jobs the economy needs most.” It’s a cruel irony that the hottest career skills--health care, high tech, and engineering--are also among the most expensive to teach, partly because of the nature of the equipment used, partly because the instructors need to be offered high salaries to lure them away from nonteaching jobs, and in some cases because of safety requirements.

Cash-strapped states are reducing their subsidies for higher education, forcing students to pay more and in many cases admitting only a small fraction of the students who want to enroll. “At one community college in North Carolina--a state with a severe nursing shortage--nursing program applicants so outnumber available slots that there is a waiting list just to get on the waiting list.”

States continue to cut college funding continue even though higher education is demonstrably one of the best investments a state can make. Google the phrase “every dollar a state invests in higher education,” and you will find research showing that California gets $3 of economic activity for every dollar invested and Texas gets more than $5. One study for the Federal Reserve Bank of Boston (PDF here) estimates a total return to government of $7.46.

So why is it politically acceptable to cut funding to higher education? At root is the implicit belief that (a) the people who get higher education are the ones who benefit from it, so (b) they should pay for it.

It’s important to recognize that this attitude has two parts, and that the second part depends on the accuracy of the first part. But it turns out that the first part of this belief is only half true. Yes, study after study has shown that higher education dramatically increases a person’s income and reduces the likelihood of unemployment. For example, see the Department of Labor’s “Education Pays” page. The recent recession has only amplified this trend.

However, it’s not true that the recipients of higher education are the only people who benefit. That $7.46 return on the dollar of investment is not coming solely from the increased tax payments of the college graduates. Demonstrably, the presence of educated people in the economy causes everybody to be more productive and thus earn more. A fascinating study by UCLA economist Enrico Moretti (PDF here) compared the wages of otherwise similar individuals who work in cities that have differing shares of college graduates. The research showed that “a percentage point increase in the supply of college graduates raises high school drop-outs’ wages by 1.9%, high school graduates’ wages by 1.6%, and college graduates wages by 0.4%.” In other words, everybody benefits from higher education, but it’s the least-educated people who benefit the most.

That’s why it’s so destructive when politicians argue against funding for higher education and whip up popular support by encouraging uneducated people to resent higher education. We saw that happen just this week as presidential candidate Rick Santorum branded President Obama a “snob” because “he wants everybody in America to go to college.” (As Politifact.com notes, the President actually advocates a full range of postsecondary education and training, including apprenticeships.)

In the present political climate, however, it’s not good enough to argue that everyone benefits from spending on higher education. Those who believe in a government small enough to drown in the bathtub don’t want any investments in the public sector that could be replaced by the private sector. In other words, the second half of the key belief--people should pay for higher education--is not based solely on the premise that education benefits only the people who receive it. It also draws on the premise that the private sector does everything best, so investments in higher education should come from the private sector. In practical terms, these investments consist of the loans that college students increasingly take out to pay for their education. Last year student debt passed the $1 trillion mark, exceeding America’s total credit card debt.

We hear increasing warnings that college debt is the next bubble threatening our economy, and sometimes the government itself is accused of inflating the bubble by making cheap college loans available. But consider that much less of this debt would be necessary if we had a well-funded system of public higher education. This is another example of what Thomas Friedman and Michael Mandelbaum refer to in the title of their book That Used to Be Us. We owe much of the post-World War II prosperity to the G.I. Bill and to well-funded state universities such as California used to have. But in the present political climate, it seems that education is too expensive, so we’re going to try ignorance instead.