TUITION AT HARVARD IN TERMS OF SHOES AND SOCKS

We have three cats. It's like having children, but there's no tuition involved. ~ Ron Reagan.

Harvard tuition, shoes and socks? This inquiry is prompted by information I found when I was investigating the history of currency. One form of currency during the early days of the 13 American colonies was wheat. Many items were assigned prices in wheat (and corn) because hard currency was in short supply.

Evidently a student of Harvard in 1653, Samuel Willis, paid his tuition in wheat, not money. From this, I wanted to see what the 1653 Harvard tuition really was. Unfortunately, I could not find Harvard's tuition in 1653. But I did find the following reference to Harvard's tuition in 1700. [What's 47 years in this case, right?]

Increase Mather (President of Harvard, 1685-1701) was appointed to sanctify the office. During the Mather administration, ending in 1701, a cow was worth 30 [shillings], a Harvard tutor was valued at 50 a year. Tuition by 1700 had reached 10 shillings per quarter, or the price of a pair of shoes and two pairs of stockings.

Given this interesting basis for the cost of tuition at Harvard, I used 2 methods to see how Harvard's 1700 tuition can be compared to the present day.
First, I examined the tuition relative to the prices of shoes and stockings (socks) in 1700 and today. I found the current cost of a pair of shoes. I determined the price of shoes for the familiar 99% of men shoppers, using shoe prices at Macy's. And I determined the price of shoes for the proverbial 1% (or less) of men by searching the web for "most expensive shoes." Quite classy men's shoes at Macy's cost $318. At close to the tippy-top of the men's shoe universe is the John Lobb 2005 shoe that sells for $1,280 per pair. As incredible as it may seem, the Lobb shoes were not the most expensive listed at this site. If you have to ask, you can't… Next, I determined the cost of socks. Ralph Lauren dress socks at Macy's are $25 (for a 3 pack).  Switching to what the 0.001% wear, they are the Zimmerli 100 percent Cashmere Dress Weight Over-the-Calf socks, at $200 for one pair. And they apparently start to wear out after 6 or 7 washings, according to a reviewer. With this, I calculated the current Harvard tuition in terms of shoes and socks (S&S).
I have assumed that our current student does not attend Harvard in the summer quarter (a reasonable assumption for undergraduates). The student, perhaps Mr. Willis' great^14th grandson or granddaughter, thus goes to Harvard for three-quarters of a year. In 1700 S&S terms, the "yearly" tuition of 30 shillings is the same as 3 pairs of shoes and 6 pairs of socks. Here's the June 2013 cost for going to Harvard (in 1700) for my Macy's Man (the 99% Mr Everyman) and for my 0.001% Mr Olympus:

My Macy's Man	The 0.001 percenter (Mr Olympus)
- $954 for 3 pairs of shoes	- $3,840 for 3 pairs of shoes
-   $50 for 6 pairs of socks	- $1,200 for 6 pairs of socks
Total  $ 1,004	Total  $5,040

Unsurprisingly, going to Harvard this fall is a bit more expensive than $5,040. The actual 2013-14 Harvard tuition is $38,391. [Adding in room & board, and fees makes the total climb to $56,407 for Harvard's full-retail, one-year price of education.]

For the second approach I calculated the present worth of 30 shillings in 1700 – the Harvard tuition for a year. Using an impressive website's income approach, the economic status value of the 30s in 2011 (the most recent year available at the site) is £3,481 or $5,361 at the current exchange rate. Interestingly, this value is unexpectedly close – only 6% higher – to the Mr Olympus amount of "equivalent" shoes and socks for Harvard's tuition.
Clearly, the cost of going to Harvard has escalated enormously over time compared to S&S and present worth. This increase is due in part to the impressively rising reputation of the College since 1700. However, even the S&S that Mr Olympus would wear total less than 15% of current Harvard tuition. Conversely, you could also argue that over the past 300 years the prices of shoes and socks (even the Olympian ones) have dramatically diminished, relative to attending the pinnacle of US private colleges. I don't think it says much about productivity gains in premium higher education; even with demand far out-balancing supply.
For my Macy's man, the 2013-14 tuition would be equivalent to providing the trustees of Harvard with 109 pairs of shoes and 461 pairs of socks (assuming he allocates 90% of his funds to buying shoes and 10% to socks). For Mr Olympus, that's a mere 27 pairs of John Lobb shoes and 19 pairs of Zimmerli socks. The Trustees probably would look very good in them.

To return this discussion to my history of currency assessment, the current Harvard tuition would require either Macy's Man or Mr Olympus to offer the Trustees 4,488 bushels of wheat; that's a whole lot more than Samuel Willis probably did. The shoes and socks might be a much more favorable offer for today's student.
Postscript for 2014-15 Harvard costs. For an up-to-date perspective, the 2014-15 full-retail costs for Harvard tuition and fees, room & board are $58,607, an increase of almost 4% since 2013. Converting this impressive sum to bushels of wheat (and using a recent and much lower price of wheat), you'd need to offer Harvard the grand total of 10,666 bushels, which is 320 tons of wheat! That's an astonishing amount of wheat for a single year of tippy-top education. Good thing we grew out of our wheat-as-currency habit. Too bad it's $58,607; and remember, many Harvard undergraduates receive financial aid one way or another from Harvard's 2014 endowment (still ranked 1^st in the nation) at $36.4 billion.

FATTER FARMERS, AILING EATERS

Beware the hobby that eats. ~ Ben Franklin  

How much and what kinds of food should we produce? Because food is a necessity, these questions have occupied policy-makers for a long, long time. Food policy, one of the most contentious political issues both within nations and across countries, varies significantly around the globe.

For all too long, US food policy has been focused on benefiting a selective, few food producers (Big Food - industrial-sized farmers and processors) and mostly ignoring food eaters (all of us).

As I've mentioned in an earlier post, the US is blessed with abundant, fruitful land on which to grow crops and raise livestock. The US ranks first among nations in the amount of land cultivated for agriculture. Equally important, US farmers have continued to innovate and utilize agricultural (ag) techniques and technologies that have steadily increased farm productivity. In the last 40 years, US ag productivity (measured by the number of people a single American farmer grows food for) has increased a remarkable 774%. Recently, however, these impressive gains seem to be subsiding. As ag productivity has risen, the number of farmers has significantly dropped, so now less than 1% of our population claims "farming" as their occupation. The remaining, larger farmers have been financially benefiting from soaring farmland prices and increasing demand for their products. Since 2009, farmland prices in Iowa and Nebraska have doubled.

Commodity ag production is dominated by an even smaller number of large, industrial-scale farm operations in the US. As the world's largest exporter of food products, the US sold $135.8 billion (B) worth of food and food products abroad in 2012. According to the UN's Food and Agriculture Organization (FAO), the US is ranked number one in the export of corn, soybeans and wheat – among primary ag commodities – along with almonds, blueberries, peanut butter, spinach and other crops. The vast bulk of these exports center around primary food commodities.

Because of our productive farms and skilled farmers, as well as deliberate food policies enacted by the Federal government, US consumers spend , by a wide margin, the lowest proportion of their income on food of any nation, as shown in Figure 1. This certainly benefits food consumers, which includes everyone of us. But this inexpensive food comes with several economic and physical consequences.

First, because the domestic food industry has fiercely and successfully protected its interests, the US like virtually all countries has provided sizable subsidies to commodity farmers (up to $35B annually) and erected significant barriers to the import of certain foods and food products from foreign countries. Who pays for these subsidies and supports? Taxpayers. Protecting a nation's food supply is arguably a high priority in terms of survival. The strategic rationale for using tariffs on ag products is long-standing in terms of "food security." Over 210 separate ag product tariffs – including one for furskins – are in force in the US. These tariffs increase the price of food. But large US commodity farmers are hardly feeble, fragile producers needing protection from superior foreigners.

Second, because of these substantial subsidies, ag products like corn, wheat and soybeans have remained relatively inexpensive. How have food producers responded? By substituting these products and their derivatives into more and more retail foodstuffs. Most soybean production is destined for food meal eaten with grain by livestock. More and more inexpensive corn has been transformed into high-fructose corn syrup destined for sugared-soda, breakfast cereal, ketchup and a myriad of other retail food products.

According to World Bank data, the US price of corn has decreased almost 9% during the past 6 months. These subsidies have well-noted and demonstrable physical consequences for the food-eating public; just ask New York City Mayor Michael Bloomberg. The increased use of subsidized ag commodities in our food contributes to higher obesity levels both for adults and children. More than one-third of US adults (35.7%) are obese, not just overweight. Obesity prevalence among children and adolescents has almost tripled since 1980. Now about 17% (or 12.5 million) of children and adolescents aged 2 -19 years are obese.

Third, the disproportionate influence of large, primary food producers not only greatly sways domestic food policy in their favor, but has scuttled the last set of international trade talks, the Doha Development Round, within the World Trade Organization. Several countries, vigorously supported by domestic food producers, would not agree on reducing often sizable tariffs on food imports. Who is hurt by these import protections? Chiefly hundreds of millions of food consumers, as well as domestic and foreign food producers, especially in developing nations.

Here are three examples of disruptive food-based tariffs. First, US tariffs on sugar, championed by domestic sugar producers, have significantly increased the price of sugar in the US. According to the Dept of Commerce, the domestic price of US wholesale refined sugar over the last 25 years has been two to three times the world price. These higher prices are maintained through support loans and tariff-rate quotas. In 2004, the US price was 23.5 cents per pound, compared to the world price at 10.9 cents. This price differential results in a significant competitive cost disadvantage for domestic sugar-containing product manufacturers, and higher prices for US consumers. Employment in domestic sugar-containing products industries decreased by more than 10,000 jobs between 1997 and 2002 according to the Bureau of Labor Statistics.

Second, like many countries Japan has venerable tariffs on food imports to protect its seemingly less efficient domestic producers. Japan applies an average tariff of 25% on agricultural produce imports, about 4 times as high as Japanese non-ag tariffs. This doesn't include rice imports (a key staple of Japanese diet),which are protected by a 778% tariff! While this astonishingly high tariff protects the usually small-scale Japanese rice farmers, it hurts all Japanese rice consumers, as well as more efficient rice exporters from Thailand, Vietnam (the world's top two rice exporters) and other nations.

Last and by no means least, the European Union's Common Agricultural Policy (CAP) is unfortunately typical of how ag tariffs protect relatively small numbers of farmers/producers to the detriment of all food consumers. The CAP's budget in 2012 was $71.5 billion (B), and represents 42 %of the total EU budget, making it the largest agricultural "aid" program in the world. The CAP offers income and market support for farmers, as well as "rural development support" that helps farmers modernize their farms and become more competitive while protecting the environment, and keep rural communities "thriving." It's interesting to note that Europe has over 17 million (M) farmers (out of a population of over 500M) with an average farm size of about 30 acres.

By comparison, the US has about 2 million farmers, and an average farm size of 445 acres. Thus, there are over 5 times as many farmers per capita in the EU, and their farms are on average 15 times smaller than those in the US. It's hard to imagine that many of these EU farms are as proficient as those in the US. A group of Purdue University agricultural economists offered the following statement in 2002 regarding the size of a farm needed for efficient production:  An economically viable crop operation in the US Corn Belt (includes Illinois, Iowa, Missouri, Nebraska, Kansas and Minnesota) would have between 2,000 and 3,000 acres of row crops. That's a lot different than a 30 acre Polish farm. As is the case for all too many ag assistance programs, the CAP appears to support an ever-shrinking culture, associated with "rural " communities, that's been overcome by the march of time and progress.

The significance of a small number of large US ag producers has steadily increased over time as techniques and technology have allowed for more efficient, mechanized industrial-scale production. A mere 46,000 farms in the US (2.5% of all farms) accounted for 50% of all sales of agricultural products in 1997. This trend in ever-more concentrated power of Big Food has had major consequences for all food consumers and producers around the globe. As mentioned above, this power extends to other nations' farmers, in particular those in the EU.

What can eaters do? We can vote with our mouths by continuing to buy food products that are healthful and nutritious (H&N), rather than laden with sugar, salt, fat and non-natural ingredients. This is easier said than done since H&N foods are often more expensive than subsidized foods. And, buying H&N foods runs counter to Big Food's enormous marketing and sales efforts of that inundate each and every one of us   all   the   time.

Federal food policy needs to change by stop subsidizing Big Food and instead support H&N food producers and eaters. Improving the viability of smaller, organic producers would be a good place to start. It would be reassuring if writing our Congress-person to indicate our serious support for H&N foods would have some positive effect towards making eaters in the US (and beyond) more relevant and healthier. It's certainly worth a try. But our beloved Congress is guided by focused and forceful minorities (like industrial Big Food reps who has now gotten "ag-gag" laws passed in several states) rather than far more numerous but restrained majorities (like food consumers, who don't have lobbyists to press their case). So it may be simplistic to rely on consumer "votes" to re-orient food policy in this land of Big Macs, Big Gulps, Pringles and Snickers, but one has to start somewhere…

THE ZERO-SUM AND MICRO - MACRO GAMES

I never lost a game. I just ran out of time.. ~ Bobby Lane

Money talks...but all mine ever says is good-bye. ~ Anon.

No, these aren't new events at the upcoming X Games. They've been played for quite some time in our nation's capitol. Washington continues live in its own self-contained bubble where priorities are all discordantly political and too rarely founded on what once-upon-a-long-time ago were termed the public interest - providing the greatest good for the greatest number of citizens. Instead, policy objectives are fractionalized, not collective, and principally aimed at narrow, special interests rather than a broad, public interest.

This private-interest political regimen is fundamentally different from policy-making for common interest, and is exemplified by the Republican's two focal points: (1) aiding the top 1% or 2% of income-earning citizens; and (2) significantly reducing government expenditures. Adding to the dissonance is the growing notion that "something has to be done" to get the country back on track towards greater economic growth, but it can't cost much, and certainly not me.

I think the metastasis of groups like the tea party is founded on the belief of more and more folks that the economic game is fixed against them, and they're losing. These people believe they're in a zero-sum game, where one person's (or group's) gains in an activity (say their participation in our economy) is balanced by the losses of other participants. In other words, there is not enough slices of the (economic) pie to go around for everyone who wants a piece so if one person/group takes a larger slice, that means there's smaller slices available for all other folks. It didn't use to be this way.

In more benevolent times, more people believed there was a positive-sum game, where everyone can benefit; when all participants end up with more than they started with – a bigger pie. A rising tide (of a sustainably growing economy) raises all boats. This is why President Obama's and Congress' principal policy goal should be to raise US economic growth sustainably and equitably to at least 3.2%.

But for the past 4 years, the US economy hasn't substantively grown; the average annual real GDP growth rate is a wretched 0.75%. In addition, 12.2 million people remain unemployed; the length of unemployment now is, on average, 38.1 weeks, that's almost ¾ of a year. Average productivity has risen over 38% during the past 16 years, but median wages have stagnated and increased only 16% since 1995.

So it's understandable why more people are seeing their future darkly. Aware of this anxiety, some politicians, offering fearful views of the future, proselytize that only by drastically reducing the burdensome government [except for entitlements like Social Security and Medicare-Medicaid], can individuals regain their economic well-being. What's one of the means such politicians are making their points? By playing the micro-macro game.

There is usually a big difference between macroeconomic policies' effects on us as individuals (micro effects) and on us all together as a nation (macro effects). The micro-macro game comes in many versions and is often played by politicians of various persuasions to confuse and distort the effects of proposed policy changes.

A prime example is the macro "fact" illustrated by the abysmally low overall (macro) rating that Congress gets from the public at large; only 9% of polled people now approve of Congress' performance – my real surprise is that it's as high as 9%. But, within the very "micro" voting booth, citizens continue to overwhelmingly re-elect their incumbent Congress-person. In 2010, 85% of incumbent House members were re-elected and 84% of Senators. As many commentators have said, Congress as an institution is held in very low regard, but in this gerrymandered world it's all the "other" Congress-people that's the problem, not my representative. Go figure.

The micro-macro game is constantly played by both parties in the policy arena as well. Consider the discussion that's occurring about the federal budget deficit and debt. The Repubs concentrate only on the macro future and dismiss the nation's current economic situation that has been adversely affecting large numbers of individual middle-class individuals and families. The Repubs' focus on now reducing discretionary federal expenditures to ameliorate our possible future macro debt (to "save the Republic" among other fantastic rationales) would magnify individual middle-class members' already-dire economic straits. Similarly, the Repubs insistence (until yesterday) on holding the US hostage by their threats to not renew the debt ceiling represent no sensible view of future consequences. By contrast, the Dems focus on the micro effects of changes to entitlement programs – like Social Security and Medicare-Medicaid – to reject any consideration of needed macro policy modifications so the programs can survive in the future.

The Dems dismiss the macro future (that shows ever-increasing entitlement expenditures due to aging Boomers and fewer Gen X'ers and Y'ers) when they utterly reject any consideration of incremental changes to these programs. They (mistakenly) state since there are no problems now with Social Security (SS) and these alterations would adversely affect individual senior citizens, no changes should be now made.  

Their over-emphasis of the current micro costs of changes is akin to a 5-year old threatening to hold her breath until she gets what she wants. After she is soon forced to gasp for a breath before passing out, she's in worse shape than before. [Sort of what happened yesterday when the Repubs, realizing they've been idiots about their debt ceiling shenanigans, finally caved – but only for 3 more months.]

A change that could help avoid Social Security (SS) and Medicare collapse is to make these benefits means-tested (eg, dependent on income level). Making such a change represents a fundamental adjustment to such entitlements, and thus goes against Democratic orthodoxy. But if the Dems continue to play the micro-macro game and refuse any changes to entitlements, the rest of us (like the 5 year old) will be much worse off afterwards.

Consider making incremental changes that involve means-testing entitlement benefits, say reducing Social Security benefits by 15% only for individuals making more than $120,000 per year. Such a change can have useful macro effects over time via the magic of fiscal multipliers. My guestimate of possible direct macro savings for Social Security is 3% of total SS benefits paid or $236M/year, not small change. But for these high-income individuals the effects will almost certainly be very modest. The 15% Social Security benefit reduction sounds sizeable , however for people earning more than $120k/yr will not likely be more than $377/month, since the maximum monthly Social Security benefit currently allowed now is capped at $2,513 for the highest-income people [$377 is 15% of $2,513]. This $377 reduction in monthly SS benefits is unlikely to meaningfully affect these high-income recipients of Social Security, because their monthly gross income is more than $10,000.
Will such a change "save" Social Security? Not by itself, but it would represent an important step. Achieving real savings in SS costs will require broader reductions in benefits, increases in the qualifying age, and/or removal of the ceiling on income that is subject to FICA (Social Security) tax. Any of these steps are an anathema for Dems.

Thus, saying that economically well-off high-income people will be hurt by minor benefit cuts – and a reason for not undertaking some form of means-testing SS benefits – is simply mistaken. However, the politics of such a marginal change in entitlement benefits, of course, are anything but incremental. And Dems seem willing to keep using the micro-macro game to waylay needed changes to entitlements, the same way Repubs do it for tax and spending changes.

Finally, politicians on both sides of the isle also use a variant of the Micro-Macro game to dismiss alterations that could benefit our longer-term (macro) structural deficit – or other issues. You hear it when a politician or a self-interested talking head states, "This possible change in policy is too small to solve our problem with [fill in the blank here], so we need to think of some other, more significant solution." My example above to begin means-testing SS benefits – just like the suggestion that SS benefits should be subject to a different COLA – would initially be met with howls of rage from Dems because changing anything to do with entitlements is verboten. But after that, politicians would (and did) say the new COLA, or my proposal, should be dismissed because it doesn't really solve the problem; its effect is too small for this large issue. You have to start somewhere, even if it's a small step.

This logical incongruence – stopping smaller changes because they're not large enough to "count", but not allowing consideration of significant changes – is used to stop any remedy from happening – just what the status quo, looking-only-at-the-present politicians want.

I guess we will continue to keep holding our breath.

EDU DISCONNECT

Education is not the filling of a pail, but the lighting of a fire. ~ William Butler Yates

Social, cultural and educational forces have reinforced the idea that success and a college degree go hand in hand. College is the academic coda to the American Dream, since in many people's minds college graduation can make the Dream inter-generational. In 2010, 5.9 million Americans between 25 and 34 years old have post-secondary degrees. Looking forward, however, I'm not so sure this educational mantra will remain true for every high-school student now considering college.

President Obama, like every politician worth his salt, rightly states that getting a good education (with emphasis on a college education) is a ticket to a brighter future. He's correct in many ways. Currently, US unemployment is a historically-miserable 7.7%. However, for folks with a BA or more, it's half the national number, 3.8%; and for those with less than a high-school degree it's a wretched 12.2%. College graduates earn during their working lifetime, on average, nearly $1 million more than people who don't go to college.

However, the popular perception that a BA creates an ever-increasing monetary bonus is no longer true. Over the past decade, the wage premium from receiving a BA has been a steady 60% more than people without a BA. Impressive and meaningful, but this premium has not grown as it has in the past; it's been constant. The BA wage premium has been maintained in no small part because the wages offered to people with only a high-school degree or less have actually decreased.

It's hard to expect that this premium would now increase as more and more young people receive college degrees. Between 1992 and 2008, the number of BAs awarded increased by 50% to more than 1.6 million. However, the wage premium provided to people with advanced degrees (masters, professional and PhD's) has progressively increased. Because of the increasing supply of graduates with BAs, those with advanced degrees are as distinguishing now as BAs were in the 1970's and 1980's. Nevertheless, our increasingly well-educated citizenry has broadly benefited our nation and its citizens, not only with income growth, but in many other equally-positive, important ways.

But for all too many recent 2- or 4-year college graduates, their post-graduate world has collided with the reality of the nation's extended economic doldrums. Just ask any graduate who's waiting on restaurant tables and/or living with his/her parents to save money to pay off student loans. About two-thirds of BA recipients take out loans to finance their education. Student loans now total more than $1 trillion (more than credit card debt), and one in 6 student borrowers are in default.

During our continuing labor market weakness employers can afford to be much pickier about what they require of applicants, who they hire and how much they offer as starting wages. A recent article illustrates this "up-credentialing" trend, where more employers now require a job applicant to have a college degree that didn't in the past. For example, 65% of ads for claims adjusters now state that a BA is required, only 48% did in 2007. The dream of achieving success through a BA is starting to seem chimerical for more graduates.

Underemployment of college graduates – in jobs that require a BA, but do not need college-level knowledge or skills – has spread widely. This expanded "trickle-down" of a prerequisite BA makes it even more difficult for job entrants without a college degree to now find meaningful work. I believe this is part of an educational disconnect perpetrated by the educational industry.

Yet not just college students and graduates are dealing with changed financial circumstances. The fiscal challenges facing colleges and universities themselves are manifest. Colleges have heavily borrowed over the past decade, following the edifice complex, to upgrade their facilities. College debt levels have doubled – now at $205 billion – in the decade ending 2011; but their pledged gifts and investments received have dropped by more than 40%. Here are a few telling statistics that show how colleges have allocated their thinning financial resources: long-term debt at US nonprofit colleges grew 12% per year from 2002 to 2008; interest costs (on their debt) increased 9% per year. Instructional costs increased only 5%. 

Despite underemployment of perhaps 50% of college graduates, an increasing number of media articles mention the "skills gap" that employers bemoan makes it impossible to hire as many skilled workers as they have need. Although there are undoubtedly firms that can't find workers with needed skills, skills that often require STEM knowhow (Science, Technology, Engineering and/or Mathematics), other firms lamenting a lack of employable workers continue to offer these skilled jobs at rock-bottom wages – starting salaries around $10/hr. If there's truly a "skills gap" in our labor market, then common sense (and extensive historical data) argues it can be lessened by raising wages/salaries to attract more qualified applicants. Why would a high-school or junior-college student with nascent STEM skills apply for such jobs that pay $10 to $15/hr when a McDonalds shift manager can make about $14/hr, and does not need any STEM knowledge? Good question.

A more fundamental question is: are high-schools and colleges producing graduates with skills needed in today's economy? When it comes to non-college-attending high-school graduates and manufacturers the answer seems to be, not really. Far too few people graduate from high school knowing the basic technical, math and science skills that more and more firms (including modern, heavily computer- controlled manufacturers) need.

Not enough newly-minted graduates have gained the skills to lay claim to the expanding job opportunities in modern manufacturing, modern science, modern engineering and modern quantitative analysis jobs. Why are job opportunities increasing for skilled, quantitatively-trained people? In part, because the average age of high-skilled factory workers is now more than 55 years old. And because quantitative methods have become necessary and expected in more and more jobs as on-line systems collect and assemble ever-more Big Data that needs to be properly analyzed and assessed.

For several reasons, today's labor market – that supplies workers to employers who hopefully demand them as employees – seems increasingly dysfunctional. This is not really a skills gap in the labor market; it's a really supply shortage of skilled workers coming into the labor market from schools, a lack of interest by students to learn such skills and a reluctance of some employers to increase wage offerings for higher-skilled workers.

First, various employers seem unwilling to understand that if they want workers with relevant skills they have to pay more than $10/hr to attract them. Second, students and potential workers must understand that in order to gain jobs in today's economy they will increasingly need skills beyond general studies and liberal arts. Although education in the liberal arts remains a necessary foundation for understanding modern society, quantitative, STEM-based skills are fast becoming necessary for a far broader array of jobs.

Finally, educational institutions that now seem disconnected from job market needs must up-date and revise their curricula to reflect these evolving needs in the labor market. This is especially true for high-schools whose non-college-attending graduates find themselves with no readably employable skills.

Basic economics explains a fair amount of this new state of affairs in the education labor market. This disconnect may result from being stuck in "the good old days" when having a college degree was truly exceptional, no matter what you majored in. It still is, but much, much less so. Now, your choice of college major makes an ever-larger difference in finding a worthwhile job.

I grew up in the 1950's and 1960's in a household where both my mother and father were college graduates. I didn't realize how unusual that circumstance was until recently. It seems in the 1960's only 3% of US households had both parents being college-educated. In fact, when my mother and father completed college in the heart of the Great Depression, less than 1% of females received a BA and less than 4% of all young people had college degrees. They were truly exceptional. In those times, as well as into the late 1960's when I graduated from college, having a BA remained very distinctive. In 1970, 11% of people over 25 years had college degrees. In 2012, for the first time 30% of young adults report having a college degree. In April, the Bureau of Labor Statistics reported that 68.3% of high-school graduates were enrolled in colleges or universities.

The difference between 11% and 30% may not seem that large, but over the past 20 years the promotion of college as one's ticket to (especially financial) success has been persistent and widely adopted. With more and more young people graduating from college having a BA remains distinguishing, but much less so than in the past – especially when combined with the effects of a slow-growth, high-unemployment macroeconomy. Yet understandably demand for post-high school education remains very strong and quite price inelastic, especially at so-called "selective schools." In my view, this continued growth in demand for tertiary education has lessened the incentives for colleges to modernize their curricula.

During the past decades, as the supply of young people in colleges and receiving degrees has significantly increased, the economic "law of diminishing returns" has become relevant. The return from receiving a BA probably has diminished compared to a decade or two ago; prompting articles with titles such as "Is college a rotten investment?" [This article's unsurprising answer: no, it's not a rotten investment. But some schools offer much lower returns – specifically on-line and for-profit – than others.] In other words, college-graduates' expectations about striking it rich just because they've got a BA needs some revision. The college return increasingly depends on exactly what skills/courses graduates gain, not the BA diploma itself.

What's happened with US education, relative to the rest of the educational universe? Perhaps most significant, over the past several decades US education has fallen from its top-tier perch of educational performance relative to other nations. After WWII, the US led the world in broadening and improving its citizens' educational attainment. This broadening was founded on passage of the 1944 G.I. Bill that sent ex-soldiers to college and on the Sputnik-inspired 1958 National Defense Education Act, which increased Federal spending on schools at all levels and created subsidized student loans for post-high-school education. Later legislation, like the 1997 Taxpayer Relief Act, further broadened tax breaks and subsidies for college education. Gradually other nations saw the wisdom of such policies and eventually either caught up or surpassed us. US education now badly needs to catch up.

By 2010, 21 OECD nations (out of the 37 member countries) have high-school graduation rates higher than the US, including the Czech republic. In 2010 the US ranked 9^th in university-level education entry rates among OECD nations. In 2011 US high-school students fell behind 31 countries in math proficiency and behind 16 countries in reading proficiency. The US ranks a grim 43^rd in the world, right behind Morocco, when comparing public education expenditures as a percent of GDP. This mediocre performance of our students bodes ill for our continued ability to compete against ever-stronger international rivals.

The US needs to counter this slipping performance if we want to benefit to our citizens and grow our economy. Here are 4 actions I suggest the US education system needs adopt to improve and become less disconnected.

1.       High schools and employers must start talking together and re-emphasize vocational education as a viable option for 18-19 year old people interesting in employment directly after graduating. Such communication, together with specific programs, has begun closing the gap between education and employment, has shown promise. I'm not talking about dusting off the shop benches and auto repair facilities that were shuttered long ago when vocational ed was swept under the educational rug and pre-college academics was put on its pedestal. We seem willing to forget that even now at least one-third of high-school graduates don't enter college and their job prospects have never been less likely or less rewarding. Many of these graduates may do better through vocational-technical-apprentice programs in high-school and 2-yr colleges. These programs have worked in the past and can again, especially when affiliated with employers who need skilled workers. These programs need to become far more practiced and widespread. The costs of providing vocational ed are declining through the use of technology that effectively inter-connects students and teachers.

2.       High-schools should mandate that all graduates must master two basic skills; writing cogent, well-constructed expositional prose with word-processing software, and knowing what I call "practical mathematics." Practical math refers to knowing how to use algebra, knowing how to graphically represent algebraic formulas, knowing how to use computer spreadsheets and understanding introductory statistics. Every graduating high-school senior needs these skills in order to be employable.

3.       Junior/Community colleges must augment these writing and math skills so graduates with associate degrees entering the workforce can be understood and can easily deal with numbers and data that surround virtually every new non-minimum wage job.

4.       Colleges and universities have been stultified into thinking no substantive changes in their curricula or programs are needed due to the ever-increasing tide of applicants. After all, students keep knocking at their front doors, almost begging to be admitted, why do anything different. Such colleges proudly display single-digit acceptance rates with tuitions and fees dutifully raised. That thinking is misguided and unsustainable for 2 reasons. (A) Although 68.3% of high-school graduates are now enrolled in colleges, only 56% of college students complete 4-year degrees within 6 years, and only 29% of those who start 2-year degrees finish them within 3 years according to a Harvard study. US college dropout rates remain distressingly high.[1] (B) US failure to graduate rates are highest among any of the 18 nations tracked by the OECD. In other words, too many US colleges aren't terribly good at what the purport to do – produce graduates. Has such mediocre performance caused a re-assessment in college presidents' compensation? Apparently not. A NYTimes article states that the number of presidents earning in excess of $500,000/yr more than tripled to 157 over the past 8 years.

What can be done at the college level? First, start by being honest with applicants and explicitly saying that gaining a BA is not a ticket for guaranteed financial and personal success. It requires significant work. It's education, not a job card. Getting a BA will involve studying hard and making strategic choices. A BA may be necessary for all too many jobs (at least half of which really don't require college-level thinking), but it's not sufficient.

The motivation for going to college needs to include interest in gaining a range of knowledge per se, not simply (or only) mastering the rec center's climbing wall and getting hired by the likes of Google, Apple or Genentech. I know, going to college to gain and expand one's knowledge may be so yesterday. But for decades college administrators have sold their service as if it were a credential for success. Middle-class families, employers and most importantly federal  and state governments have swallowed this hook, line and sinker. In this educational variant of the American Dream, governments have continuously expanded subsidized loan programs so more students can afford college, which in turn has lessened the need for colleges to moderate their ever-escalating tuition and fees. Virtually everyone by now knows that the cost of a college education has followed a ballistic trajectory over time: rising 4 times as fast as all other goods and services since 1995.

Federal and state governments should leverage their large power of the purse to force colleges to adopt 3 needed, transformative changes. Colleges can receive continued financial and research support from the government only after they accomplished the following. (A) Higher education must create publicly-available standards of academic quality. These standards, which do not exist now, would be applied to colleges' degree programs allowing prospective students and others to assess a particular college, relative to the standards' norms. (B) Numerous colleges need to enter the 21^st century by vacating the 19^th through modernizing both administrative and educational fiefdoms. Too many colleges have as many administrators as instructors. The current management, operational and administrative structure of colleges (as well as K-12 schools) hasn't really changed in ages and all too often contains bureaucratic inefficiencies. By their nature, such bureaucracies will be reluctant to adjust. The carrot and stick of government funding may make them see the "value" of modernizing and improving.

 It goes without saying that Harvard is an exceptional university and practically without peer academically. Like many colleges, Harvard has heavily invested to maintain its exalted position; debt has increased $7.4 billion in the last decade (the largest increase in the nation). It graduates 97% of its undergraduate students within 6 years. And yet, this university seems a decent example of a bureaucratic mausoleum. Harvard comprises 11 separate academic units and 10 faculties—that teach 6,700 undergrads and 3,900 grad students. It offers 46 undergraduate majors, 134 graduate degrees and 32 professional degrees. In other words, even exceptional colleges will likely benefit from modernizing their operations and realizing efficiencies that private industry has practiced for generations.

(C) Colleges must adopt and use modern educational technologies that support MOOCs (massively open online courses) and other innovations that can reduce cost and improve efficiency, flexibility and accessibility. I expect MOOCs and their associated infrastructure will exert a disruptively positive, broadening and re-connecting force on tertiary education.

With these changes more young people will receive more value from their high-school and  post-high-school educational experiences. Education will become more connected and more effective, for everyone's benefit.

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[1] The dropout (or failure to graduate) rate for private for-profit colleges is an astonishing 78%; for private nonprofit colleges it's 35%, for public nonprofit schools it's 45%.