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Immigration and American Jobs

By: Jeff Taylor and Paulius Kosmarciukas.
Edited by: Jacob Beck.

This, “Immigration and American Jobs” by Eduardo Porter, article sheds new light on the issue of immigration to America, focusing on those who enter the US illegally from Mexico and South America. The prevailing argument for tougher border security and immigration control is the notion that these unskilled laborers come to the US to displace American workers because the immigrants are willing to work for less money. Mr. Porter posits that these unskilled laborers do not directly compete with the American laborers because unskilled labor jobs are not being taken away from anyone.

However, a number of Americans believe that incoming immigrants, in fact, do take jobs away from currently employed Americans, forcing native workers into unemployment. Not only do immigrants take the jobs away from Americans, but they also put undue strain on the social institutions by “free riding” in the healthcare system and avoid paying taxes. For example, sick or injured illegal immigrants go to the emergency room when hurt and cannot be denied treatment even if they do not have health insurance. Due to this, the tax-paying citizens end up picking up the unpaid hospital tab. In addition, immigrant families also strain the municipalities in which they live by overloading the school buses and classrooms with students whose families do not always pay property taxes.

While some of these points are quite valid, the effect of immigration on the US economy is overall positive. The article points out that it is quite a rare case that an immigrant worker directly displaces an American worker. As a result of this transition of jobs, the American workers must continue to better themselves by acquiring new skills or knowledge. This is part of a global, competitive market economy. From the employer’s perspective, cheap labor saves money by lowering operating costs for the entire business. Thus, the extra savings can be spent on investments in the growth of company, creating more skilled jobs for American workers. By displacing the American workers from the unskilled position, it forces them to learn and innovate, which promotes a healthier economic environment, and creates more skilled, educated American workers in upper-level management type positions. In the end, the immigrants end up contributing more to the long-term value of the United States economy than taking away value from the economy in the short term.

America is a country founded and built by immigrants. It must be remembered that immigration is the driving force behind the renewal process that defines America. Part of economic growth is replacing old job titles with new job titles. The upward trajectory of the American worker is in part driven by the fact that there are fewer unskilled jobs available. The American dream, the idea that anyone has an opportunity to better oneself and move up in society, is deeply rooted in this as well.

Instead of wasting federal and state budgets on border patrols and building higher fences to keep the illegal immigrants out of the country, that money should be spent on finding ways to make legal immigration more simple. By providing pathways to legal status, illegal immigration should decrease. In addition, these pathways will allow newly naturalized citizens to participate in the American society as many native born citizens already do, by paying taxes for their use of schools and healthcare.

What’s the Issue with American Schools?

By: Ryan Santana and Benjamin Virkus.

It comes as no surprise that American educational institutions are ranked poorly amongst the American public. Education reforms from the past decade have all fallen short of their goals: Quality schools are still not accessible and affordable, and America is still falling behind in the education department. There have been attempts made by the Obama administration, such as Race to the Top, to help the faltering states and schools; There have been promises made by Mitt Romney, such as slashing the federal education budget and using a voucher system, to help states and schools. Although it is unclear whether or not any policy has the ability to turn around American schools, what is clear is that America needs to revamp its educational system, and fast.

Obama’s Race to the Top has made education a competition. While the intentions of the policy are good, the results are far from that. Poor schools and states made up of largely poor school districts have found it hard to compete for the extra federal funding. Teachers have found an increased incentive to falsify test scores, and essentially cheat for their students. Another supposed remedy for education is charter schools. Charters schools are good in theory, but they fail to serve the larger needs of the community. Students who attend charter schools only perform marginally, if at all, better than their public school counterparts. Federal intervention and funding seems to be key to providing students from all walks of life equal educational opportunities.

What about Romney’s proposed plan? Romney would like to cut federal intervention to schools and provide vouchers to parents. A couple of states already have voucher programs and those states do not outperform or provide an above average education. Vouchers would only cover a fraction of what needs to be done. But why should the Government not be involved in education? Without Government intervention, schools might still be segregated. Government funding, while good natured, might not be the best option. Still, the extra funding might be able to keep impoverished school districts at the same level as their better-funded counterparts. Cutting the education budget and funneling funds elsewhere is definitely not the answer.

American schools are falling behind their international counterparts. America used to be home to some of the world’s most progressive institutions of learning, but now school is either too expensive or offers subpar education. Education is in need of massive reform and policy makers have yet to find a solution. No matter which side wins this election, Obama or Romney need to put pressure on states and schools to start providing for their citizens. America can lead again, we just need a push in the right direction.

America’s Changing Labor Force and Manufacturing

By: Kyle Peabody and Alyssa Dizoglio.
Edited by: Luke Martin and Fiona Maguire.

America’s labor force is changing - the “baby boomers” are retiring in masses and the next generation filling their positions have been raised in a world radically different than that of their parents.

Today’s youth are attending college at a much higher rate than generations past. The public perception has become such that many believe they must attend college post high school in order to procure a career. A college education is undoubtedly valuable, but there is currently a shortage of approximately 80,000-100,000 “highly skilled” workers in America today, according to the Boston Consulting Group. In addition, the Fabricators and Manufacturers Association estimate that 10 million new “skilled workers” will be needed by 2020.

Despite the shortage in skilled workers, pressure is still on today’s youth to attend colleges and universities. Students will frequently incurring large amounts of debt financing college, rather than pursuing trade and skilled positions. Many youths opt to pursue fields such as arts, humanities, and law, which have unemployment rates of 11%, 9%, and 8%. Meanwhile, fields such as plumbing, construction management, and HVAC (heating ventilation and air conditioning) are expected to have over 15% in job growth by 2018.

Jacey Wilkins of the Manufacturing Institute, found that few high school graduates seek these manual or industrial positions, and those who do lack even the most basic math skills. Due to the recession forcing many companies to cut training and human resources budgets, businesses cannot afford to hire these workers who have no skills and are in need of training. This is potentially troublesome for U.S. manufacturing because companies are looking to regain production from China and to compete with the high costs of labor and energy in Western Europe and Japan.

In order to remedy the current lack of skilled industrial workers in the U.S., high schools should offer more programs for students to begin trade and technical training through programs such as BOCES and the Industry Works Council. The US needs to emphasize the benefits of students attending trade schools and community college programs, including the fact that they are one-tenth of the cost of private universities, in order to encourage students to pursue these fields.

According to a study by Deloitte and the Manufacturing Institute, just one in three parents would encourage their child to work in a trade. Also, among 18-24 year olds, 52% have little or no interest in a manufacturing career, and 61% prefer to enter a “professional” career. To initiate a revival of U.S. manufacturing, it is necessary to educate the American youth about the value of skilled-workers in the economy.

iPatent, you Pay

By: Paulius Kosmarciukas and Christina Rencis.

Technological advances have propelled the human race forward for as long as anyone can remember, from the invention of the wheel to the release of the iPhone 5. But some of the biggest contributors to software and technological innovation for the past decade are taking a different approach. For the first time ever, companies like Apple and Google are spending less money on research and development than on intellectual property right protection.

Edith Ramirez, the Federal Trade Commission officer, warns that patents halt growth and “can deter innovation by increasing cost and uncertainty for other industry participants, including other patent holders.” The innovation engine has slowed down significantly with as much as $20 billion spent on patent litigation in the smartphone industry alone over the past two years. Legal warfare is becoming the new name of the game, leaving the consumer to pick up the tab.

Patents weren’t always thought of as a weapon for legal battle, but as a way to protect one’s self from copycats. Intellectual property rights were first introduced in 17th Century Britain. The enactment of these laws are thought to be a major catalyst of the industrial revolution. Thomas Jefferson used these same principles to set up similar laws in the U.S. during his presidency.

Today the innovation landscape looks much different. Now, even if a competitor is the first to bring a physical prototype to the market, they can be taken to court by the one who was “first to file,” which slows down innovation in the legal system. For instance, if you found a way to move information faster than the speed of light through the fifth dimension you would violate patent number 6,025,810.

Clearly, there are inefficiencies in the current patent system. Industry-specific regulation for protecting intellectual property is paramount. To research and develop a life-saving drug takes years of effort and large sums of investment, while to make copies of it would cost significantly less. Long-term patents are essential to recovering invested resources during development. On the other hand, creating a “slide to unlock” feature on a cell phone requires a lot of investment but the costs can be recovered much quicker due to a different nature of the fast-moving pace of the technology industry.

Patents are the candy that the mega-corporations don't like sharing with others. However, collaboration is often a true source of novel ideas and discoveries. Perhaps the current patent system could model itself after the Creative Commons License, offering custom intellectual property protection of anyone who is a part of the collective pool of inventors.

Intellectual property protection is meant to nurture the entrepreneurial spirit of innovation, not stifle it. Patents have the potential to act as creative catalysts in creating an environment that embraces future inventions rather than pose as litigious obstacles. The opportunities to modern prosperity are realized because of the creation and growth of companies that shape our society.
It’s important to learn from the past in building a successful future and we must restructure the current model of the patent system that is more industry-specific.

For more see:

Duhigg, Charles and Steve Lohr "The Patent, Used as a Sword." New York Times, October 7, 2012.

Posner, Richard. "Do patent and copyright law restrict competition and creativity excessively?" The Becker-Posner Blog, September 30, 2012.

Parnell, Brid-Aine. "Are we in the middle of a PATENT BUBBLE?" The Register, November 4, 2011.

Hariharan, Venkatesh. "Is IP another bubble about to burst? A view from another civilization." opensource.com, Dec 16, 2009.

Lohr, Steve. "Widening Scrutiny of Google’s Smartphone Patents." The New York Times, October 9, 2012.

Overprotective Patent Grabbers

By: Andrew Smith.
Edited by: Michael Kopelman.

Technology changes rapidly and so has the application of patent laws that govern technological inventions. When Congress passed the America Invents Act in 2011, it codified the attitude that people and corporations no longer invent products, but rather ideas. In a New York Times article from earlier this week, Charles Duhigg and Steve Lohr discussed how American patent laws have shifted from protecting the designs from “First to invent” to protecting “First to file.” This shift means that patents now protect potential ideas and broad technologies instead of specific applications of those ideas or the individual inventions that use them.

However, this shift to a broader interpretation of patent law did not come from the lawmakers themselves. It is a product of many large legal battles technology companies are waging against their competitors. The most publicized and most recent instance of such a battle involved a lawsuit that Apple brought against Samsung, regarding similarities in the technology the two companies use in their respective lines of smart phone products. Apple argued that the physical design and software Samsung used in its smartphones was too similar to the same aspects of Apple’s iPhone. Apple has a history of filing these types of suits. In the early 1990s, Apple unsuccessfully sued Microsoft for using graphical user interface technology on its computers that was too similar to the Apple’s version of this same technology which they had previously “Borrowed” from Xerox.

From a business perspective, it makes perfect sense to protect your own product from unauthorized reproduction by a competitor. A company has a vested interested in out-innovating their competitors in an attempt to win against them in terms of revenue and sales. However, the government has a vested interest in preserving competition in the market as it allows the economy to function properly and gives consumers an opportunity to choose the product that best fits their wants and needs. By attempting to sue its competitor out of the smartphone market, Apple is denying consumers this opportunity.

If consumers cannot vote with their wallets when it comes to buying goods, smartphones specifically, there is no incentive for innovators to try and improve upon existing technologies. Obviously, no corporation or individual should be allowed to steal someone else’s invention or application of a specific technology. Inventors do deserve to receive credit as well as royalties for their inventions. The United States Constitution actually provides for the protection of inventions in an effort to “Promote the advancement of science and the useful arts” in article 1, section 8. However, to construe this provision as carte blanche to patent and restrict every idea or technological innovation to the first person to file a patent on it, is to follow a non-valid interpretation of this article. A company that invents a certain products or devises a particular application for a certain technological innovation only has a valid claim to that particular invention or application. And not to any and every conceivable application of the same idea.

Patent laws need to catch up with new technology. However, the law needs to strike a balance that does not stifle competition or innovation. The standard for interpreting and enforcing patent laws should involve tangible products or applications of intangible ideas. If the patent office continues to grant patents on ideas that haven’t produced a physical result, then the patent holders will be able to prevent new technologies (Which haven’t progressed from the drawing board) from ever entering the market at the hand of someone who could create, and perhaps improve, an amazing idea. Market competition and consumer choice are more important than the profit margins of a single company. Until the patent office realizes this, litigation will continue to struggle competition and innovation.

Race Against the Machine: What You Should Know!

By: Nick Tourville.
Edited by: Wenqing Zhang.

The words of John Maynard Keynes, “’we are being afflicted with a new disease…(called) technological employment,’” refer to a new phase of human society, in which less people have to produce goods and services. According to the book, Eric Brynjolfsson explains why the rapid improvements in technology displace human labor, just like John Maynard Keynes predicted. There is nothing new. The 19th and 20th centuries were marked by waves of automation that drove us from a primarily agricultural economy to an industrial economy. Machines such as the plough and steam engine displaced jobs in certain sectors, but there were plenty of new sectors that were coming into existence that gave new jobs. Today, we are at another transition in society where automation may help us discover the 3rd industrial revolution, or it will just continue to displace jobs.

Technological progress, in particular the computer age, has such a high rate improve progress; therefore our skills, institutions, policies, and schools cannot keep up. New technologies substituted normal routine tasks that were originally occupied by humans. For example, virtual assistants and self-service machines are decreasing the need for human occupancy in assistant and clerk-like jobs. Additionally, computers perform the tasks that people in sales, logistics, and analytics used to do. One electronics company called Foxconn has even purchased 1 million robots to replace much of its workforce. Routine jobs originally performed by humans at this company, such as welding, basic assembly of parts and spraying paint, are now being accomplished by these robots. Additionally, computers may still be in an infant stage as evidence suggests that this exponential increase in computing power may continue for much longer. This could pose even greater problems because a growing population and fewer jobs mean a faltering economy.

While productivity continues and wealth increases at the rate which is greater than at any point before, the average worker is not doing as well as they should. The replacement of jobs is consequently causing real median income to fall; the last decade proved the first real drop in real median income. Furthermore, Real GDP Per Capita is growing much faster than real median income. This proves that the wealth is being allocated to the richest people in the country, but not allocated in average. Historically, increased output has been correlated with increased employment, but now the two are diverging (employment is not rising with GDP), as digital technology is becoming much more prominent.

Technological improvements are causing a widening gap in inequality some reasons. First of all, many industries tend to favor only a few individuals to get the largest proportion of wealth. Athletes, entrepreneurs, CEOs, TV stars, and financial executives have been able to take advantage of digital technologies and leverage their skills across the globalizing world. In fact, the average CEO in 2005 got 300 times more than the average worker is paid, which is an increase from 1990 when a CEO only made 70 times more. In addition, as automation substitutes routine tasks, the demand for skilled labor is increasing. This is causing an even greater gap between the educated and the least educated. Now, people are forced to be educated or they will loss their opportunity to compete with others; however, the people who are in the lowest level on the totem pole are in a terrible position to pay for educating. Furthermore, technology causes a great shift from labor to capital, which rewards the capitalists. The richest capitalists capture a greater share of income. Since the laborers spend a greater proportion of their income than the capitalists (capitalists have a propensity to save more of each marginal dollar than laborers), money is not being circulated through the system and creating greater inequality.
The unemployment rate is rising and the future that people are facing is not much better with technology. The core of the problem is that the skills of institutions, organizations and people have lagged behind the increasing technological change. As a solution to these problems, humans and machines have to work together to create even better ideas. Innovation is essential right now. The author of this book, Erik Brynjolfsson, recommends creative entrepreneurship as being the viable solution for everyone. Everyone can become an entrepreneur and creates small businesses everywhere around the world. Hopefully, the ingenuity of the human race will create the 3rd industrial revolution and jobs will be created. If not, technology will continue to displace jobs, and major shocks in the economy are to come over the next few decades. There needs to be a new plan to adapt to the changes that are taking place in our world either way.

On Education

By: Luc Shay and Fiona Maguire.
Edited by: Michael Kopelman.

A recent article in The Economist, “How Will the Candidates Tackle Schools and Colleges?” ties back to our studies on education. Until the 1970’s, the United States was a world leader in education, but has since fallen. Government policy, societal changes, and the way we value education has evolved. These changes have warped the system we have today.
The US began by building an educational system focusing on children. In the mid-1800s, the Common School movement emphasized the basics of education and led way in the early 1900’s for the focus of education to move from common schools to high schools. This is where students poured in seeking skills that would benefit them in their jobs. During this movement, the US surpassed Europe in education by allowing their system to be open for all. After World War II, higher education expanded to include college as soldiers returning home competed for skilled jobs. College became popular as people realized better education equaled an increase in yearly income at a skilled job.

Sixty years later, students still attend college with the goal of getting educated to obtain a higher paying job. However, in education today, not only are the students more competitive, but so are the schools. Now, schools are focusing more their reputation rather than educating their students.

With the expansion of the system, the government should have the power to redirect schools to focus on their students’ education. However, due to the government size and amount of money it deals with, they are unable to focus on specific issues like education. In the article, both Barack Obama and Mitt Romney discuss their views on how education should be reformed. Even though they stress the importance of education It is likely that the government will not address this issue. This is because of more demanding issues, leaving education an unresolved problem.
Government involvement has the potential to improve the quality of education in America, but has in the past created problems in the system. The government’s role in education has changed drastically over time. The government’s size, power, and involvement has created many improvements, but has also weakened other areas.

The government has hurt education through its prevalent approach of setting up laws and regulations that protect bad teachers. Many teachers are inadequate to begin with and continuously diminish the profession because government makes it difficult for them to be fired. Previously it was much easier to replace a bad teacher, but due to these increased laws this is becoming harder and harder to accomplish.
Likewise, where laws protect bad teachers, they also protect bad students. In the past, some people were discriminated against and not allowed into educational institutions. Today, the power of government has been used in reverse, as institutions must admit people based on their background. Extending education to more people is an improvement, but has become counter-productive in terms of creating a better educational system, as people are admitted to create diversity rather than on the student’s abilities.

The government’s efforts to make education more affordable may actually achieve the opposite. When the government helps pay for education, institutions have no incentive to keep costs low and instead raise prices, knowing that government will pay.

In many cases the road to bad education has been paved with good intentions. This article describes ways in which each candidate may improve the system. However we believe that maybe the best thing would be for them to simply back off. If the government was able to get out if the way, then America could regain its position as an educational leader. By strangling the nation with laws, regulations, and big government education is in a constant decline.

The Cost of the Baby Boom

Image credit.

By: Luke Martin and Janaki Patel.
Edited by: Luke Rebecchi.

The baby boomer generation experienced unprecedented growth in labor supply, education levels, and income throughout their lifetime. And while the economy surged whilst they dominated the workforce, as the baby boomers near retirement, the economy has stagnated. The accumulation of massive debt looms over the heads of future generations.

While the majority of the population will agree - and politicians would be weary to argue - the baby boomers have worked hard to deserve paybacks in Social Security, Medicare, and other entitlement programs but the arithmetic for the entitlement programs and the tax schemes cited in the article simply do not add up. The monetary contributions the boomers have made are $333 billion dollars less than the amount of benefits they will receive through the government, leaving the current and future generations to pay the bill for the boomers’ benefits. In terms of the forthcoming election, this puts both candidates in a very uncomfortable position, since they know they must reduce costs and grow the economy, while simultaneously appeasing the boomers, since they currently make up 17% of the voting base. On the issue of Social Security, Romney claims that nothing will change for those at or near retirement. Nor will he make any changes to Medicare. However, in the future he hopes to raise the retirement age to account for the costs of longevity. Obama has similarly stated that he will not slash Social Security benefits for those near retirement, nor for future generations. In terms of elderly healthcare needs, he plans to cut $716 billion in Medicare costs and decrease prescription plan costs. This pre-election attitude preceding makes clear that both parties must keep seniors’ entitlements in mind, but that they must also address the economic problems associated with the senior benefits. The most alarming part of the situation is that even if the candidate who is in office next term is able to keep costs somewhat the same or even attempt to decrease them for seniors, by 2030, population statistics illustrate that 26% of the voting public will be seniors, which will put even more entitlements on the already strained system.

The burden of paying for the entitlement programs of the newly retired boomers, will fall squarely on the shoulders’ of their children. The most interesting part of the unsustainability of these programs is that during the time when the majority of these senior benefit plans had originated; Social Security as a part of the New Deal, and Medicare establishment 1965, the tax rate was much higher than it is currently. In 1981, the average federal tax rate for the median American household was 18% - as of 2011, the tax rate is just over 11%. This is particularly problematic because the majority of the American public want entitlements, but tax increases for the American public are generally out of the question in order to attain such benefits, making it very difficult for there to be any type of consensus.

Given the upcoming election, the influence of the baby boomers is vital. Both candidates seem to be appealing to the boomers, insisting that they will receive the full benefits of entitlement programs they have been promised since they entered the workforce. But it is generally agreed this is mathematically impossible. It is likely that both candidates are utilizing stylized facts when touting their plans regarding Medicare and Social Security. Drastic structural changes must be taken to ensure the sustainability of entitlement programs for baby boomers without piling more debt on top of the deficit for future generations to pay.

Unlucky Lockout Losers

Image credit: CBSsports.com.

By: Michael Kopelman and Jeffrey Taylor.
Edited by: Samantha Weinberg.

Another NHL lockout is in full force once again. While most of the attention of strikes in sports has been focused on NFL referees, the NHL has lost regular season games for the second time in seven years. While hockey, or sports in general, might be of little to no interest to many, the economic ramifications of a sports lockout can be devastating on a community.

Many of us, if not all, believe that professional athletes nowadays are extremely overpaid; even if you believe that these players are highly over paid, they are huge revenue generators for their cities. In most successful NHL cities, such as Boston and Philadelphia, researchers estimate that each missed game will cost the city upwards of one million dollars in revenue in the areas surrounding the arenas in the various bars, restaurants, and stores. As each NHL team plays 41 home games, the lockout will have a potentially devastating effect on a local economy (losing around 40 million in revenue). Besides the loss in revenue, one must mention the loss of jobs this lockout will create, including reduced staff at the arena and surrounding establishments. A third effect is the lost income tax paid by the players on their exorbitant salaries: for example, in Philadelphia, each player on both the home and away team must pay city income tax pro rata for their annual salary for each game played in the city.

The question at this point becomes: will these fans who attend the games, frequent local bars, or order in food with family and friends continue to spend these dollars on other events in the city, such as the Kimmel Center for opera shows in Philadelphia. Since a lot of these people tend to spend their money on activities related to the hockey games, logic holds that most of these fans will probably not spend these dollars on other activities around the stadiums, since they have no reason to be down in that area.

One more issue to consider is the fate of the coaches and other team staff who are not involved in the negotiations between the NHL Players Association and the NHL Commissioner, Gary Bettman, his office, and the owners. They will not be receiving their salary, and will not have as much money to spend in their respective areas, without any way to affect the outcome of the negotiations.

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