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