September 26, 2020

The Education Revolution: Faltering Economy in China Dims Job Prospects for Graduates

Businesses say they are swamped with job applications but have few positions to offer as economic growth has begun to falter. Twitter-like microblogging sites in China are full of laments from graduates with dim prospects.

The Chinese government is worried, saying that the problem could affect social stability, and it has ordered schools, government agencies and state-owned enterprises to hire more graduates at least temporarily to help relieve joblessness. “The only thing that worries them more than an unemployed low-skilled person is an unemployed educated person,” said Shang-Jin Wei, a Columbia Business School economist.

Lu Mai, the secretary general of the elite, government-backed China Development Research Foundation, acknowledged in a speech this month that less than half of this year’s graduates had found jobs so far.

Graduating seniors at all but a few of China’s top universities say that very few people they know are finding jobs — and that those who did receive offers over the winter were seeing them rescinded as the economy has weakened in recent weeks.

“Many companies are not expanding at all, while some of my classmates have been hired and fired in the same month when the companies realized that they could not afford the salaries after all,” said Yan Shuang, a graduating senior in labor and human resources at the Beijing Institute of Technology.

Ms. Yan said she had been promised a job at a sports clothing company over the winter. But the company canceled all hiring plans in March as the economy weakened.

China quadrupled the number of students enrolled in universities and colleges over the last decade. But its economy is still driven by manufacturing, with a preponderance of blue-collar jobs. Prime Minister Li Keqiang personally led the cabinet meeting, on May 16, that produced the directive for schools, government agencies and state-owned enterprises to hire more graduates, a strategy that has been used with increasing frequency in recent years to absorb jobless but educated youths.

“Any country with an expanding middle class and a rising number of unemployed graduates is in for trouble,” said Gerard A. Postiglione, the director of the Wah Ching Center of Research on Education in China at Hong Kong University.

A national survey released last winter found that in the age bracket of 21- to 25-year-olds, 16 percent of the men and women with college degrees were unemployed.

But only 4 percent of those with an elementary school education were unemployed, a sign of voracious corporate demand persisting for blue-collar workers. Wages for workers who have come in from rural areas to urban factories have surged 70 percent in the last four years; wages for young people in white-collar sectors have barely stayed steady or have even declined.

Economists have long estimated that the Chinese economy needs to grow 7 or 8 percent annually to avoid large-scale unemployment. But that rule of thumb has become less reliable in recent years as the labor market has split.

Relatively slow growth is still creating enough jobs to provide full employment for the country’s blue-collar workers. But much faster growth may be needed to create white-collar jobs for the graduates pouring out of universities.

The International Monetary Fund predicts the Chinese economy will grow 7.75 percent this year — slower than the growth of 10 to 14 percent before 2008, but still a much faster pace than in the West. The main problem for China lies in the sheer growth in graduates; the United States produces three million graduates a year, while China has increased its annual number of graduates by more than five million in a single decade.

Keith Bradsher reported from Hong Kong and Sue-Lin Wong from Beijing. Chris Buckley contributed reporting from Hong Kong, and Mia Li contributed research from Beijing.

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The Boss: Hearing Health Foundation’s Chief, on Never Turning Away

Having a family member with a disability was not easy. I saw how hard it was to navigate in a wheelchair, and that people were often condescending. They’d address my father when they had a question for my mother. She’d tell them, “You can speak to me.”

I also see that happening today to those with hearing loss. People sometimes think that someone who can’t hear has trouble processing information, so they address someone else instead.

I majored in religion at Temple University. In my junior year, I studied in Rome. It was one of the best experiences of my life. I remember how my classmates and I would go to an all-night bakery for chocolate croissants that had just come out of the oven.

After graduating in 2000, I worked at a synagogue for a year as the executive assistant to the clergy, then moved to New York University as special events manager and coordinator for the dean of the College of Arts and Science. While at N.Y.U., I enrolled for a master’s in education. I learned from the dean that the way to be a fund-raiser was to find out what was meaningful to people invested in our community and to get them more involved. Asking for money goes only so far.

In 2006, I went to work for Bear Stearns as a fixed-income corporate marketing and events manager for a year. I wanted to work for a nonprofit group, and in 2007 I was offered the position of chief operating officer at the Hearing Health Foundation. I was promoted to executive director in 2010.

Until September 2011, we were known as the Deafness Research Foundation. But we wanted our name to cover the full range of hearing loss, as opposed to how people thought of deafness years ago. Most of our constituents would probably say that they have hearing loss or hearing impairment but would not say that they’re deaf.

We fund hearing research. Our emerging research grants program pays for research at a junior level. We hope that two years after receiving our help and collecting their data, researchers will receive funding from the National Institute on Deafness and Other Communication Disorders. We also hope to encourage scientists to enter the field of hearing research.

My grandmother had terrible difficulty hearing but refused to get a hearing aid. When talking to her, everyone in the family yelled, trying to be heard. I remember holiday dinners when she’d deliberately look down and stare at her hands.

Once I tried to start a conversation with her, but she said, “Honey, it’s just too hard for me to hear with all this going on.” I realized that she avoided making eye contact so that no one would try to engage her in conversation. It broke my heart. I hear such examples again and again when I talk to people with hearing loss.

In the 1960s, we funded some of the initial studies on cochlear implants, and last year we started the Hearing Restoration Project, in which researchers are working on a cure for hearing loss. We’ve learned that chickens can recover their ability to hear and that mice can recover partial hearing. We believe that scientists can achieve the same results for people.

As told to Patricia R. Olsen.

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Economix Blog: Gaming the System



Dollars to doughnuts.

Inside Higher Ed had a fascinating article a couple days ago about some college students who unanimously boycotted their final exam and all got A’s under a grading curve loophole. It’s a great example of game theory at work.

In several computer science courses at Johns Hopkins University, the grading curve was set by giving the highest score on the final an A, and then adjusting all lower scores accordingly. The students determined that if they collectively boycotted, then the highest score would be a zero, and so everyone would get an A. Amazingly, the students pulled it off:

The students refused to come into the room and take the exam, so we sat there for a while: me on the inside, they on the outside,” [Peter Fröhlich, the professor,] said. “After about 20-30 minutes I would give up…. Then we all left.” The students waited outside the rooms to make sure that others honored the boycott, and were poised to go in if someone had. No one did, though.

Andrew Kelly, a student in Fröhlich’s Introduction to Programming class who was one of the boycott’s key organizers, explained the logic of the students’ decision via e-mail: “Handing out 0’s to your classmates will not improve your performance in this course,” Kelly said.

“So if you can walk in with 100 percent confidence of answering every question correctly, then your payoff would be the same for either decision. Just consider the impact on your other exam performances if you studied for [the final] at the level required to guarantee yourself 100. Otherwise, it’s best to work with your colleagues to ensure a 100 for all and a very pleasant start to the holidays.”

This is an amazing game theory outcome, and not one that economists would likely predict.

In this one-off final exam, there are at least two Bayesian Nash equilibria (a stable outcome, where no student has an incentive to change his strategy after considering the other students’ strategies). Equilibrium #1 is that no one takes the test, and equilibrium #2 is that everyone takes the test. Both equilibria depend on what all the students believe their peers will do.

If all students believe that everyone will boycott with 100 percent certainty, then everyone should boycott (#1). But if anyone suspects that even one person will break the boycott, then at least someone will break the boycott, and everyone else will update their choices and decide to take the exam (#2).

The problem is that Nash equilibrium theory alone doesn’t tell us what the students are more likely to do. Economists would say that the first equilibrium, where no one takes the exam, is unlikely to result because it is not “trembling hand perfect,” an idea that helped win Reinhard Selten win the Nobel Memorial Prize in Economics.

The idea is to think about what would happen if one of the players believes that there’s a small probability that a mistake will occur and someone’s hand will “tremble” and play a different strategy.

The second equilibrium — the one where everyone takes the test — is trembling-hand perfect, in that if someone makes a mistake and doesn’t take the test when she means to (she sleeps through the exam, for example), everyone else continues with their strategy to keep taking the exam.

If someone makes a mistake under equilibrium #1 — in which no one takes the test — and takes the test even though he doesn’t believe others will (and knowing that it won’t improve his grade), then that equilibrium unravels and everyone decides to take the test after all.

Even more impressive to me than the students’ cooperation is the professor’s decision to honor the original grading system and give everyone an A. I guess he knew, though, that he’d made a poorly designed grading system and that the students had outsmarted it. According to Inside Higher Ed, the professor is modifying the grading scheme going forward.

“I have changed my grading scheme to include ‘everybody has 0 points means that everybody gets 0 percent,’” Professor Fröhlich told Inside Higher Ed, “and I also added a clause stating that I reserve the right to give everybody 0 percent if I get the impression that the students are trying to ‘game’  the system again.”

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You’re the Boss Blog: A Start-Up Tries to Eliminate ‘Food Deserts’

Carrie Ferrence, co-founder, inside Stockbox prototype in Seattle's Delridge neighborhood.Patrick Robinson — West Seattle HeraldCarrie Ferrence, co-founder, inside the Stockbox prototype in Seattle’s Delridge neighborhood.


The adventure of new ventures.

Last year, M.B.A. students at the Bainbridge Graduate Institute in Seattle began hunting for a business-based solution to the problem of “food deserts” — low-income neighborhoods lacking access to healthful, affordable food. (More than 23 million Americans live in such places, according to the Department of Agriculture, which maps them here.)

The result? Stockbox Grocers, a start-up that converts reclaimed shipping containers into miniature grocery stores and operates them out of parking lots in under-served communities. Its slogan: “Good food, where you live.”

Founders: Former classmates Carrie Ferrence, 33, and Jacqueline Gjurgevich, 32, registered Stockbox as a limited liability corporation in July, a month after completing their graduate studies. Now they’re both working full-time, handling everything from securing permits to cultivating community relationships and selling veggies.

Employees: None.

Location: Seattle.

Pitch: Stockbox intends to promote access to fresh food — and turn a profit — by blending the dependability of brick-and-mortar shops with the low overhead of pop-up retailers and food trucks. “We take away the high set-up cost,” Ms. Ferrence said. “We take away the high ongoing operating cost, and we focus on the inventory that moves most efficiently. Most families, most communities, buy the same five to 20 items, week in and week out, so they only need to go to a huge grocery store once or twice a month to get the remaining items.”

For that reason, Stockbox focuses on perishables like juice, milk, dairy, meat, produce and other staples. Not only does this limited range of heavy-turnover items help a whole market fit in a shipping container, Ms. Ferrence believes it can boost profitability, too. “Huge grocery stores are fairly inefficient,” she said. “They depend on 15 percent of their inventory to carry the profitability of the rest of their store.”

Traction: Stockbox took second place at the University of Washington Business Plan Competition in May and also won the contest’s “best service/retail” category, earning a total of $12,500 in prize money. On Sept. 12, the company opened a temporary prototype selling more than 300 types of items in the Westhaven Apartments parking lot in Delridge, a Seattle neighborhood where grocery options are limited.

“No one’s really put a grocery store in a parking lot before,” Ms. Ferrence said. “We wanted to be able to bring it to life, show people what it would really look like.” The last day of the eight-week pilot is scheduled to be Nov. 7. Stockbox plans to open its first permanent store this spring in one of two Seattle neighborhoods, Delridge or Skyway. Plans are to open two to four stores next year.

Meanwhile, Ms. Ferrence and Ms. Gjurgevich have received calls from entrepreneurs in more than half a dozen cities — including Detroit, New Orleans, San Francisco, and Washington — most of them looking to franchise the idea. Stockbox plans to open at least its first 10 to 20 stores itself but is considering franchising after that. “People are thirsty for this,” Ms. Ferrence said. “It’s been great to see that people look at the idea, they see the business, and they see a way for it to work where they live as well.”

Revenue: The company does not release revenue figures. The Delridge prototype began collecting modest revenue in September and gets between 20 and 25 customers in an average half-day, Ms. Ferrence said. Projections are for the permanent stores to take in $600,000 a year in revenue with a profit margin, eventually, of between 5 percent and 8 percent.

Financing: Stockbox’s $12,500 business plan competition winnings became seed money. A Kickstarter drive that closed Sept. 15 garnered $20,129 from 195 contributors. Eighty percent – or about $20,000 — of the company’s costs for refrigeration and initial marketing efforts were covered by Healthy Foods Here, a local initiative funded in part by the Department of Health and Human Services.

To get their first permanent store off the ground this spring, the co-founders plan to rely on a mix of grants and bank loans. They said they also hope to open a couple more stores in 2012, for which they’ll seek angel investments. “Our models do have us being financially sustainable, but we’re not a tech start-up, we’re not going to have huge returns,” Ms. Ferrence said. “We’re looking for investors who want to support something that is giving back to the community, so they don’t need to have the 10-times return.”

Marketing: The partners have been relying primarily on a grassroots, do-it-yourself effort to get the word out. They’ve been attending community group meetings to forge relationships, posting fliers, getting supporters to put up yard signs and distributing coupons.

Competition: Most food deserts aren’t completely barren. Residents are accustomed to shopping at convenience stores, which may carry some staples but prioritize alcohol, cigarettes, lotto tickets, soda and junk food over components for healthful meals. “It doesn’t feel good to take your kids into those stores, but those are the established places to shop in the community,” Ms. Ferrence said. “Similar to any retailer, we’re competing against what people have been using for many years.”

Stockbox will also compete with big grocery stores, but those are typically a couple of miles away and inconvenient to reach by public transportation.

Challenge: Getting consumers to change their habits. At the prototype, Ms. Ferrence said, “we would see people standing 20 feet away in the parking lot, just staring at the store. We had to invite them in. They just had no concept of what was going to be inside.” To win repeat customers, she added, Stockbox will have to break down the idea that a “real” grocery store needs to be 30,000 square feet and carry 50 types of toothpaste.

What do you think? Can Stockbox serve its community and climb into profitability? And what’s the best way for its co-founders to help shift shopper behavior?

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The Class That Built Apps, and Fortunes

ALL right, class, here’s your homework assignment: Devise an app. Get people to use it. Repeat.

That was the task for some Stanford students in the fall of 2007, in what became known here as the “Facebook Class.”

No one expected what happened next.

The students ended up getting millions of users for free apps that they designed to run on Facebook. And, as advertising rolled in, some of those students started making far more money than their professors.

Almost overnight, the Facebook Class fired up the careers and fortunes of more than two dozen students and teachers here. It also helped to pioneer a new model of entrepreneurship that has upturned the tech establishment: the lean start-up.

“Everything was happening so fast,” recalls Joachim De Lombaert, now 23. His team’s app netted $3,000 a day and morphed into a company that later sold for a six-figure sum.

“I almost didn’t realize what it all meant,” he says.

Neither did many of his classmates. Back then, Facebook apps were a novelty. The iPhone had just arrived, and the first Android phone was a year off.

But by teaching students to build no-frills apps, distribute them quickly and worry about perfecting them later, the Facebook Class stumbled upon what has become standard operating procedure for a new generation of entrepreneurs and investors in Silicon Valley and beyond. For many, the long trek from idea to product to company has turned into a sprint.

Start-ups once required a lot of money, time and people. But over the past decade, free, open-source software and “cloud” services have brought costs down, while ad networks help bring in revenue quickly.

The app phenomenon has accentuated the trend and helped unleash what some call a new wave of technology innovation — and what others call a bubble.

Early on, the Facebook Class became a microcosm of Silicon Valley. Working in teams of three, the 75 students created apps that collectively had 16 million users in just 10 weeks. Many of those apps were sort of silly: Mr. De Lombaert’s, for example, allowed users to send “hotness” points to Facebook friends. Yet during the term, the apps, free for users, generated roughly $1 million in advertising revenue.

Such successes helped inspire entrepreneurs to ditch business plans and work on apps. Not all succeeded, but those that did helped to fuel the expansion of Facebook, which now has nearly 700 million users.

Venture capitalists also began rethinking their approach. Some created investment funds tailored to the new, bare-bones start-ups.

“A lot of the concepts and ideas that came out of the class influenced the structure of the fund that I am working on now,” says Dave McClure, one of the class instructors and founder of 500 Startups, which invests in lean start-ups. “The class was the realization that this stuff really works.”

Nearly four years later, many of the students have learned that building a business is a lot harder than creating an app — even an app worthy of an A+.

“Starting a company is definitely more work,” says Edward Baker, who was Mr. De Lombaert’s partner in the class and later in business. The two have founded, a social networking start-up.

Still, many students were richly rewarded. Some turned their homework into companies. A few have since sold those businesses to the likes of Zynga. Others joined hot start-ups like RockYou, a gaming site that at the time was among the most successful Facebook apps.

The Facebook Class changed Mr. De Lombaert’s life. His team’s app, Send Hotness, brought in more users and more money faster than any other in the class. And its success attracted the attention of venture capitalists.

“The class, more than anything, set the tone for us to try to start something big,” says Mr. Baker, 32,’s C.E.O.

When the Send Hotness app began to take off, Mr. Baker encouraged Mr. De Lombaert to treat himself to a new car. Mr. De Lombaert settled for a laptop. (He also put some money aside to help to pay his Stanford tuition.) They eventually sold the app to a dating Web site.

Facebook did not actively participate in the Stanford class. But some of its engineers attended sessions, and it benefited from the success of the students’ apps. “It really felt like an incubator,” says David Fetterman, a Facebook engineer who helped develop the applications platform.

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