January 27, 2023

Economix Blog: Nancy Folbre: What Makes Teachers Productive?


Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

If you watch the documentary “Waiting for Superman” or read Steven Brill’s “Class Warfare: Inside the Fight to Fix America’s Schools,” you will learn that many advocates of school reform think they know how to increase teacher productivity: Rate teachers according to their students’ performance on standardized tests and fire those who don’t make the grade.

But economic theory suggests several reasons why this approach will probably backfire.

Today’s Economist

Perspectives from expert contributors.

Scores on standardized tests are not an accurate measure of success in later life, because they don’t capture important aspects of emotional intelligence, such as self-control and ability to collaborate with others. The Nobel laureate James Heckman describes noncognitive traits as a crucial component of human capital.

Indeed, research by the economists Eric Hanushek and Steven Rifkin — both advocates of school reform — indicates that neither teachers’ own test scores when they were students nor their educational credentials explain much of the variation in their students’ outcomes. Why judge teachers narrowly on a set of outcomes that are not even predictive of their own success?

The most highly promoted evaluation schemes statistically analyze year-to-year changes in individual test scores, yielding an estimate of teacher “value added.” This approach helps control for differences among students for which teachers shouldn’t be held accountable. Still, the results show a high level of random variation and high error rates. Teacher rankings often vary from class to class and year to year.

Too much pressure to improve students’ test scores can reduce attention to other aspects of the curriculum and discourage cultivation of broader problem-solving skills, also known as “teaching to the test.” The economists Bengt Holmstrom and Paul Milgrom describe the general problem of misaligned incentives in more formal terms – workers who are rewarded only for accomplishment of easily measurable tasks reduce the effort devoted to other tasks.

Advocates of intensified teacher assessment assert that current practices leave too many incompetent or ineffective teachers in place. But many schools suffer from the opposite problem: high teacher turnover that reduces gains from experience and increases the costs of personnel management. As Sara Mosle pointed out in a recent review of Mr. Brill’s “Class Warfare,” about 40 percent of teachers in New York City quit after three years.

Teaching is an increasingly demanding job. Yet its average weekly pay has declined in recent years compared with the pay of other college graduates. Sweeping budget cuts have led to layoffs and worsened working conditions. Teachers in some school districts in Texas are now assigned janitorial work.

In principle, “pay for performance” based on student test scores (rather than sweeping classrooms) could help attract better teachers. In practice, however, most people don’t know whether they will be good teachers until they have given it a try. New teachers need support, encouragement and mentoring to help develop their skills. High-stakes assessments that force them into competition with one another discourage collaboration.

In a fascinating study of the effect of supportive social networks on teacher productivity, Carrie Leana of the Graduate School of Business at the University of Pittsburgh found that both the amount of time that teachers spent talking to peers and teacher stability had positive impacts on student outcomes. In other words, the development of “social capital” contributed to the productivity of human capital.

All these economic factors help explain why Mr. Brill’s version of education reform should get a low grade.

Effective schools require effective teacher assessments. But efforts to improve educational accountability have a long history, thoughtfully analyzed in a new book, “High-Stakes Reform: the Politics of Educational Accountability,” by my University of Massachusetts colleague Kathryn McDermott. The most important lesson, she concludes, is not that we should stop trying to measure performance but should “resist pressure to oversimplify and reach for all-purpose carrot-and-stick combinations.”

If we want super teachers, we need to be super careful about how we assess them.

Article source: http://feeds.nytimes.com/click.phdo?i=d1737aef449c53e41e7a3070134ef14f

Economix Blog: Nancy Folbre: Public Job Creation


Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

President Obama has signaled a new commitment to combating unemployment, with a major speech planned for later this week. The big question is whether his battle plan will go beyond indirect means of encouraging long-run employment growth (such as tax incentives) to include public job-creation programs that could significantly lower unemployment over the next year.

Today’s Economist

Perspectives from expert contributors.

His Republican critics take a “been there, done that, didn’t work” approach to economic stimulus. But President Obama’s stimulus plan, the 2009 American Recovery and Reinvestment Act, relied primarily on tax cuts and increases in aid to the states, shying away from direct federal job-creation efforts that were considered politically risky. (Jared Bernstein, chief economic adviser to Vice President Joseph R. Biden Jr. at the time, provides a clear account of the administration’s rationale).

The stimulus helped the economy toward recovery. Increased aid to the states temporarily buffered the impact of state and local budget cuts. But over all, the Obama administration has been characterized by public job elimination rather than creation. The latest estimates of government employment (preliminary estimates for July 2011) show a significant decline since 2008, to about 22 million from about 22.5 million.

This decline in public employment will inevitably be intensified by further cuts in public spending and has particularly ominous implications for women, who make up a disproportionate share of state and local payrolls.

As Eileen Appelbaum points out, men were harder hit by job losses in 2009 than women but also faster to regain jobs as private sector hiring revived. A recent report from the Institute for Women’s Policy Research provides a vivid, up-to-date graph of these trends.

As of August 2011, the seasonally adjusted unemployment rate for men 16 and older was 9.6 percent; that for women, 8.5 percent. A new Economic Policy Institute report notes that persistently high unemployment has lowered the earnings and family income of a wide swath of American families.

Democrats to the left of President Obama have long argued the need for direct job creation through new federal programs, targeted transfers to state and local governments or both. Robert Reich, who served as secretary of labor under President Clinton, has offered a model speech along with a model plan.

The National Urban League, a prominent civil rights organization, has outlined a 12-point proposal, Putting America Back to Work.

Representative George Miller, Democrat of California, has introduced several legislative proposals, most recently the Local Jobs for America Act. Money would go directly to eligible local communities and nonprofit community organizations that would decide how best to use them. The act would also underwrite approximately 50,000 additional private-sector on-the-job training positions to help businesses put people back to work.

Representative Jan Schakowsky, Democrat of Illinois, has sponsored the Emergency Jobs to Restore the American Dream Act, which puts more explicit emphasis on money for schools, health care and community service. This program would be fully financed through separate legislation creating higher tax brackets for millionaires and billionaires, elimination of subsidies for major oil companies and closing of corporate tax loopholes that encourage offshoring of American jobs.

In a post last year, I described several specific proposals to create jobs in home-care services, including a voucher program to help subsidize the cost of home aides for the elderly, moving them out of nursing homes and back to their own homes.

Last week, Heidi Hartmann, president of the Institute for Women’s Policy Research, mobilized an online discussion of participants in the Womens Scholars Forum (including me). The resulting briefing paper summarizes a number of additional ideas, such as expanding the length of the school day and school year to improve educational outcomes and developing an Urban Conservation Corps.

The briefing paper emphasizes a longstanding concern of women’s organizations: the need to make sure that “women get their fair share of jobs that are nontraditional for women, for example technical and craft jobs in construction, transportation, and green energy and that are supported by federal dollars or federally guaranteed loans.”

A good example of targeted spending in this area is a small grant that the Women’s Bureau of the Department of Labor recently awarded to Austin Community College in Texas to recruit women to a renewable energy training program.

A strong public job-creation effort could help qualified graduates of programs like these find jobs improving the energy efficiency of schools and other public buildings. The employment impact would be both quicker and more reliable than subsidized loans or tax breaks for renewable energy companies.

Right now, the unemployed themselves represent an important form of renewable energy that is going to waste. That’s why President Obama should take a close look at proposals to put them to work in a variety of publicly financed jobs.

Article source: http://feeds.nytimes.com/click.phdo?i=53fcc2ca3dbac420e4a9f3c930295a43

Economix Blog: The Credit Rating War


Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

The continuing brouhaha over Standard Poor’s downgrade of the United States government’s credit rating offers a powerful lesson in institutional economics.

Today’s Economist

Perspectives from expert contributors.

In standard economic models of “efficient markets,” we can all easily obtain the accurate information we need to make good decisions. In the real world, we often cannot, in part because so much mis- and disinformation competes for our attention.

Many economic actors have an incentive to lie and cheat, and it is often hard to figure which ones actually do. Markets work best in an institutional environment that creates strong incentives for everyone to tell the truth.

Whether you call this institutional environment law and order or, more specifically, regulation, it’s not easy to design because it is so easily corrupted. Those who anticipate the largest potential gains or losses typically dominate the decision-making process.

Some observers, as well as some representatives of the Obama administration, view the Standard Poor’s downgrade as a strategic effort to retaliate against regulatory changes that would adversely affect the company as well as a political intervention in the deficit-reduction debate.

Their fury was intensified when John Bellows, acting assistant Treasury secretary for economic policy, discovered a significant informational error (a miscalculation amounting to $2 trillion) in Standard Poor’s initial explanation of the rating change. The rating agency declined to change its assessment after the error was pointed out.

Most Republicans interpreted the rating change as support for their insistence on deeper budget cuts, although some were perhaps chastened by Standard Poor’s emphasis on a crisis of governance induced by resistance to compromise.

Yet there is widespread bipartisan agreement that our dependence on the current credit ratings system is dysfunctional.

Ratings provide a far simpler and more comparable measure of creditworthiness than an in-depth analysis of every company’s balance sheet can offer. Reports from Standard Poor’s, Moody’s and Fitch, the three most prominent agencies recognized as nationally recognized statistical rating organizations help guide both individual and institutional investment decisions.

But the ratings that these companies provide are often incredibly misleading. Their epic disregard of mortgage-backed derivative scams contributed to the near-collapse of the financial sector in 2008.

In general, ratings tend to follow the market rather than to inform it and may even worsen information problems, by giving investors a false sense of security. Rating companies argue that they can’t be held legally liable for mistakes, because this would infringe on their free speech (an argument that will eventually be tested in court).

These failures are clearly linked to a basic flaw in institutional design: credit agencies receive payment from the very companies they rate, not the potential buyers who seek information about those companies.

Imagine baseball umpires who could be hired and fired by one team, movie reviewers paid entirely by Hollywood or restaurant critics who depend on the chefs they evaluate for every meal. All these arrangements violate a basic economic principle that incentives should be aligned to encourage rather than discourage honesty.

Conservatives sometimes play down this issue, emphasizing instead that government regulation has squelched competition by requiring many institutions to meet targets for portfolio composition based on ratings by the top three firms.

But these two problems are not mutually exclusive. The links between them have long been emphasized by scholars like Frank Partnoy, who published a detailed law review article on the topic in 1999.

It’s not regulation per se that causes the problem, but bad regulation that could, in principle, be fixed. Thanks in part to the efforts of Senator Al Franken, Democrat of Minnesota, the Dodd-Frank Wall Street Reform and Consumer Protection Act outlines a number of specific policies that would diminish the influence of the top three rating firms.

These policies won’t solve the misinformation problem, but they could substantially reduce it. (For a more detailed analysis of this issue, see this working paper by my University of Massachusetts colleagues Gerald Epstein and Robert Pollin.)

Of course, these policies will also reduce the profitability of the rating agencies. And implementation of Dodd-Frank as a whole faces enormous resistance, manifest in Congressional maneuvers to starve the Securities and Exchange Commission of money necessary for its effective enforcement.

The credit rating war is likely to escalate. Large institutional investors and hedge funds, with their hefty research departments, will be able to rise above the fray. Small investors trying to garner the information they need to make intelligent investments in stocks and bonds will continue to suffer casualties.

As for ordinary workers — they are just part of the supply chain. The business community has already lowered their rating far below investment grade.

Article source: http://feeds.nytimes.com/click.phdo?i=3372b44a26aecab4fb2b5aa8c24d21f8

Economix: Vermont’s Move Toward Single-Payer Health Insurance

Today's Economist

Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

New England seems to be the testing ground for health insurance reform. The Affordable Care Act, now often called Obamacare by its critics, was modeled on health-insurance mandates put into place in Massachusetts under the governorship of Mitt Romney, a Republican, who announced last week that he was formally seeking his party’s presidential nomination in 2012.

Now Vermont has passed legislation moving the state toward a Canadian-style universal, single-payer health-insurance system, to be phased in alongside national health-care changes. The plan relies heavily on the prospect of waivers that will allow it to reallocate some federal Medicaid funds and on other sources of money that have not yet fully specified.

The new law calls for establishment of a five-member board to set reimbursement rates for health-care providers and streamline administration into a single, unified system called Green Mountain Care that will cover all Vermont residents. In the long run, it aims to replace fee-for-service payment with a system that will pay health-care providers a specific amount of money to care for a specific population, providing incentives for preventive care.

The basic outlines represent a left-wing alternative to the health-insurance changes being put in place under the Obama administration, with a stronger commitment to equitable public financing, a single insurance pool and less reliance on the market.

Why has Vermont moved into the vanguard? The possible explanations range from the structural to the personal.

Vermont has less income inequality and racial and ethnic diversity than Massachusetts (despite increasing inequality and diversity in recent years) and probably has higher levels of “social capital.”

It is a small state, with a population of less than 650,000. Private health-insurance companies have less to lose in Vermont than elsewhere, and their lobbyists may have been distracted by the national debate.

Single-payer advocates organized effectively around a “health care is a human right” campaign. The Vermont Workers’ Center, affiliated with the national organization Jobs With Justice, played a vital role in building a robust political coalition in support of change.

Vermont has long been represented in Congress (first as a representative, currently as a senator) by Bernard Sanders, who calls himself a democratic socialist and is a longtime advocate of universal single-payer health insurance.

Gov. Peter Shumlin, a successful small-business owner, was elected in November after he made a strong case during his fall campaign for the positive impact that single-payer insurance could have on small businesses and job creation.

All these factors enhanced the political impact of economic evidence, which shows that single-payer health insurance can create a simpler, more streamlined payment system, cut administrative costs and expand access to high-quality care.

In testimony before the Vermont State Legislature, William Hsaio, a professor at the Harvard School of Public Health, described his experience designing single-payer health-care systems in several countries, most recently Taiwan. He also presented the results of a detailed analysis of the health-care system of Vermont, providing estimates of potential savings from three different strategies and making a strong case for the single-payer option. (A report written by Professor Hsaio, Steven Kappel and Jonathan Gruber provides more detail.)

My University of Massachusetts Amherst colleague Gerald Friedman, active in efforts to promote a single-payer system in this state, estimates that similar changes in Massachusetts could sharply reduce the cost of billing and processing insurance claims, generating savings of 17 percent. As he puts it, a universal single-payer approach is not just more affordable; in the long run, it may be the only affordable option.

The current Massachusetts health-insurance system, like that emerging on the national level, requires residents to buy health insurance and provides subsidies only to low-income families. As a result, it leaves many people vulnerable to increases in the cost of insurance and may also create political resentments among those with incomes just above the subsidy eligibility level, who are forced to buy insurance they can ill afford.

The system is not “wildly unpopular,” as some conservatives assert, but it’s not wildly popular either.

As Vermont moves forward with its plan, a fascinating standard of comparison should emerge. The Canadian single-payer system grew out of successful innovations in the province of Saskatchewan, which led other provinces to follow suit. Here in Massachusetts, many of us are looking hopefully over our shoulder at the Green Mountain State.

Article source: http://feeds.nytimes.com/click.phdo?i=26ee9a2738ccc01548f1a36373d82abd

Economix: Super Sad True Jobs Story

Today's Economist

Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

What happens when the most successful no longer need the less successful? In Gary Shteyngart’s entertaining new dystopian novel, “Super Sad True Love Story,” low net-worth individuals begin to rebel. Everyone else continues shopping.

A similar (but nonfictional) story seems to be unfolding about jobs.

Once upon a time, economic recovery led to expanded employment of the United States population. Not anymore. The percentage of adults employed has declined sharply during the last two recessions and failed to increase much in their aftermath.

As Alan Krueger of Princeton pointed out, the employment-to-population rate remains at about 58 percent, about the same as in December 2009 and far lower than the peak of 65 percent achieved before the 2001 recession.

The unemployment rate does not provide as clear an indicator of employment trends, because it is strongly affected by individuals’ decisions to drop out of the labor force (which includes only those who are working for pay or seeking paid employment).

As Catherine Rampell reported in a recent Economix post, more than 45 percent of those unemployed in January reported they had been looking for jobs for 27 or more weeks. Many other workers in this situation simply give up and stop looking for paid employment – and thus are not counted as unemployed.

Concerns about the sputtering and laggard performance of the Great American Jobs Machine arose well before the Great Recession. In a terrific overview published by the Federal Reserve Bank of New York in 2005, the economists Richard B. Freeman and William M. Rodgers III reviewed several possible explanations.

While they mentioned job losses due to offshoring as one important factor, they emphasized that displacement effects have been difficult to measure. The possible trade-offs between job creation in the United States and in other countries are even more difficult to quantify.

But a recent article by David Wessel of The Wall Street Journal provided startling evidence of the impact of globalization. His analysis of data from the Commerce Department indicates that major multinational corporations cut their employment in the United States by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.

This is a big change from the 1990s, when those corporations added 4.4 million jobs in the United States and 2.7 million abroad.

Mr. Wessel pointed out: “The growth of their overseas work forces is a sensitive point for U.S. companies. Many of them don’t disclose how many of their workers are abroad. And some who do won’t talk about it.”

Among the chief executives willing to go on the record was Jeffrey Immelt of General Electric, who emphasized that his company goes abroad in search of new markets rather than cheap labor. “Today we go to Brazil, we go to China, we go to India, because that’s where the customers are,” said Mr. Immelt, who is also chairman of President Obama’s Council on Jobs and Competitiveness.

But the motives for multinational disinvestment in the United States seem far less important than the consequences. Globalization weakens the link between economic recovery, increased profits and job creation in the United States.

Macroeconomic models of these relationships based on historical data are increasingly obsolete. As Deepankar Basu and Duncan Foley argued in a recent Political Economy Research Institute paper, the correlation between output growth and employment growth in the United States has declined in recent years.

Foreign-owned businesses may locate in the United States, helping compensate for declining investment by American multinationals. But as all businesses become more footloose, they have less incentive to support public spending on education, health, human services or social safety nets, including unemployment insurance.

Unneeded as workers, the unemployed also become superfluous as consumers and burdensome as citizens.

Cutting unemployment benefits (as was just accomplished in Michigan and is well under way in Florida) becomes just another means of cutting losses.

Super sad no-love story. Wish it weren’t true.

Article source: http://feeds.nytimes.com/click.phdo?i=c14c5132d2b0c31cc1ab28119d7f995d