Month: August 2015

Governing Magazine: Drowning in Data, Cities Need Help

Urban planners have historically had to do their jobs with only the dimmest understanding of what’s going on. Now they have more information than they can handle.

BY | AUGUST 2015

 When I was an urban planning student at the University of California, Los Angeles, more than 30 years ago, my area of concentration was known as the “built environment” — the bricks and mortar, the form and design of the buildings, the streets, the sidewalks, the parks and everything else that makes up the way humans have manipulated the environment to create built spaces. The course of study led me to think that cities are pretty static: Buildings, roads and other structures are expensive and time-consuming to build, and they don’t change much over time.

If you want to understand how completely wrongheaded that way of thinking is, just check out Corridorscope. It’s a website created by the Alliance for Downtown New York and the Center for Urban Science and Progress at New York University, and it displays all kinds of data that shows just how dynamic a city is. Specifically it shows how Wi-Fi connections, 311 service requests, bike-share docking and trash compactors grow and shrink during the day as humans come and go. It’s a startling depiction of how one street in one neighborhood in one city changes over the course of the day.

This kind of information isn’t just fun to look at. It’s also a powerful way to help cities understand what’s really going on and how they can better manage urban systems. For most of human history, urban managers have had to do their jobs with only the dimmest understanding of what’s going on — with the possible exception of vehicle traffic, which is maybe the only thing that has been comprehensively tracked by cities over the past several decades. Now, however, we are awash in data. Not long ago, I got a briefing from Houston’s analytics department about how the open data effort was going. The answer was, “We’re doing OK, considering we have 2,000 data sets.”

Which is why the democratization of data may be the most important urban trend in the long run. No city government, university or consulting firm can possibly figure out how best to use all the data we now have. The future lies in having everybody who understands how to manipulate data — from sophisticated engineering professors to smart kids in poor neighborhoods — mess around with it in order to come up with useful solutions.

And the solutions are no longer top-down. They’re also bottom-up. Yes, we can use data and technology to improve the way urban systems work, such as by having cameras on fire trucks discover new potholes or using sensors on trash compactors to tell the city when to pick up the garbage. But it also works to tell residents about those things. In an open data environment, once city officials know where the potholes are, residents using apps can also take that information and figure out how to avoid them. Once the city knows which trash cans to empty, the Average Joe can also figure out where there’s a trash can with some room. This, more than anything, makes urban systems work better than ever before.

Huffington Post: Everything You Think You Know About the History and Future of Jobs Is Likely Wrong

47 Percent…”

That’s the highly-cited estimate out of Oxford by Frey and Osbourne of the percentage of existing jobs that are likely to be automated away with the help of technology within the next two decades. According to this paper, flip a coin and call heads or machines to see if your job will exist in 20 years. This is the 21st century fear for many called “technological unemployment.”

There is also a conception among many (about half of those considered experts, so again flip a coin) that there is no technological unemployment problem because even though technology eliminates jobs, it also creates new and better ones of sufficient supply such that pretty much everyone is better off than they would be in otherwise “undisrupted” lives.

There does tend to be one caveat to this dismissal of automation fears — that most of all of these high-skill jobs will require high-skill labor, and thus a highly-skilled work force which in turn will require more education. So of course the answer to what could otherwise be a somewhat thorny future, is simply education, education, and more education.

Well, David Autor of MIT just published a fascinating paper (though we reach different conclusions) in the Summer 2015 Journal of Economic Perspectives titled,“Why Are There Still So Many Jobs? The History and Future of Workplace Automation.” In this paper he compiled the following chart, and it should blow anyone’s mind who holds a strong opinion about the historical effects on jobs by computing technology since it took off in the 1970s, and so the possible future we should expect if the trends continue.

2015-08-19-1440002196-6166740-E6Zc5e2.png

Source: Journal of Economic Perspectives

This chart has some very interesting complexity to it, which I’ll attempt to simplify with snippets from Autor’s paper. The most important thing to recognize is that all points above the flat red line show relative growth in jobs while points below show relative loss in jobs. Points to the left show jobs with less skill required and points to the right show jobs with more skill required. Each curve represents basically a different decade.

Three Important Employment Observations

First, the pace of employment gains in low-wage, manual task-intensive jobs has risen successively across periods, as shown at the left-hand side of the figure.

 If we look at the far left of the chart, we see growth in jobs with the least skill, increasing decade after decade after decade. As the story goes, technology should have the opposite effect. The simpler a job is, the easier it should be to automate, and yet we’re not seeing this at all. Instead we’re seeing more and more low-skill jobs being created not destroyed.

Second, the occupations that are losing employment share appear to be increasingly drawn from higher ranks of the occupational distribution. For example, the highest ranked occupation to lose employment share during the 1980s lay at approximately the 45th percentile of the skill distribution. In the final two subperiods, this rank rose still further to above the 75th percentile–suggesting that the locus of displaced middle-skill employment is moving into higher-skilled territories.

Where these curves intersect the red line has been moving to the right, meaning thatmore and more middle-skill jobs have been lost in a way that even increasingly eats into higher and higher skill ranges. This is a hollowing out of the middle and even upper-middle. Jobs that require what’s considered between a low and high amount of skill have been disappearing. This appears to reflect the loss of the middle class. As each decade passes, the jobs that require mostly a medium amount of skill are simply going away, replaced instead with jobs requiring less skill, not more skill, and thus jobs that tend to pay less, not more.

Third, growth of high-skill, high-wage occupations (those associated with abstract work) decelerated markedly in the 2000s, with no relative growth in the top two deciles of the occupational skill distribution during 1999 through 2007, and only a modest recovery between 2007 and 2012. Stated plainly, the growth of occupational employment across skill levels looks U-shaped earlier in the period, with gains at low-skill and high-skill levels. By the 2000s, the pattern of occupational employment across skill levels began to resemble a downward ramp.

We should expect to see what we see on the left of this chart on the right instead, but we don’t. Between 1979 and 2007, a span of almost 30 years, there was less and less growth in jobs requiring the most skill. Only since 2007 has there been a reversal with a small amount of growth in these jobs. Other than that, as Autor himself describes it, it looks like a “downward ramp”, meaning that both middle and high-skill jobs are being steeply replaced with low-skill jobs, and have been since the 1970s.

This is not the story we are told. Instead we read story after story like this latest one from the Guardian, claiming that 140 years of job creation show that jobs will always be created. And yet the ongoing trend of such articles is to mostly ignore the potentially unnecessary nature of the jobs themselves, the level of skill involved to perform them, and the lower pay they can command than the jobs they are replacing. Take for example the following excerpt:

Their conclusion is unremittingly cheerful: rather than destroying jobs, technology has been a “great job-creating machine”. Findings by Deloitte such as a fourfold rise in bar staff since the 1950s or a surge in the number of hairdressers this century suggest to the authors that technology has increased spending power, therefore creating new demand and new jobs.

 So there’s no need to worry about technological unemployment, because there will always be a need for more bar-backs and haircuts? Is that bar-back better off no longer having a manufacturing job paying $40,000 per year and instead having a job paying $20,000 per year in the service industry? Is that an important job to the human species, bringing empty glasses from Point A to Point B? Is the job entirely voluntary or done out of need for income? And is this a job that just can’t possibly be done by a machine, or outright eliminated? Ever? Is the service industry really safe?

We should also probably keep in mind that the percentage of the population in the labor force peaked back in the year 2000, and has been falling since. The above chart of employment skills polarization only examines the makeup of those employed, and ignores all those unemployed and all those not even looking for work anymore. The amount of those employed within the total population is at a record 38-year low of 62.6%. Meanwhile, despite slowing, GDP is still growing, so all the work is still obviously getting done somehow…

Many Questions Unasked

Centuries of data may show us how jobs have been both destroyed and created but recent decades worth of more nuanced data more importantly show us there’s more to this story. Whenever we see someone claiming new jobs are being created and will continue to be created so as to provide everyone a job, we need to look deeper and ask, “What kind of job? What are the skills required? How much does it pay for how many hours? Does it provide more security or less? What are the benefits it offers? Is the job really necessary? Does the job provide meaning to those tasked with it? Are jobs and work the same thing? Is there work to do that’s more important than what the job involves? Is working in the job actually better than not working at all?

Regarding that last question in particular, there’s this important finding which should not go ignored in any discussion celebrating job creation:

Those who moved into optimal jobs showed significant improvement in mental health compared to those who remained unemployed. Those respondents who moved into poor-quality jobs showed a significant worsening in their mental health compared to those who remained unemployed.

That’s right, having no job at all can be better than having a bullshit one. Thanks, science. And if low-skill jobs are more likely to be worse on mental health than medium and high-skill jobs, then for decades we’ve been increasingly working in newly created jobs that are depressingly worse for us than not working in any job.

All of the above questions are important to actually ask because when we get right down to it, the mere existence of a job means very little. We have to ask additional questions about the nature of the job itself. Those not asking these additional questions are simplifying the story in such a way it becomes even simpler than a story. It becomes a fairy tale.

Yes, our economy is so far creating more and more jobs as our technology destroys old ones, but these jobs are not at all the jobs we may assume they are. They are mostly low-skill jobs, and that means mostly low-paying jobs. For every new job as a Facebook engineer, there are countless more jobs in fast food, and there are a whole lot fewer jobs in car assembly plants. There are also not as many total jobs available for everyone as we may think. What does this all mean to us and to our country as a whole? What does it mean for the great increases in productivity we could otherwise see if job elimination were instead actually our goal?

This also means that more education isn’t the answer. As the decades have passed, the population has gotten more and more educated. Our workforce now is the most educated workforce in US history, and a great deal of this education is being put to work in jobs that don’t need it, because the jobs that do need it aren’t being created in sufficient numbers. Are bar-backs with PhDs a triumph of new job creation?

The true story of technology and jobs is a story of an eroding middle, a relatively slowing top, and a vastly growing bottom.

So unless we all wish to pursue insecure lives of low-skill underpaid mostly meaningless employment thanks to all the machines increasingly doing all the rest of the work (not really for us but mostly for the benefit of those who own them), we will need to break the connection between work and income by providing everyone an income floor sufficient to both meet basic needs and purchase the goods and services the machines are providing. It’s as simple as that. Without that decoupling, there will be no economy, because there will be insufficient consumer buying power to drive it.

If we look at the details of the last few decades of job creation and destruction, we’re either going to make enough new low-skill jobs in numbers sufficient to keep unemployment numbers low enough to actually run a society… or we’re not. Either way, consumer buying power is likely to steeply erode, even after we account for the effects technology has on lowering prices because the costs of basic needs like food and housing are the costs technology has had relatively little effect on this century. Meanwhile, if we can eliminate half of our jobs in just 20 years, do we really evenwant to create that many tens of millions of new ways to work for someone else? Why?

There appears to be no happy ending to this story that doesn’t involve universal basic income. So instead of continuing to ask if jobs are going to be automated in sufficient quantities to need basic income, let’s instead start to increasingly ask if there’s any job we can’t automate so we’re all more freed to live by it.

Bloomberg: Maybe There’s a Way to Create Good Jobs Again

Academic economists don’t spend a lot of time thinking about how to restructure society in order to provide a good life for the majority of people. They usually restrict themselves to quantifiable data, mostly ignoring non-monetary payoffs such as self-respect, freedom and community. Perhaps that’s because they want to avoid the appearance of politicization, or perhaps it’s because these intangible qualities are difficult to shoehorn into the mathematical models that economists use to demonstrate their intelligence to each other. Either way, the task of figuring out how to create a good economic life for the average person falls mostly to non-economists — writers, politicians and the occasional sociologist.

The average American worker is confronting a number of problems right now — stagnant income,  an overhang of debt from the housing bubble, the high cost of college and the replacement of pension plans with high-fee, low-return 401(k) plans. But few would deny that one huge challenge is economic insecurity. Political scientist Jacob Hacker’s 2006 book, “The Great Risk Shift,” discusses how many risks that were once borne by companies are now shouldered by individuals. That is probably an inevitable result of the transition from corporatism to neoliberal shareholder capitalism that occurred in the 1970s and 1980s. Basically, the era of “good jobs” is a memory for most workers. Private-sector unionization is disappearing, average job tenure has plunged and benefits have been cut.

Now people are beginning to worry that a new wave of technological change will erode job security even more. Information technology facilitates outsourcing, so that much more work can be divided among armies of independent contractors instead of done within large companies. Many believe that this will kill off what little security corporate jobs still provide, leaving us as permanent temps in a “gig economy.” Noam Scheiber reported on this for the New York Times in July:

Though the broader phenomenon of shifting work to nonemployees is difficult to quantify, data on contingent workers suggests rapid growth in the last decade.

The number for the category of jobs mostly performed by part-time freelancers or part-time independent contractors, according to Economic Modeling Specialists Intl., a labor market analytics firm, grew to 32 million from just over 20 million between 2001 and 2014, rising to almost 18 percent of all jobs. Surveys, including one by the advisory firm Staffing Industry Analysts of nearly 200 large companies, point to similar changes.

The poster child for the “gig economy,” of course, is Uber, which provides taxi-like services and has fought vigorously against treating its drivers as employees. But technology-driven outsourcing started long before Uber, and covers a much wider array of occupations than driving — everything from human-resource management to sales to accounting.

So what should the U.S. do about outsourcing and the gig economy? As Allison Schrager writes in Quartz, existing laws are set up to favor corporate jobs. There is, for instance, a tax deduction for employer-provided health insurance. If that deduction were removed, the money could be used to provide bigger health-care subsidies for all Americans, including independent contractors and entrepreneurs. Unemployment insurance could even be supplemented or replaced with a system of government-subsidized wage insurance, for when large recessions force down the wages of independent workers.

But turning the gig economy into a good deal for workers doesn’t just require government policies, it demands a cultural shift. That’s the kind of thing that economists have trouble wrapping their heads around. Technology is taking away one big benefit of the old corporatist economy — security — but in its place it’s giving us something we had almost forgotten how to value. It’s giving us independence.

In the pre-industrial U.S. economy of the 1700s and early 1800s, much of the work (other than farming) was done by skilled artisans who sold their own products — basically, they were independent contractors. In “Battle Cry of Freedom,” historian James McPherson describes how, in the very early days of the U.S.’s Industrial Revolution, wage labor was widely seen as a threat to freedom — a form of slavery lite.

That will resonate with anyone who has ever had a boss they didn’t like. Corporate hierarchies are power structures, and bosses can be unpleasant or even despotic. The high cost of switching jobs makes it prohibitively difficult for many workers to quit in response to abuse by people above them in the chain of command.

The outsourcing economy might change all that for the better. When you’re an independent contractor, or an entrepreneur, you’re selling your labor in much more of a free market. You don’t have bosses — you have customers. If you don’t like one of your customers, you can usually “fire” that customer without losing all of your income streams.

In a way, this will make our society a more equal one as well, since it will replace vertical management hierarchies with horizontal webs of contracts among equals. The gig economy probably won’t create greater income equality, but it will almost certainly increase statusequality.

So I think we should tweak our culture to embrace the gig economy. Security is nice, but freedom, independence and status equality are also nice. In a way, it’s a return to the classic American notion of what a good economy should be.

America’s Family Businesses

Ashtabula County is a great place to start and grow family businesses. We will be producing an article on Ashtabula County’s family businesses in the future. In the meantime, Just how important are family businesses to the U.S. economy? Read on.

America’s Economic Engine

Family-owned businesses are the backbone of the American economy. Studies have shown about 35 percent of Fortune 500 companies are family-controlled and represent the full spectrum of American companies from small business to major corporations. In addition, family businesses account for 64 percent of U.S. gross domestic product, generate 62 percent of the country’s employment, and account for 78 percent of all new job creation.1

The greatest part of America’s wealth lies with family-owned businesses. Family firms comprise 80 to 90 percent of all business enterprises in North America.2

Roughly 90 percent of the families responding to a survey in “From Longevity of Firms to Trans-generational Entrepreneurship of Families: Introducing Family Entrepreneurial Orientation indicated that they control more than a single firm. The results of the survey suggest that there is strong entrepreneurial activity undertaken by controlling families beyond their core (i.e., largest) company.3

Small businesses, including many family firms, employ just over half of US workers. Of 119.9 million non-farm private sector workers in 2006, small firms with fewer than 500 workers employed 60.2 million and large firms employed 59.7 million. Firms with fewer than 20 employees employed 21.6 million.4

Research shows that family businesses are less likely to lay off employees regardless of financial performance.5

Family Businesses Have Longevity

Recent research has shown that continued family control can be efficient, since families are, for example, able to positively affect the resource inventory and usage of their firms, apply a long-term perspective allowing for unique strategic positioning, have less human resources problems and higher firm values, or drive new entrepreneurial activity.6

What truly drives many family businesses is the sense of connection and identity the owners and their family members feel with the business.7

The mean age of family control in the family’s core company is 60.2 years.8

More than 30% of all family-owned businesses survive into the second generation. Twelve percent will still be viable into the third generation, with 3% of all family businesses operating at the fourth-generation level and beyond.9

The tenure of leadership in a Family Enterprise is four to five times longer than their counterparts.10

Of primary importance among family firm wealth holders is transferring not only their financial wealth but also their values surrounding their wealth to subsequent generations. Primary values taught include encouraging children to earn their own money, philanthropy, charitable giving and volunteering.11

The environment for innovation in family businesses improves when more generations of the owning family are actively involved in the business.12

Family businesses retain talent better than their competitors do: only 9 percent of family businesses workforces turned over annually (versus 11 percent at nonfamily firms), in a Harvard Business Review study. They create a culture of commitment and purpose, avoiding layoffs during downturns, promoting from within and investing in people.13

Family Businesses Create Wealth

Family-owned businesses have strong entrepreneurial activity across time. On average and over the family’s history these families controlled 6.1 firms, created 5.4 firms, added 2.7 firms through merger and acquisition activity, spun off 1.5 firms, and shifted industry focus 2.1 times. These families exhibit a significant level of entrepreneurial activity over time, in terms of rearranging the portfolio of activities through founding activity, mergers and acquisitions, as well as divestments.14

The largest family-owned business in the US is Wal-Mart Inc., with $443.9 billion in net sales and 1.4 million U.S. employees in 2012.15

222 owners and executives of mostly mid-sized, family-owned businesses were surveyed. Approximately 70% of the respondents represented companies with revenues of $200 million or more, while 25% were with companies generating revenues of $500 million or more.16
In the S&P 500 companies, ROI is greater in family businesses, with a 6.65 percent greater return than non-family firms.17

Family Businesses Know How to do Business Right

Family-owned businesses practice good governance. A Harvard Business Review study showed 94 percent of surveyed family firms were controlled by supervisory or advisory boards. Family representation on these boards averaged 28 percent the Americas, demonstrating a clear separation between family and business in most cases.18

Family businesses leaders focus on the next generation, not the next quarter. They tend to embrace strategies that put customers and employees first and emphasize social responsibility.19

Family businesses develop leaders in unlikely places – more than 40 percent of companies in the Harvard Business review study included members of the next generation on their boards and committees in order to nurture their business and management skills.20

Family businesses have powerful internal cultures. A study of 114 family firms and 1,200 other large companies for their organizational health found that family-owned businesses scores significantly higher on things like worker motivation and leadership.21

Women Matter in Family Business

Women are increasingly participating in family businesses leadership. Currently, 24 % of family businesses are led by a female CEO or President, and 31.3 % of family businesses surveyed indicate that the next successor is a female. Nearly 60 percent of all family-owned businesses have women in top management team positions.22

Over the past five years, woman-owned family businesses have increased by 37%.23
Female-owned family firms are typically 10 years younger than male-owned firms and more are first-generation businesses.24

Of the non-family firms in the Fortune 1000, only 2.5 percent are currently led by women (Fortune magazine, 2007).25

Female-owned family firms experience greater family loyalty to the business, agreement with its goals, and pride in the business.26

Woman-owned family firms have a 40% lower rate of family member attrition in the business.27

Big Issues Face Family Businesses

By 2017, it is estimated that 40.3 percent of family business owners expect to retire, creating a significant transition of ownership in the US. Less than half of those expecting to retire in five years have selected a successor.28

Nearly a third of family business owners (31.4 percent) have no estate plan beyond a will. Only 53.5 percent of these owners reported having a “good understanding” of estate taxes that could be due.29

Even though nearly 70% of family businesses would like to pass their business on to the next generation, only 30% will actually be successful at transitioning to the next generation.30
A majority of family businesses (60 percent) believe that their ethical standards are more stringent than those of competing firms. They also report ethical standards being discussed often or always at meetings with employees, in discussions with customers and during board meetings.31

Source References

1 Astrachan, J.H. and Shanker, M.C. (2003), Family Businesses’ Contribution to the U.S. Economy: A Closer Look. (http://coles.kennesaw.edu/centers/cox-family-enterprise/cox-family-documents/FB-in-US-2003.pdf).

2 Astrachan, J. H. and Shanker, M. C. (2003), Family Businesses’ Contribution to the U.S. Economy: A Closer Look. Family Business Review, 16: 211-219. Retrieved November 2012: (http://onlinelibrary.wiley.com/doi/10.1111/j.1741-6248.2003.tb00015.x/abstract.)

3 Zellweger, Nason, Nordqvist. From Longevity of Firms to Transgenerational Entrepreneurship of Families: Introducing Family Entrepreneurial Orientation. Retrieved November 2012: (http://c.ymcdn.com/sites/www.ffi.org/resource/resmgr/docs/goodman_study.pdf.)

4 Zellweger, Nason, Nordqvist. From Longevity of Firms to Transgenerational Entrepreneurship of Families: Introducing Family Entrepreneurial Orientation. Retrieved November 2012: (http://c.ymcdn.com/sites/www.ffi.org/resource/resmgr/docs/goodman_study.pdf.)

5 US Department of Commerce, Bureau of the Census. Statistics for All U.S. Firms That Were Family-Owned by Industry, Gender, Ethnicity, Race, and Veteran Status for the U.S.: 2007 Survey of Business Owners. Retrieved November 2012: (http://factfinder2.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=SBO200700CSCB04&prodType=table)

6 Greater Washington D.C. Family Business Alliance. Family Business Fun Facts. Retrieved November 2012: (http://www.dcfamilybusiness.com/resources/knowledge-base/family-business-fun-facts)

7 Fallon, N. “Focus on ‘Family’ Is Key to Long-Term Family Business Success.” 2014. Business News Daily. Retrieved June 2014: (http://www.businessnewsdaily.com/6567-managing-family-business.html)

8 Zellweger, Nason, Nordqvist. From Longevity of Firms to Transgenerational Entrepreneurship of Families: Introducing Family Entrepreneurial Orientation. Retrieved November 2012: (http://c.ymcdn.com/sites/www.ffi.org/resource/resmgr/docs/goodman_study.pdf.)

9 Family Business Alliance. Retrieved June 2014:(http://www.fbagr.org/index.php?option=com_content&view=article&id=117&Itemid=75)

10 Family Business Alliance. Retrieved June 2014: (http://www.fbagr.org/index.php?option=com_content&view=article&id=117&Itemid=75)

11 Deutesche Bank Group. Wealth with Responsibility Study/2000. Retreived November 2012: (http://www.bc.edu/content/dam/files/research_sites/cwp/pdf/wwr.pdf)

12 Greater Washington D.C. Family Business Alliance. Family Business Fun Facts. Retrieved November 2012: (http://www.dcfamilybusiness.com/resources/knowledge-base/family-business-fun-facts)

13 Kachaner, Stalk, Bloch. What You Can Learn From Family Business. Retrieved May 2015: (https://hbr.org/2012/11/what-you-can-learn-from-family-business)

14 Zellweger, Nason, Nordqvist. From Longevity of Firms to Transgenerational Entrepreneurship of Families: Introducing Family Entrepreneurial Orientation. Retrieved November 2012: (http://c.ymcdn.com/sites/www.ffi.org/resource/resmgr/docs/goodman_study.pdf.)

15 Walmart 2012 Annual Report. Retrieved December 2012: (http://www.walmartstores.com/sites/annual-report/2012/WalMart_AR.pdf)

16 Bundrick, H. M. “Are Family-Owned Businesses on the Way Out?”2013. Learnve$t. Retrieved June 2014: (http://www.learnvest.com/2013/07/are-family-owned-businesses-on-the-way-out/)

17 Anderson, R. C. and Reeb, D. M. (2003), Founding-Family Ownership and Firm Performance:

18 – 20 Fernandez-Araoz, Iqbal, Ritter. Leadership Lessons from Great Family Businesses. Retrieved May 2015: (https://hbr.org/2015/04/leadership-lessons-from-great-family-businesses).

21 The Economist. To Have and To Hold. Retrieved May 2015: (http://www.economist.com/news/special-report/21648171-far-declining-family-firms-will-remain-important-feature-global-capitalism

22 Mass Mutual American Family Business Survey, 2007. Retrieved November 2012: http://www.massmutual.com/mmfg/pdf/afbs.pdf.)14 (University of New Hampshire Center for Family Business. Family Business Facts. Retrieved November 2012: (http://www.familybusiness.unh.edu/usefulinfo/FamilyBusinessFacts.pdf)

23 Family Business Statistics. Gaebler. Retrieved June 2014: (http://www.gaebler.com/Family-Business-Statistics.htm)

24 Allen, I. E. & Langowitz, N. S. Women in Family-Owned Businesses. Center for Women’s Leadership at Babson College. 2003. Retrieved June 2014: (http://www.uvm.edu/business/vfbi/documents/2003Women-in-Family-Owned-Businesses.pdf)

25 Mass Mutual American Family Business Survey, 2007. Retrieved November 2012: (http://www.massmutual.com/mmfg/pdf/afbs.pdf.)

26 Allen, I. E. & Langowitz, N. S. Women in Family-Owned Businesses. Center for Women’s Leadership at Babson College. 2003. Retrieved June 2014: (http://www.uvm.edu/business/vfbi/documents/2003Women-in-Family-Owned-Businesses.pdf)

27 Allen, I. E. & Langowitz, N. S. Women in Family-Owned Businesses. Center for Women’s Leadership at Babson College. 2003. Retrieved June 2014: (http://www.uvm.edu/business/vfbi/documents/2003Women-in-Family-Owned-Businesses.pdf)

28 Mass Mutual American Family Business Survey, 2007. Retrieved November 2012: (http://www.massmutual.com/mmfg/pdf/afbs.pdf.)

29 Mass Mutual American Family Business Survey, 2007. Retrieved November 2012: (http://www.massmutual.com/mmfg/pdf/afbs.pdf.)

30 Peak Family Business Survey. 2011. Retrived June 2014: (http://www.amserv.com/index.cfm/page/Family-Business-Statistics/pid/10715.html)

31 Mass Mutual American Family Business Survey, 2007. Retrieved November 2012: (http://www.massmutual.com/mmfg/pdf/afbs.pdf.)

We Can Learn from the German Workforce Development Model

By Eli Dile
IEDC, Washington, DC

Germany is a manufacturing powerhouse, due in large part to its centralized, regulated, and adaptable system of vocational education. In 2012, the German Mission in the United States launched the Skills Initiative, a program to encourage sustainable workforce development in the United States by teaching best practices from Germany’s “dual system” of vocational education. The initiative brings together German and American businesses and educational institutions to align academic curriculum with businesses’ needs. The Skills Initiative has helped create apprenticeship programs at the state and local level across the United States.

ED Now visited the German Embassy in Washington, D.C., and sat down with Hermann Nehls, counselor of Labor, Health, and Social Affairs and Dr. Karsten Hess, counselor of Science and Technology for a discussion on Germany’s approach to workforce development and ways it could be adapted in the United States.

This interview has been edited for length and clarity.

ED Now: How does Germany’s dual system of vocational education work?

Nehls: It is called the dual system because part of the student’s time is spent as an apprentice at a company where he or she earns a wage, and the other part is spent in the classroom. Upon graduation, apprentices receive an industry certification that is recognized throughout the country because the training process is standardized. All vocational training is regulated under federal law, established in 1969 under the Vocational Training Act.

It’s a tripartite system that incorporates government, businesses, and organized labor to develop curriculum that is responsive to the needs of firms. There are around 330 occupations recognized throughout Germany, which are all defined by a consensus between unions and firms. To become certified, apprentices must pass a test – which is also designed by collaboration between firms and labor unions – and each year the exam is updated to reflect changes in technology.

What are the biggest strengths of the dual system?

Nehls: The dual system is very adept at responding to labor market needs. We have a special focus on comprehensive skills, taking quite a broad view on skill development. A high level of competence makes the labor market very flexible. Germany does not have a lot of natural resources, so we focus on exports. We are totally reliant upon the quality of our products, and quality demands a high level of skills competence.

It seems to me that American companies don’t want to invest in training someone who can easily leave for another job. We don’t have that problem in Germany. Workers have a high level of identification with their workplace, and our certification system allows firms to identify individuals with the relevant skills for a vacant position.

Hess: For students, the advantage of the dual system is that it opens the labor market faster. As an apprentice, you can begin to make money earlier than someone who pursues a bachelor’s degree. You finish your education with no debt and even earn a small salary while you learn.

A common complaint in the United States is that our system of workforce development is too “supply-driven.” How do German companies and labor unions make sure vocational curriculum is relevant to available jobs?

Nehls: Firms have a large say in what is taught because our chambers of commerce actually write the apprentice exams. A notable difference between Germany and the United States is that German companies are required to join a chamber of commerce, and they must pay for membership.

“You must get companies away from the thinking that prioritizes short-term profits. Developing skills requires long-term thinking.”

But labor unions play a large role as well and help design training curriculum and certification tests. Without trade unions there would be no dual system. They are a key partner for when it’s time to update training to align with new technologies and employer needs. They’re the ones who know what’s happening on the shop floor.

It’s probably unrealistic to think we could copy and paste the dual system in the United States. But what are some elements that we could implement here, and how can the United States expand apprenticeship programs?

Nehls: Yes, there are historical and societal differences that would make full adoption virtually impossible in the United States. So you want a system that is not copied but inspired from the dual system.

First, you need a thorough understanding of the linkage between education and the labor market. Generally, in the United States, business and education operate totally independent of one another. Also, you need better awareness of the importance of having a high-skilled workforce and for more people to understand that this is critical for the U.S. economy.

To create a quality apprenticeship program, you must begin with a strong system of governance. It’s important to establish at least a minimum standard for occupational definitions. When developing certification exams, you need a high level of transparency. And it needs to be standardized, so you have a certification that is recognized in other states.

It is most likely that the impetus to expand apprenticeships will come from the private sector. It would make sense to first start working with larger companies with many employees. But you must get companies away from the thinking that prioritizes short-term profits. Developing skills requires long-term thinking.

Hess: One of the most advanced U.S. apprenticeship models we’ve seen at the city level is in Chattanooga at the Volkswagen plant. Stakeholder cooperation is very strong there, to the point where the local chamber of commerce designs the apprentice test. And once apprentices complete their training and pass the test, they receive a certification that is even recognized in Germany.

Nehls: At the state level, I think the best example is Minnesota. Last year, Minnesota passed an apprenticeship law that establishes state-wide standards for vocational curriculum and occupational definitions. I think they have the most developed framework. It was based heavily on the dual system, and the governor even visited Germany to learn from our model.

In the United States, parents and society as a whole tend to push young people toward a bachelor’s degree. And there’s often a stigma attached to those who attend a community or technical college. Youth who go this route are sometimes regarded by their peers as…

Nehls: Losers?

Yes, unfortunately. Is this also true in Germany? And if so, how do you dispel the sector’s negative image and encourage young people to pursue a career in manufacturing?

Hess: One thing we always tell young people is we have a lot of CEOs who started as apprentices. Apprenticeships are seen as a means to further develop your education and to open new opportunities. It is not viewed as a “dead end.” From our perspective, it isn’t inferior to a four-year college degree but is parallel to other forms of education.

Nehls: I think in the United States, most parents have a perception of a “gold standard” of education which idealizes the bachelor’s degree and ignores other opportunities. You are told to work hard in high school to prepare for a four-year college, and if you don’t follow this path, you’ve made a mistake. This is not the case for Germany and Switzerland because vocational training is regarded as a central pillar of the education system. In Germany, there is an eight-level scheme with clearly defined quality standards that ranks our degrees. A traditional bachelor’s degree is level six, a master’s is seven, and a PhD is eight. In vocational education, you can reach levels six and seven. This is not a system for “losers.”

How 3D Printing is Revolutionizing Health Care

While health care has been slow to adopt electronic medical records and other new technologies, it has been quick to embrace 3D printing, and with good reason — this revolutionary technology is improving patient care, cutting costs, and in some cases even saving lives. The 3D printing market for health care will generate more than $4 billion by 2018, according to a report by Visiongain.

Here’s a look at how 3D printing works, and some of its most promising applications in health care.

3D printing: 101
In 1986, Charles Hull co-founded 3D Systems to commercialize the technology he invented: stereolithography, commonly known as 3D printing. 3D printing essentially works by taking a digital file, cutting it into slices, and layering them on top of each other to build a product. Called “additive manufacturing,” this process mimics the way nature works and is less wasteful and frequently less expensive than subtractive methods such as forging, milling, or casting.

Using 300 materials from titanium to sugar, 3D printers can make everything from an airplane bracket that’s 84 percent lighter than traditionally manufactured versions to prosthetics for children who have lost limbs to landmines. Dental implants, hearing aids, and eyeglasses are already being created with 3D printing. The possibilities are virtually limitless, since the technology is getting better, faster, and cheaper all the time.

Hearing aids and ears
Most hearing aids are manufactured using 3D printing, and have been for almost 10 years, reports Forbes. What used to be a nine-step process that took weeks has been shortened to a three-step process that can be completed within a day. The result is a completely customized hearing aid tailored to each individual patient.

And now, researchers are printing actual ears. Cornell University bioengineers and physicians used 3D printing and injectable gels from living cells to make artificial ears that look and act like human ears. Similar research on the ear has been done at Princeton University and Johns Hopkins University. And British company Fripp Design & Research has figured out how to print soft-tissue prostheses such as ears and noses using biocompatible materials.

Eyes and glasses
Can 3D printing one day cure blindness? Research is certainly pointing in that direction. Researchers at the University of Cambridge printed living retinal eye cells from adult rats, the first time anyone has successfully printed adult nerve cells. This is a step toward developing treatments for retinal diseases such as glaucoma and macular degeneration, two of the biggest causes of blindness. Organizations also use 3D printers to create prosthetic eyes. In late 2013, Fripp Design disclosed that it can make 150 prosthetic eyes per hour at a fraction of the cost of those usually made by hand.

3D printing may also be the solution to bringing much-needed eyeglasses to developing countries. The World Health Organization estimates that roughly 314 million people are visually impaired, with nearly 90 percent of blind and visually impaired people living in poor countries. Corrective eye care is often an impossibility or scarcity due to lack of doctors, eye care professionals, and eyeglasses.

However, using a 3D printed material, researchers have developed adaptive spectacles that offer users the ability to adjust the refractive power of each lens themselves. This vision correction technology has been tested in African populations and has proven to be a successful, viable method. The glasses are durable, fully customized for the wearer, and can be produced in under an hour for a cost of $1 per pair.

Organs
Printed body parts brought in $537 million last year, up about 30 percent from the previous year, according to a recent article in the journal, Nature. The Queensland University of Technology in Brisbane, Australia, along with three other research universities in Europe and Australia, have jointly launched a master’s program in bioprinting, the technique of using 3D printers to grow human tissue.

In January of 2014, a company called Organovo delivered its first 3D-printed liver to a third-party lab for experimentation and testing. The company is also developing 3D kidney tissues and breast cancer tissues. Wake Forest Institute for Regenerative Medicine is conducting similar work, exploring 3D printing’s potential in organs such as the skin and liver.

These are just some of the ways 3D printing is being applied in health care. It is also being used to create mechanical hands and skull prosthetics, 3D casts to set broken bones, and a tracheal splint for a baby with a collapsed bronchus. See more about how 3D printing is reshaping health care in this Information Week article.

Read more about how technology is improving patient care and medical practice operations, or contact us to find out how technology can help change your practice.

Selling workforce strength to businesses

Many recent surveys, including those from Area Development Magazine, echo the assertion that workforce strength is the primary consideration for new business location decisions.

Economic Modeling Specialists International recommends five core data points that communities should be able to communicate to prospects: workforce size, earnings, concentration, education completions, and demographics.

Site Selection Magazine recently interviewed workforce development officials in 12 states about new initiatives undertaken to up-skill their residents; some highlights are listed below.

Kansas: The Career and Technical Education Initiative covers the cost for high school students to take post-secondary technical classes.

Wisconsin: Wisconsin Fast Forward’s Blueprint for Prosperity provides additional funding to address technical school wait lists in high-demand fields and school-to-work collaborations that provide high school students with industry certifications.

Iowa: Home Base Iowa is designed to grow the state’s population by attracting transitioning military personnel.

Ohio: The In-Demand Occupations Report is a database of the state’s most urgent job needs that compiles labor statistics, online job posting trends, and direct employer feedback.

South Dakota: Day-long workforce summits have been used to engage a cross-section of stakeholders in an open-forum format to discuss pressing workforce needs. Summits were also used to publicize the Community Matching Incentives Program, which provides matching funds to communities that implement cross-sector workforce development programs.

Brookings Says Let Older Workers Keep Working. My Question is Should They?

I find arguments for and against the Brookings’ point of view in this article. It is true that older skilled workers and professionals are valuable assets to businesses and their continued growth, especially if younger talent is not available to assume older workers’ jobs. But older workers staying on the job also keeps younger workers from assuming older workers’ jobs. It is also true that for many older workers financial uncertainties loom large for them at and into retirement, which means many need to continue to work past age 65. It is equally true that financial uncertainties loom large for younger workers, and their forecasted retirements are expected to offer them less.

Here is my bottom line: We are not our employed work (our jobs), and it’s a good thing for people to break the work routine and develop other sides of themselves. I go back to Abe Maslow’s hierarchy of needs, and Maslow’s observation that everyone needs to make the journey to their satisfy self-actualization needs. Often our employed work gets in the way of self-actualization. I believe a large number of people live to work, which leads to bankrupt lives. They don’t evolve as human beings. So what is most important? I’m opting for self-actualization, which will build on my work life (career), but will center my conscious evolution as a human being.

From Brookings Institute

Every  day, 10,000 baby boomers — Americans born from 1946 to 1964 — leave the work force. Most of them have not saved enough for retirement; at least one-fifth have basically no retirement savings. Our economy has a shortage of skilled workers.

Keeping older Americans on the job therefore benefits everyone: It is crucial to maintaining economic growth, and it will help the boomers to preserve and increase their savings if longevity continues to rise.

Sadly, Social Security, which was enacted 80 years ago this week, encourages older workers to leave the work force. There are remarkably strong disincentives to work for people who take their benefits early, between 62 and full retirement age (66, rising to 67 by 2027).

Wait a minute, you might be thinking: Aren’t my benefits permanently lower if I start collecting Social Security before full retirement age? And don’t I get the maximum level of benefit if I wait until I’m 70 to collect?

Workers who are financially savvy and in good health know this, and many opt to wait. But about two-thirds take their benefits early; 1 to 2 percent wait until age 70, even though the retirement benefit level is a shocking 76 percent higher (after adjusting for inflation) than at 62.

There are many reasons for this. Some workers are laid off, or encouraged to retire via incentive programs from their employers. Others find their productivity is lagging. Many face age discrimination.

Moreover our fear of death leads us to take benefits early so we don’t lose them. But that logic, while understandable, is mistaken. The real danger is not kicking ourselves in the grave. It’s living to 100 without a decent income. American women who have made it to age 60 will live, on average, until 86; men, on average, until 83. But we can’t count on dying on time.

We aren’t taught to think of Social Security benefits as insurance against a catastrophic event — namely, living to 100 or, gasp, beyond.

Starting at age 62, through age 65, annual earnings above $15,720 are taxed at a whopping rate of 50 percent, for those who take their benefits early. (A smaller monster tax, 33 cents on the dollar, applies to wages over a higher threshold — currently $41,880 — earned between Jan. 1 and your birthday in the year you turn 66.)

Without the earnings test, low-wage earners would work 50 percent more, and middle earners 18 percent more, according to a 2000 study by Leora Friedberg, an economist at the University of Virginia. A 2008 study by Steven J. Haider, at Michigan State University, and David S. Loughran, at the RAND Corporation, found that the earnings test significantly reduced the labor supply of early retirees.

Now, here’s the really odd part. The earnings penalty is actually a sheep in wolf’s clothing. Under an arcane provision known as the adjustment of the reduction factor — ARF, for short — if you earn too much between 62 and 66, the loss of benefits will be made up to you, at 66, in the form of a permanent benefit increase.

Come again? You get taxed and then you get untaxed?

Precisely.

Consequently, millions of older Americans believe they face a huge tax on working, which, if they understood the ARF, they’d ignore.

The best birthday gift we can bestow to Social Security is simply to eliminate the “now I tax you, now I don’t” combination of the earnings test and the ARF.

This would significantly improve work incentives for early Social Security beneficiaries. And here’s the best part: It shouldn’t cost Uncle Sam a dime. A tax that’s fully handed back, after all, doesn’t produce any net revenue.

So much for helping young retirees stay active. What about even older folks — for example, those 70 or older? Fewer than 12 percent of them are still on the job.

Giving them a lower tax rate might turn this statistic around. You don’t need to be a rabid supply-sider (we certainly aren’t) to recognize that lowering payroll taxes on Americans over 70 could induce at least some additional work force participation (and perhaps even pay for itself, through higher income tax revenue).

Specifically, we’d give those over 70 a pass on paying Social Security’s 12.4 percent payroll tax — the 6.2 percent paid by employees and the 6.2 percent paid by their employers. The former would encourage older workers to keep working; the latter would help overcome the bias of some employers against keeping on employees beyond age 70. But we’d also change Social Security’s benefit formula to keep anyone over 70 from getting a higher benefit based on post-70 earnings.

Telling young retirees they face a monster tax on working and then burying the fact that it will be repaid is ludicrous. It’s inducing baby boomers to call it quits or work part time.

Congress can and must end this insanity. It should also nudge those over 70, few of whom now work, to get back on the job. Both the boomers and Uncle Sam will be richer for it.

This op-ed originally appeared in The New York Times.

New University of Kansas study gives more accurate picture of value of college education

While it is certainly true that not everyone is destined for college, it is also true wealth creation is greatly enhanced through educational attainment. A new national study underscores the importance of Kent State University, Ashtabula to future wealth creation in Ashtabula County.

A new study that is the first to use Social Security Administration’s personal income tax data tracking the same individuals over 20 years to measure individual lifetime earnings has confirmed significant long-term economic benefits of college education.

Chang Hwan Kim, a University of Kansas researcher, said the research team was also able to account for shortcomings in previous studies by including factors such as gender, race, ethnicity, place of birth and high school performance that would influence a person’s lifetime earnings and the probability of college completion.

The study estimates that the lifetime earnings gap between high school and college graduates, including those with a graduate degree, is around $1.13 million for men and $792,000 for women. These results are similar to past findings.

However, when important socio-demographic variables that influence both earnings and the probability of college completion are accounted for, the study shows that a man who earned a bachelor’s degree would earn $840,000 more over 50 years than a man with a high school diploma. For a woman on average the gap is $587,000 between earning a bachelor’s degree and a high school diploma.

Further, the study applies a 4 percent discount rate over time to account for psychological depreciation of dollar value for future earnings. When taking this into account the net value of a college education at age 20 is around $314,000 for men and around $232,000 for women. From this view, the net present lifetime value of college education at age 20 for those who have similar likelihood of obtaining a bachelor’s degree is still six times greater than the total cost of college education for men and 4.5 times greater for women.

“This corroborates a college education still yields a substantially more financial reward than it costs,” said Kim, associate professor of sociology. “Our results show higher growth rates in median earnings over the lifetime of college graduates relative to high school graduates, which suggests greater intra-generational mobility.”

Kim said the findings actually show previous studies overestimated lifetime earnings by about one-third, but he said the objective was to give a more accurate picture of the value of post-secondary education.

“The results reconfirm that the lifetime return on a college education is large,” Kim said. “However, the net lifetime value of a college education is smaller than what previous studies claim without controlling for these certain factors.”

Kim conducted the study — funded by grants from the National Institutes of Health and The Spencer Foundation — with Christopher Tamborini of the U.S. Social Security Administration and Arthur Sakamoto, a professor of sociology at Texas A&M University. The paper is forthcoming in the August edition of Demography, the top-ranked journal in demographic studies.

Kim said a major key to the study was to match respondents to the Survey of Income and Program Participation to longitudinal earnings recorded by the Social Security Administration, giving the team the ability to estimate 50-year lifetime earnings.

“Most research about differentials in lifetime earnings by education is based on earnings for only a single or limited number of years,” Kim said. “This is informative, but it typically entails unrealistic assumptions.”

The study examined educational attainment and other data of four groups of men and women born in each decade from the 1930s to 1960s. Then the team examined the lifetime earnings data from 1982 to 2008 to compare with the birth cohort data.

He said a number of studies have used the Social Security earnings data, but none had applied them to the lifetime earnings of education.

“Our analysis uses long-term earnings for the same individual, which provides a better description of the relationship between education attainment and lifetime earnings than estimating cross-sectional data would,” Kim said. “Also, our results show the importance of adjusting for socioeconomic and demographic characteristics to disentangle the effect of education from other factors. This study assesses the adequacy of the measurement of lifetime earnings using cross-sectional survey data.”

He said the persistence of the net effect of college education on cumulative earnings was noteworthy. The study also found the effects of a graduate degree on earnings persist for people into their 60s – more so than someone who only earned a bachelor’s degree. The disadvantages of high school dropouts also appear to be mitigated compared with high school graduates later in their work careers, a point that likely further illustrates the importance of a college degree.

Kim, who studies inequality, said future research would focus on differences in lifetime earnings by college majors and other factors, like race and demographic groups.  He said the broad study has findings that would be important for public policy related to student loans and retirement and aging.

– See more at: https://today.ku.edu/2015/06/19/ku-study-gives-more-accurate-picture-value-college-education#sthash.GuhbEI5r.dpuf

High-Wage Occupations Leading Post-Recession Job Growth, Educational Attainment Critical

Despite media reports that the most recent economic recovery has been largely driven by job growth in low-paying positions, a new report from the Georgetown Center for Workforce and Education finds that it is actually high-paying jobs that are leading this growth, and nearly all of them are going to individuals with at least a college degree. According to Good Jobs Are Back: College Graduates Are First in Line, during the economic recovery from 2010 to 2014, good jobs – those that pay more than $53,000 annually and are more likely to be full-time and offer benefits – represented 44 percent of all job gains, or 2.9 million jobs. Low-wage jobs paying $32,000 or less accounted for just 27 percent (1.8 million) of the jobs added in the recovery, while middle-wage jobs represented 29 percent (1.9 million jobs). Using a methodology that segments populations of workers by occupations rather than industries, the authors are able to compare individuals with similar sets of skills and who earn similar wages against each other, providing a more accurate picture of the economic recovery.

Of the 2.9 million good jobs added during the recovery, 2.8 million (97 percent) went to those with at least a bachelor degree. While 152,000 workers with some college or an associate degree filled the remaining spots, workers with a high school diploma or less lost 39,000 good jobs since the beginning of the recovery. Less educated workers lost jobs at every wage tier during the recovery, including 280,000 middle-wage jobs and 159,000 low-wage jobs.

More than three-in-five good jobs created during the economic recovery were managerial and professional office jobs, though STEM occupations, healthcare professionals and technical occupations were also major areas of growth. Of jobs that were lost after the recession, more than 70,000 were blue collar and more than 180,000 were in education professions. Although the report finds that low-wage jobs have fully recovered, they are doing so at a slower rate, less likely to be full-time, and less likely to offer benefits than good-jobs.  Medium-wage jobs, however, in which traditionally blue-collar occupations allowed for less-educated individuals to earn higher-wages, have largely been replaced by low-wage work.

Ultimately, these findings suggest the importance of educational attainment in the post-recession job market. As higher-wage jobs increasingly go towards individuals with higher skills, the gaps between those that completed college and those who did not will continue to widen. Although increased educational attainment is unlikely to completely fix inequality, it is shown to increase average earnings and the likelihood of being employed. Furthermore, as the report shows, it is becoming necessary to procure a good job.