A bill introduced in the Missouri Legislature, Senate Bill 88, would build on improving past successes in the occupational licensing sphere. It would strengthen prior licensing reciprocity legislation by reducing the maximum wait time for oversight bodies to waive requirements from six months to 45 days. This bill would also make it possible for Missouri licensing requirements to be waived for workers in states without such requirements provided they have at least three-years of applicable experience.

Ness Sandoval, a professor from St. Louis University, has written that Missouri is in a demographic winter—more people are dying in Missouri than are being born. Pair this finding with declining student enrollment in the state, one can see the need for Missouri to attract workers from out of state rather than put barriers in their path.

Against the substantial cost of licensing requirements we need to weigh the potential benefits to the quality and safety of products/services, but evidence of such benefits is underwhelming. The Mercatus Center at George Mason University conducted a meta-analysis of 19 different studies in Florida directly related to licensing and product quality. In 16% of these studies, researchers observed positive relationships between licensing and product quality, in 21% they observed a negative relationship, and in 63% they observed no relationship.

The Institute for Justice has identified nine occupations that Missouri licenses but are not licensed by at least 15 states throughout the country. For example, Missouri is one of 22 states that require a license to work as a sign-language interpreter—which entails $442 in fees, 60 credit hours of education, and two exams. Under current statute, if a sign-language interpreter with three years of experience from Kansas, Tennessee, Texas, Oklahoma, Florida, or Ohio wanted to move to Missouri, they would have to spend the time and money to acquire a license before they could work here. The same would be true for an experienced veterinary technician from one of the 15 states that don’t require a license.

Occupational licensing increases costs to consumers, limits competition, and by its nature involves government in the free market. In some cases (e.g., physicians), such costs may be justified in order to ensure the safety of the public. But policymakers should look for ways to limit the burden of licensing to cases in which it is absolutely necessary. Embracing the policies embodied in Senate Bill 88 would be a step in this direction,

The post Senate Bill 88 and Licensing Restrictions appeared first on Show-Me Institute.

A year later, in January 2023, a lot has changed, but some things remain the same—especially the amount of economic uncertainty on the horizon. The economy began the year with rock-bottom interest rates, but after the Federal Reserve finally came to terms with the persistence of inflation, it wisely abandoned its lax stance and proceeded to tighten the screws by raising interest rates at an extremely rapid pace—taking its benchmark Fed Funds rate from 0 percent at the beginning of the year to over 4 percent by the end. During this same period, mortgage rates jumped from historically low levels of under 3 percent to over 7 percent. As a result, existing home sales fell by 35 percent over the year, and residential investment plummeted. Meanwhile, gross domestic product shrank during the first two quarters of the year but managed to register a respectable number in the third quarter (fourth quarter data is not available yet).

The primary questions on everybody’s minds entering 2023 are these: Can the economy achieve a soft landing? And can inflation come down without the U.S. economy entering recession? Unfortunately, it is still far too early to tell. Today’s jobs report revealed that the labor market continues to hold up, with payrolls growing by 223,000 in December 2022 and the unemployment rate falling to 3.5 percent. While these data are good news, they don’t tell us much about the future, because the labor market tends to lag the rest of the economy. In other words, if the U.S. economy hits turbulence in 2023 and enters recession territory, the labor market response will likely be delayed, as has been the case historically. In the meantime, the main takeaway from the most recent jobs report is that the prospects for the Federal Reserve reversing its rate hikes are basically nil—at least until inflation drops back down to 2 percent and remains there for a while. The recent release of the Federal Reserve’s minutes from its most recent policy meetings confirms that there is no sentiment at the Fed to begin rate cuts anytime soon.

It is still possible to gather some other tea leaves from some of the recent economic data, however, to get a sense for where the economy may be headed. The downside of the latest jobs data is that there is little to no evidence that workers are being enticed from the sidelines. As shown in the chart here, the labor force participation rate—which counts people who are working and those actively looking for work—remains below 2019 levels by a full percentage point. Some of the drop is due to early retirements during COVID-19, but if one looks at the data just for prime-age workers (those between the age of 25 and 54—see the chart here), their labor force participation rate hasn’t fully recovered either. With 1.75 job openings per unemployed worker, the labor shortage has no imminent end in sight, which also complicates the inflation picture by making it more difficult for businesses to accommodate demand without raising prices.

Thankfully, the end of 2022 offered some promising signs for inflation. Most directly, the inflation data itself showed some moderation, although it continues to run hot at over 7 percent year-over-year. Also, the most recent jobs report showed that wage pressures also may be subsiding to some extent. Of course, faster wage growth in principle is a good thing for workers, but only when driven by sustainable forces. Over the past nearly two years, wage growth has run hotter than in prior years, but the increase took place amidst a backdrop of declining productivity. The result has been even faster price growth, resulting in a steep drop in purchasing power, leaving families poorer in terms of their living standards. Going forward, 2023 offers a lot of uncertainty, and data over the next few months regarding inflation and productivity will be quite revealing. One thing working in the economy’s favor is a divided Congress, which should mean a stop to the glut of inflationary government spending. The question is whether it will be too little, too late to avoid a hard landing.

The post Year-End Jobs Report: Goldilocks, or Calm Before the Storm? appeared first on Show-Me Institute.

With all these job openings, it really does seem like it’s time for things to finally get back to normal and for people to get back to work. The reasons we may have needed additional unemployment benefits during the height of the pandemic are fading fast—businesses are opening, vaccines are widely available, and people are returning to life outside their homes.

The economy is recovering from the pandemic, but it’s possible that increased federal unemployment benefits have slowed down our recovery by causing people to push back their job search. Governor Parson decided that Missouri would end all federal pandemic-related unemployment benefits on June 12th to incentivize people to get back to work. I think this was a smart move because jobs are clearly available. It’s time to stop relying on government handouts and fill those job openings.

The post Jobs, Jobs, and More Jobs appeared first on Show-Me Institute.

The CARES Act made several large changes to the unemployment insurance system. These changes were intended to be temporary and preserve family and small business finances during the period of greatest uncertainty. Specifically, the CARES Act extended the duration of unemployment benefits, added a $600 weekly supplement to the usual state benefit amount, expanded eligibility to gig workers and many others traditionally excluded from the unemployment insurance system, and introduced other modifications such as the waiving of job search requirements to account for the unique circumstances of the pandemic. At the end of 2020, the federal government extended into March the supplemental benefit amount at a lower level of $300, and President Biden’s American Rescue Plan extended these enhanced benefits further until September 2021.

These changes to the unemployment system have undoubtedly had major effects on individuals and the economy. The additional $600 was certainly beneficial for the financial situation of the unemployed; researchers have found that additional benefits from the CARES Act resulted in 76 percent of unemployed people earning more than their previous wages on unemployment between April and July. In Missouri, the median replacement rate of UI benefits (including the $600) to lost wage earnings was 154 percent, meaning those on unemployment made 54 percent more than their lost wages. Even with these extra earnings, research has found that unemployment benefits did not harm job growth in spring and summer 2020 when lockdown restrictions made job search very difficult.

However, conditions have changed. Most businesses are open, vaccines are available to those who want them, and the unemployment rate has fallen from 14.8 percent to 6.1 percent. Are these extra unemployment benefits still necessary? Job openings hit a preliminary record high in March and anecdotally, many businesses are struggling to find workers. It’s certainly possible that the additional $300 and the long extension to September are causing people to push back their job search and extend their time receiving UI. Jobs will likely be even more abundant by the time benefits expire, thereby reducing the risk of a delayed job search.

It seems that the job market (and therefore our economic recovery) is being helped by vaccine access and business re-openings and hurt by extended unemployment benefits. However, we may be able to see the light at the end of this UI tunnel. Governor Parson announced that Missouri would end participation in the federal pandemic unemployment programs on June 12th, saying that these benefits were always meant to be temporary and it’s time to get people back to work. The federal government is also taking steps to return to pre-pandemic UI rules. Lawmakers seem to recognize that getting people back to work is a priority and enhanced UI benefits may not have been moving us toward that goal. Hopefully, these changes will help us continue to recover quickly.

The post How Are We Recovering? (Part 3) appeared first on Show-Me Institute.

As things currently stand, the American Rescue Plan promises jobless workers $300 per week on top of the usual wage replacement rate of just under 50% all the way into September. For most of the workers who are receiving nearly the same or more to remain jobless, it is understandable that they might be reluctant to accept a pay cut just to go back to work. For small businesses struggling to reopen, these unemployment benefits represent anywhere from a short-term headache to an existential threat. Many of them operate on small profit margins and cannot afford to compete with the artificial compensation offered by a federal government with a nearly endless capacity to borrow. Tacitly acknowledging the role of unemployment benefits in the lackluster jobs numbers, President Biden is now exhorting workers that “if you’re receiving unemployment benefits and you’re offered a suitable job, you can’t refuse that job and just keep getting unemployment benefits.” He has also directed the Department of Labor to work with states to reinstate job search requirements, which in their current form are mostly window dressing that cannot effectively monitor or induce search effort. Instead of trying to fill the leaky bucket caused by bad policy, the federal government ought to plug the hole and stop erecting hurdles to small business hiring and reopening.

In Missouri, the economy sports what sounds like a healthy 4.2% unemployment rate, but here, too, many Missourians have exited the labor force, and there are over 114,000 fewer people working relative to back in February 2020. Missouri’s recently announced termination of enhanced unemployment benefits is one positive step toward addressing this jobs shortfall and returning its economy to pre-pandemic strength.

The post How to Put Missouri on a Faster Path to Recovery appeared first on Show-Me Institute.

Generally, UI affects the labor market by changing job search behavior. UI decreases the gap in pay between working and not working. It creates an incentive for unemployed workers to take more time in their job searches, resulting in fewer job applications and longer jobless spells. On the other side of the labor market, the UI benefits that make it easier for workers to put off job searches and be more selective also make it more difficult and costly for businesses to hire, which reduces the incentive to post job openings. Ultimately, UI can damage both sides of the labor market.

Providing money to help someone between jobs isn’t inherently a bad thing, especially during difficult economic times. In fact, one justification for having an unemployment insurance system at all is that the added time spent searching for a job leads to the possibility of a higher-quality job fit, which has stabilizing effects on consumer spending. However, excessive generosity or duration of UI benefits can hamper the economic recovery following a recession.

Researchers have cited the extensions of unemployment benefits as playing a role in the slowest job recovery on record—the aftermath of the Great Recession—and other jobless recoveries. Similarly, eventual cuts to UI benefits after periods of extensions have led to large influxes of workers and decreases in unemployment levels.

All this research on the relationship between UI and the labor market makes me question whether our UI policy during this economic downturn has been optimal. The recent extension of unemployment benefits with the $300 weekly supplement may threaten to impede the pace of our current recovery as UI has in the past. Governor Parson has even decided to end Missouri’s participation in the federal pandemic unemployment benefits beginning on June 12th, saying that it’s time to get people back to work. The complicated topic of UI and our current recovery with be discussed in the next blog in this series.

The post How Are We Recovering (Part 2) appeared first on Show-Me Institute.

As I wrote when this legislation was first being considered, this is a worthwhile removal of red tape. Military families are very mobile, and military spouses are especially burdened by regulations that don’t allow occupational licenses to transfer from one state to another. Licensing reciprocity will significantly reduce the barriers for military spouses, giving them easier access to jobs while their spouses serve our country. This legislation is also good for Missouri, potentially leading to more qualified professionals in our workforce and making our state a more desirable location for military families to relocate.

While this is a good move by Missouri lawmakers, a bigger question remains: Why is broad licensing reciprocity only allowed for military spouses and not the rest of the workforce? Military couples aren’t the only people who have to deal with the issues created when a move is required because of job demands. Lawmakers should remove barriers for all workers, not just a select few. Hopefully we will see licensing reciprocity for all workers very soon.

The post A Regulatory Win for Military Spouses – But Much More Left to Do appeared first on Show-Me Institute.

During the 2017–18 school year, over 180,000 high schoolers in Missouri took at least one CTE class, but fewer than 28,000 concentrated (taking three or more classes) in any one area. What’s more, fewer than 8,000 students earned an industry-recognized credential (IRC), a signal to employers that the student has mastered some set of skills. Many Missouri students—especially those not interested in going to college—could benefit from earning an IRC and leaving high school career ready. 

A recent report from ExcelinEd shows that there are thousands of well-paying jobs that could be readily accessible to Missouri’s high schoolers if they were earning the right credentials. According to the report, Missouri met only one out of five indicators of a quality CTE program.

To put in perspective what kind of opportunities students are missing out on, let’s take a look at careers in just two industries. In 2018, some 617 students in Missouri earned an Automotive Service Excellence Certification. But there were over 3,600 job postings requiring that credential, and these jobs paid over $15 an hour last year. The unmet demand is also apparent in digital designing. There were over 3,300 job postings for Adobe Certified Associate and Adobe Certified Expert credentials each—again, these jobs pay at least $15 an hour—yet there were only 146 Missouri high school students who earned an Associate credential, and none received the Expert credential. Perhaps not enough students are interested in these careers to meet the demand, but are they even aware of these opportunities?

One way to improve awareness and options for students is through teacher bonus pay. If CTE teachers have skin in the game—for instance, $50 for every student of theirs who earns an IRC—they would have an incentive to get more students that could excel in a particular field working towards earning an IRC. Florida has such a program and students there earned over 140,000 credentials during the 2016–17 school year. Overall, one in six Florida high school students earned a credential, compared to just one in twenty high school students in Missouri.

Like many states, Missouri has a workforce problem. But with some simple changes, which other states have implemented successfully, we could increase the number of students earning credentials, while aligning those credentials to the job market. Good information paired with the right incentives can help move Missouri’s CTE in the right direction. 

The post CTE in Missouri Is Not Aligned with Needs of Students or Employers appeared first on Show-Me Institute.

The report projects Missouri to be the ninth-highest state in tech growth over the next decade with 2.9 percent growth, ahead of the national 2.1 percent projection. The tech industry includes energy, environmental, life sciences and information technology (IT).

Despite projected growth, Missouri workers may not be prepared to fill the needs of an expanding tech industry, as jobs could outpace the availability of skilled workers. A survey by Gallup of 1,000 Missouri employers find that only 44 percent were satisfied with the current availability of skilled workers, and only 15 percent agree that high schools are preparing students for the workforce. In 2016 one of the largest workforce gaps was in Science and Technology—around a 9 percent gap  between the workforce demand and available workers.

This gap shows the need for more high school graduates prepared to enter the tech field. If students graduate with the proper credentials, they could have access to a high-demand job and enter the workforce immediately. The largest tech sector in Missouri is IT, of which high school students can earn over 15 IT-related industry-recognized credentials (IRCs) approved by the Department of Elementary and Secondary Education (DESE). An IRC is a nationally recognized credential that tests job skills, awarded by a third-party professional organization. In 2018, fewer than 500 IT-related IRCs were earned among Missouri high school students (less than one percent of the graduating class if all test takers were seniors) according to data received from DESE.

Florida and North Carolina have found that providing bonus pay to teachers is one way to get more students to graduate with an IRC. Bonus pay encourages high schools and teachers to focus on the important work of preparing students for a career.

A growing tech sector would be a huge boon to Missouri’s economy. But if we don’t act now to ensure our workforce is ready for these jobs, the potential boon will turn into a missed opportunity.

The post Missouri Needs to Prepare for Expanding Tech Job Market appeared first on Show-Me Institute.

The prevailing wage sets a floor for pay, but it can actually hurt the workers it’s intended to help by denying employment to people who can do the job at a more competitive price. To make matters worse, making projects more expensive also means that less taxpayer money will be available for other priorities.

THE SOLUTION: Let the market set wages.

Rather than dictate wages, the government should have policies that support a healthy jobs environment where higher wages for all sorts of construction projects—including public construction—develop on their own without the harmful effects of wage floors.

Policymakers must keep in mind that project delays can hurt their communities over time. It would be better to let the market set wage rates for these projects and to begin delivering those public services sooner rather than later.

WHO ELSE DOES IT? States with no prevailing wage law include Alabama, Arizona, Arkansas, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Utah, Virginia, and West Virginia.

THE OPPORTUNITY: Moving away from market-distorting policies like the prevailing wage will help the state promote job growth and spend taxpayer money efficiently.

KEY POINTS

• These reforms would promote job growth and make public works projects more affordable.
• Taxpayers get the most bang for their tax buck when their money is spent efficiently and effectively.

SHOW-ME INSTITUTE RESOURCES

Blog Post: Special Interests Inhibiting Joplin’s Recovery?

Blog Post: Playing Favorites on the Board of Aldermen?

Blog Post: The Race Is On: Wisconsin Pushes to End Project Labor Agreements and Prevailing Wage

For a printable version of this article, click on the link below. You can also view the entire 2018 Missouri Blueprint online.

The post 2018 Blueprint: Prevailing Wage appeared first on Show-Me Institute.

This new notoriety (from Google Fiber) and all the press and tweets that went with it gave us a new way to tell the Kansas City story, Tech entrepreneurs discovered that Kansas City was a great place to start up. They moved here just to plug in to Google Fiber and gigabit connectivity.

Well, maybe not. Google Fiber came to the Kansas City area in 2011, the same year Mayor James took office. Prior to that, information jobs in the region, according to the U.S. Census, had been sliding downward. The number of these jobs slipped from 52,000 in 2008 to 39,000 in 2011, a loss of one-quarter. Since then, the numbers through 2013 are pretty flat.

We don’t need to rely solely on Census data. The Show-Me Institute’s Joe Miller recently reviewed a study by the San Diego Economic Development Corporation that ranked cities based on the health of their tech scenes. Miller concluded that the tech industry in Saint Louis is “not a large player nationally, nor is it a terribly significant driver of,” the economy. The outlook for Kansas City is even worse. Of the country’s 50 largest metros, Kansas City ranked 34th, behind peer cities St. Louis (28th) and Oklahoma City (24th) but ahead of Louisville (39th).

Kansas City ranked even lower (42nd) for tech talent, a measure based on tech employee retention rates, percent of population with computer or math degrees, and the number of computer science degrees being awarded. The Mayor recognized as much in his remarks,

Our tech companies need more trained help—people who can manage the flow of information and data, write code, fix equipment and implement creative ideas. And lots of people in our city need jobs, or better-paying jobs to support their families.

While more recent Census data may show an uptick in information jobs and employers in the Kansas City region, for all the spending and talk of momentum and people moving to Kansas City “just to plug in,” the data suggest otherwise. 

The post Kansas City’s Tech Inertia appeared first on Show-Me Institute.

Business leaders have voiced concerns over how unprepared recent graduates are to enter into the workforce, many of them citing the lack of applicable skills as a major problem. The Alabama Community College System projected that over the next year, 5,000 skilled worker jobs will need to be filled in southwest Alabama alone. 

Having recognized this problem, several states are backing programs that would allow students enrolled in vocational training programs to earn credentials at a faster rate, continue to build on those credentials, and keep them no matter where they move. They are considered portable and stackable. Portable in the sense that, as the McGraw-Hill Research Foundation notes, they are “trusted by employers and educational institutions throughout the country… they would be independently verified or accredited”; and “stackable” in the sense that they can be combined with each other to earn industry certifications or even associate’s or bachelor’s degrees.

An example of a portable credential is the National Career Readiness Certificate. This credential measures the test-taker’s ability to solve problems, think and read critically, and understand and use work-related text. The certificate is recognized in 42 states and can be used by employers to help predict an applicant’s ability to succeed in the workplace.

Virginia addressed the need for skilled workers in 2008 by creating the Virginia Career Pathways System. This system includes training programs like apprenticeships so students can earn credit toward a certificate or degree while also getting hands-on training.

Mississippi created a similar system in 2005 that has 4 levels of skills achievement. It starts with an Adult Basic Education Certificate, then moves on to a Manufacturing Skills Basic Certification. At the next level, students can choose the manufacturing skill they want to learn in depth and enroll in a program devoted to it. Finally, the industry knowledge they acquire can be used for college credits toward a degree.

Stackable credentials are more flexible than traditional degrees, appear more in tune with what employers want, and may be collected over time at a lower cost. They are a promising way to help students get the preparation they need to be successful in the job market.

The post Want to Make College More Affordable? Stack Credentials. appeared first on Show-Me Institute.

But what we also should take into account (but almost never do) are the conditions of the labor market in which teachers work.  If you pay the same amount to a teacher in St. Louis that you do a teacher in Nodaway County, it’s very likely that you’ve underpaid the St. Louis teacher and overpaid the Nodaway County teacher, even though they got the same amount.  Let me explain why.

There are vast differences in the cost of living and average salaries of workers across the state. Take Shannon County for example. Located just south of the Mark Twain national forest, Shannon County is one of the poorest counties in the state (It also happens to be where my wife’s grandparents call home). The median household income in 2011 was roughly $20,000 less than the state average, at $25,684.  The average teacher in the county makes over $35,000, more than 135% of the median household income. On top of that, teachers receive a 14.5% match on retirement contributions and employer-paid health care. All of this for 180 days of work—that is, unless they use their 10 to 12 built-in sick/personal days. 

What would happen if we gave these teachers a raise? Would paying teachers an extra $2,000 or $3,000 and moving them to 140 or 150 percent of median household income attract new teachers or retain current teachers? That’s unlikely. They’re already far above their neighbors. What’s worse, it would strain the already limited stream of money that the district has to fund its schools. Small benefit, high cost, bad policy.

As I pointed out yesterday on the blog, teacher pay should reflect local economic markets.  The map at the top of this post shows the average salary of teachers in each Missouri county. The color indicates how the salary compares to the median household income of the county. An index can be thought of as a percentage, so in the counties shown in orange, teacher salaries range between 75% and 99% of median household income.  In many areas of the state with “low” teacher salaries, the wages are actually high compared to the median household income. 

Because of all of this, a statewide increase in teacher salaries (like the ones the MSTA calls for) would mean paying teachers in some areas of the state above what their local market demands.  It would push districts that are already financially strapped to take unpopular measures such as holding wages down for more senior teachers or increasing class sizes by hiring fewer teachers.

Today Missouri requires all school districts to start teachers at a salary of at least $25,000, and teachers with a master’s degree and 10 years of experience must earn at least $33,000. Increasing the minimum teacher salary to, say, $30,000 would have little effect on overall teacher pay.  According to a study by the Missouri State Teachers Association, the average starting teacher salary in Missouri is $33,012.

Still, many school districts—poor, rural districts—would be affected by an increase in the state-required minimum wage for teachers. Thus, this type of mandate would disproportionately affect those districts most strapped for cash. It would mean they could hire fewer teachers because they have less money to spend.

Increasing teacher salaries may be a noble goal, but the decision of whether to do so should be made by local school boards taking into account local conditions, not by politicians in Jefferson City.

The post Increasing Teacher Pay from On High Is Simply Bad Policy appeared first on Show-Me Institute.

The table below reports three pieces of information pertinent to assessing the job picture in Missouri. The first two columns of data report the unemployment rate in October of 2014 and 2015. In Missouri, the unemployment rate has fallen, dropping from 5.5 percent to 5.0 percent, the same value as the national average. How does this compare to our neighboring states?

All states in the table below (except Oklahoma) also experienced a decline in their unemployment rate over the past year. What is notable is that some states, such as Iowa, Kansas, Nebraska and Oklahoma, have achieved very low rates of unemployment. These values signal very robust labor markets in those states.

The Bureau’s recent release also provides more direct information about job growth. In the last column in the table below I report the percentage change in jobs over the past year (October 2015 data are preliminary.)

This calculation shows that job growth in Missouri has been slow over the past year, increasing at only about a 1 percent rate. Three other neighboring states—Illinois, Kansas, and Oklahoma—have experienced slower job growth, though Kansas and Oklahoma already have achieved very low unemployment rates. In the remaining states, job growth is notably faster than in Missouri.

The post Missouri Jobs Increase at Slow Pace appeared first on Show-Me Institute.

Several decades ago, earning a college degree—almost any college degree—was all it took to get a job. Now, many college students must strategically choose the right major in order to break into the field with the greatest growth potential. Experts say that majors in STEM (science, technology, engineering, and math), health care, and agriculture offer the surest path to rewarding careers. But how good are these “expert” predictions? Should state governments direct tax dollars toward these winning degrees?

For years, states have incentivized the pursuit of certain majors through grants and scholarships. Gov. Nixon signed a bill in April, for example, which will grant 80 $5,000 scholarships to agriculture majors who agree to work in the agricultural industry in Missouri after graduation.

“The overwhelming argument now for education—at all levels and from government—is that it’s a preparation to make you a better factor of production,” Hillsdale College President Larry Arnn told the Wall Street Journal recently.

It’s certainly true that students are no longer attending college to learn for the sake of learning, but before we continue our practice of picking winning and losing majors, there are a few things we should consider.

First, 80 percent of college students switch majors at least once. Though a student may pursue a degree through the assistance of a grant or scholarship, there is no guarantee the student will remain in that major, complete the degree, or pursue a job within that field of study. In many cases, students must repay loans for coursework they never use in their actual career.

Even if scholarship programs hold students accountable through loan repayment agreements, employment trends change. According to Will College Pay Off? author Peter Cappelli, “The odds of predicting correctly are zero to none.” By the time students graduate and enter the job market, a prediction might not pan out, or new “hot” jobs will replace old “hot” jobs. Cappelli cites the increase in the demand for petroleum engineers due to fracking. Ten years ago, the word “fracking” bore little significance to the public. Now petroleum engineering graduates have the highest projected median starting salary for the class of 2015.

Just as it’s not always clear which fields are expected to experience job growth, it’s also unclear if any of our attempts to attract specific students to certain fields have paid off. For example, Missouri offers the Minority Teaching Scholarship to students who agree to teach within a Missouri school for five years after graduation.

While attracting minority students to the teaching profession is a concern in schools everywhere, there are a lot of unknowns. How many students remain in the profession beyond five years? How many students decide to pursue a different career and become burdened with student debt? Do these students teach in high-need schools? Do these students become effective teachers?

We don’t actually know, because we aren’t tracking these investments. At this point, the state is about as good at predicting the future of the economy as an 18-year-old is good at picking a major.

This is not to say that investing in education isn’t worthwhile, but we should be cautious about expanding our practice of picking winning majors, especially if investing in certain degrees does not result in net gains for taxpayers and college graduates.

The post Choosing a Major, Picking a Winner appeared first on Show-Me Institute.

While reducing poverty is a laudable goal, proponents often ignore the negative effects that raising the minimum wage has on workers, especially those just entering the labor market or those who lack sufficient skills to realize a higher wage. At its very core, setting a minimum wage is simply a form of price control, which economists of all stripes recognize as a recipe for resource misallocation. With calls for further increases in the minimum wage unabated — even during times of economic distress — it is important to clarify the potential consequences and costs of such policy actions. It is useful, therefore, to consider the fundamentals of what happens in the labor market to workers and employers when the government sets wages that are different from those established in the market for labor. In this essay, we focus on the predictions from a simple model of the labor market, present evidence based on recent research, and consider the important though often ignored question of just who pays for increases in the minimum wage. Unlike popular wisdom, it is not just employers.

Establishing a minimum wage higher than the going wage rate for the low-skilled segment of the working population will harm many of the very workers for whom the minimum wage is supposed to help.

Read the essay:

The post Increasing The Minimum Wage Does More Harm Than Good appeared first on Show-Me Institute.

Early on, I penned an op-ed. Not in defense of Turner, for I didn’t know the details of his case, but in support of school choice. How, you may ask, does Turner’s story mesh with the topic of school choice?

Like this:

The Joplin School District has the corner on teaching jobs in Joplin. In economic speak, this is called a Monopsony. Whereas a monopoly means having a single provider of goods or services, a monopsony means having a single buyer of goods or services. Buyers or employers with a monopsony control the market and are able to dictate terms to the supplier — in this case, the teacher. In most cities, public school districts have a monopsony on the teaching jobs.

You see, in a school choice system, it is not just students who have options; teachers have greater options as well.

Essentially, school choice breaks up the monopsony that districts have on teaching jobs. It gives individual educators more freedom to seek out the teaching post that best fits them and it increases the market competition for their talents.

You can read the full op-ed on our website.

The post Monopsony: Why Teachers Should Support School Choice appeared first on Show-Me Institute.

About the paper: Imagine a school in which the highest prize for academic achievement went to the student who had been there the longest. Though it seems ridiculous to reward students in this manner, this is exactly how school districts reward teachers — by longevity. Teachers by and large are paid on a single salary schedule. These schedules not only fail to reward teachers based on their quality, but they fail to recognize that teaching different subjects and grade levels requires different skill sets and that those particular skill sets are in varying demand in the marketplace. For instance, there are reportedly 3.1 jobs in science, technology, engineering, and math (STEM) for every one unemployed person in Missouri. In comparison, there is only 1 non-STEM job for every 3.7 unemployed people. This means teachers with strong backgrounds in math and science may have more, higher-paying options outside of teaching. This is a reality we must address.

The post Being There Is Not The Same as Being Better appeared first on Show-Me Institute.

My friend’s concerns are many, but he has two main questions. Is it fair to pay teachers of one subject more than teachers of another? And, if we paid math and science (a.k.a. STEM) teachers more, wouldn’t it lead to shortages in other fields?

In the paper, I tried to focus on what is practical and logical from what we know about teaching and the job market. Because STEM teachers are in high demand and short supply, it does not make logical sense to pay them the same amount as teachers of other subjects who are in abundant supply. Fairness, of course, is a subjective term and paying teachers of some subjects more may seem unfair to some; but as I say in the paper, “it seems more unfair . . . to not recognize teachers for their specific skills and talents. Not all teachers are the same and not all skills are equally demanded.”

It is also important to remember that schools are not in the business of adult fairness, they are in the business of educating children. To that end, single salary schedules put a straitjacket on school officials and prevent them from having the ability to attract and retain teachers.

School districts need to be released from their straitjackets so they can begin paying teachers for their unique contributions. Schools districts then would have more leverage to attract high-quality teachers in STEM fields. If this creates shortages in other fields, the market would need to adjust. That is the beauty of the free market; it has an uncanny way of adjusting to supply and demand, whereas our current system is inflexible and perpetuates the problem of shortages in STEM subjects.

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