Archive for February, 2013

When will Starbucks require PhDs?

February 21, 2013

Consider the following news items:

  1. Bachelor degree, a requirement for filing clerks
  2. A higher percentage of those aged 18-24 enrolled in post secondary education
  3. Grade inflation in Ontario high schools
  4. Proposals to increase university enrollment

Alone each fact tells a particular story. Together they point to a malaise in the educational system and a failure to adjust to labour market conditions. This is the market in which our children and grandchildren will earn their living.

1. More jobs are advertised today with an undergraduate degree as a requirement. This could be due to a combination of existing and new jobs needing more education, and/or a glut in the labour market (higher unemployment) allowing employers to ask for more education.

Other studies show that those with more than one degree have a significant lifetime income advantage over those with one degree – See “Can the Middle Class be Saved?” Atlantic, Sept. 2011.

2. The proportion of those, age 18-24, attending post secondary institutions has increased significantly over the past 30 years. This is a result of expanding the places available in universities and community colleges. As long as standards remain unchanged, then the increased enrollment means that more qualified students can now attend these institutions. However, if standards are lower then, less qualified students are being enrolled. The latter seems to be the case.

3. The screening mechanism for Ontario students applying to attend universities is the grade 12 course average received. These grades are assigned by each school. Averages in the 90’s are not uncommon and many universities in Ontario have a cutoff point in the 80’s. There is a strong incentive for schools to assign high marks in order that their students will be accepted into universities. Parents, students and their teachers have an interest in these higher grades and grade inflation has occurred since the removal of the standardized test.

In the 1960s, Ontario high school students wrote a standardized test in their final year. Those who scored 80% were named Ontario scholars and received a cheque for $100. By the 1970s, the standardized test was abolished and today each school grades its own students. Teachers warned that grade inflation would ensue and it did. From less than 20% of students being Ontario scholars, the number rose to 40% by 1980 to 60% in 2010. When it is suggested returning to a standardized test, teachers and principals oppose the move, because they feel their teaching and school is being evaluated, which it is. But the grades attained are a result of both the quality of teaching and the caliber of the students.

When students move to first year university, there is often a drop in grades and sometimes failure. Some argue that first year university has become an extension of high school, as students are required to do remedial work to come up to university standards. This tends to make the undergraduate degree less valuable and reinforces the view that at least two degrees are necessary to prosper in today’s workforce.

4.  Those, often politicians, who propose expanding the size of university enrollment would aggravate the present problem due to the absence of standardized high school exams, grade inflation leading to the waste of university resources, and the demand by employers for credentials where previously they were not required. For a list of studies of grade inflation in Ontario see

Thinking about the future

February 16, 2013

As of 2013, topics of public discourse about the global future include a number of issues, discussed briefly below in no particular order of importance. Many are interrelated and relate to the outlook for future generations

Global population

Estimates of the global population are about one billion persons in 1800, two billion in 1920, four billion by 1980 and seven billion today, doubling first in 120 years, again in 60 years and almost again in 33 years. Many of the front page issues today are the result of growth in the world population, which receives little public attention except by certain groups.

Discussion requires dealing with issues like birth control, abortion, infanticide, hunger, starvation, disease, the size and growth of national populations and many issues which people often feel uncomfortable to publicise and discuss.

Age structure of populations

Countries and societies face different issues according to their population age structure. A pyramid structure with too many young people may cause youth unrest due to unemployment, as exists in a number of developing countries. An inverted pyramid, like Japan, has different problems, such as too few active people to support a high percentage of older people. One is not more of a problem than the other. They give rise to different issues, youth unemployment in one case and support for the elderly in another. As a country’s future age structure can be estimated, policies can be implemented ahead of time.

Take the Canadian example where an ageing population is forecast. This can be mitigated by people working to an older age, full and partime, pensions paid out later, emphasis on retraining of unemployed and others where there are likely to be shortages, immigration of those with required skills, use of temporary foreign workers, outsourcing of work abroad, or domestically to people able to work at home, and the substitution of capital for labour. Numerous adaptations can be made and were made for example in wartime – see the TV program Wartime Farm on TVO which shows the adaptations which occurred in the UK during WW2.


The crossborder movement of people involves tourists, short term visitors such as foreign students, seasonal workers and permanent residents. The last are usually on the track to become citizens. Another category of migrants includes refugees. Problems arise when short term visitors do not leave the country and become illegal immigrants or visitors, and are often exploited by employers.

The supply of migrants arises as people in poorer countries attempt to improve their circumstances by moving to richer countries, or try to escape from violent situations. The receiving countries may provide incentives to attract people with certain types of skills. Unlike the past, migrants now find it relatively inexpensive to travel home and to communicate with their families. They also send remittances home which become a way of richer countries paying for the valuable resources taken from poorer countries.

National immigration policies act as filtering mechanisms and are often accompanied by policies which assist in integrating newcomers into the society, referred to as multiculturalism.

Warfare and Terrorism

Global warfare during the first part of the 20th century has been replaced first by local wars, and now instances of terrorism which have come to the fore since 9/11.  In the early part of the 20th century armies were still equipped with horse ridden cavalry and engaged in trench warfare. This was found to be expensive in terms of equipment and manpower (and animals) and the nature of warfare changed. Tanks, artillery, naval and air power began substituting equipment for military personnel.

Note that even in the 1940s the Japanese invaded and occupied Malaya using bicycles; the German army advanced into Holland, Belgium and France using horses and bicycles as well as motorized equipment. The armoured blitzkrieg which subdued Poland was accompanied by infantry on foot. Today the use of drones displaces troops with boots on the ground.

Terrorism as warfare changes the nature of war and the rules which are supposed to govern it. The original so-called rules envisaged national armed forces lined up against each other with someone at the national level in charge, willing to declare war, accept surrender, sign treaties and abide by their terms. This never happened in a clear-cut way and so the first world war morphed into a second one, followed by the Cold War and regional wars like Korea, Vietnam, Algeria, East Africa and so on. This, in turn, has morphed into guerrilla warfare and terrorism as in Ireland, East Timor, and currently the actions of terrorists, Islamists and others in North Africa and the western Mediterranean. The proliferation of nuclear weapons by rogue states or groups within those states such as North Korea and Iran has become a basis for state terrorism.

Human rights

These include a multitude of issues, prominent among them globally are the rights of children, women and aboriginal people, many of whom have not experienced the political and economic benefits enjoyed by others. While today more people live within democracies and have a higher standard of living than in earlier times, there are still many people living in abject poverty in the least developed countries, as well as the existence of poor people in richer countries. Hong Kong is among the countries with the highest per capita income in Asia, but has poor people living in wire cages stacked on top of each other.

Deficits and debt

Fiscal deficits and debts are present and future problems for governments and individuals. At present they are less of a problem for many corporations, which are holding unprecedented levels of cash and short term securities, as a result of cost cutting and unwillingness to make major new investments due to global economic uncertainty.

Increasing deficits lead to rising debt levels which at present governments and individuals can finance due to low interest rates. But if rates rise, then governments will have to cut back on program spending, which they are already doing, or go further into debt or default which Iceland did and Greece nearly did.

Individuals face similar problems. For example, with low interest rates they borrow more, often using as collateral the inflated cost of housing. When the housing bubble bursts, they cannot finance their debt and are forced to reduce other expenditures or default on their debt payments.

Deficits arise from the annual flow of expenditures exceeding incomes, leading to an increased stock of debt which is sustainable only as long as the payments on the debt can be made. As governments and individuals cut back on spending, the adverse consequences flow to other parts of the economy leading to a general downturn.

When the depression of the 1930s ended, it was associated with a world war which caused unemployed men to be employed in the forces, women filling their places in the civilian workforce, and a general economic upturn as wartime production was ramped up. The present global recession is less severe than the 1930s, but it is as well to recall what circumstances caused the economic turnaround in the 1940s.

Income inequality

This occurs within a country where a few people hold a disproportionately large amount of the wealth, or earn a disproportionately large amount of a country’s income. When carried to an extreme, the sense of unfairness, if not remedied by the political process, can lead to some form of revolt. In western democracies, income inequality has been growing over recent decades. Signs of revolt are present in European countries like Greece, Spain, Italy and France. Students have protested against fee increases in the UK and Canada (Province of Quebec).The “occupy movement” took place in the US, and the Tea Party branch of the Republican party is a protest movement, as are aboriginal protests in Canada. Use of the internet and social media facilitate the coordination of protest movements.


Healthcare costs are continuing to rise due to a combination of an ageing and longer living population in some countries, reduced infant mortality and technological change, which has improved the delivery of healthcare services for some. For many governments, healthcare costs are taking a rising proportion of total revenues with older people responsible for much of the increase.

As with population growth healthcare becomes a difficult issue to discuss because it has intergenerational features. The idea of rationing healthcare for the aged or for any group of persons is a sensitive issue, for example should hip, knee and shoulder surgery for people over a certain age be paid for by the state. Young people would probably say no, at least before remembering that they are going to get older.

The environment

Over the past half century, the environment has become a widely debated issue. Part of the discussion relates to the impact of human activity on the environment and on climate change. Another notes the fact that earth is currently in the fifth ice age,

“During the most recent North American glaciation, during the latter part of the Wisconsin Stage (26,000 to 13,300 years ago), ice sheets extended to about 45 degrees north latitude. These sheets were 3 to 4 km thick.

This Wisconsin glaciation left widespread impacts on the North American landscape. The Great Lakes and the Finger Lakes were carved by ice deepening old valleys.”

Current evidence shows the melting of glaciers and ice packs in the Arctic and Antarctic regions. The cause of the warming is debated, as will be cooling of the planet’s temperature, which will almost certainly follow centuries hence.

Energy sources

The industrial revolution from the 1800s was driven in part by the substitution of various sources of mechanized energy for human labour. The first industrial revolution lasted until about the mid 1900s  (some divide this period into a first and second industrial revolution.) Since around 1950, a new industrial revolution has emerged associated with nuclear power and developments in communications technology amongst other factors.

The demand for petroleum (oil and natural gas) has increased markedly as more countries and regions of the world have undergone economic development. But because of the environmental effects of coal and petroleum based energy sources, alternative cleaner energy is being developed. The alternatives are well known, wind, solar and water including tidal, being amongst the more prominent. While these receive much attention, the possibility of organizing manufacturing and service activities in an energy saving way also provides a means of making existing energy supplies last longer.


If the foregoing includes some of the major issues affecting current societies, what type of educational experience should young people be offered. I suspect a greater emphasis on maths and science or a stronger grounding in these areas will benefit future students. Life long learning will be needed to permit people to adapt to a rapidly changing workplace. At the same time, distance online learning will provide the flexibility for people to study at home without having physically to attend an institution.


The foregoing laundry list of issues will require involvement by governments which will increase their role, and at the same time generate further problems. Reliance on centralized government bureaucracy, expanding entitlements, and the rise of interest group politics to defend the entitlements may undermine future economic growth.

Forecasting and thinking about the future

February 9, 2013

The accuracy of weather forecasts is a reasonable question and can be easily answered for the short run? Posing the same question about economic forecasts for the coming year, for example, provides such a range of answers that it makes you wish you had not asked it. There is little consistency in the answers given, at least after reading a series of articles thrown up on the subject by an internet search engine. Warren Buffett’s view of certain forecasts is the following at –

“We have long felt that the only value of stock forecasters is to make fortune-tellers look good. Even now, (Berkshire Hathaway vice chairman) Charlie (Munger) and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”

And yet in order to make decisions for the short and longer run, everyone has to assess the future as best they can. This is also true when advising the next generation. How then to proceed given the present state of the world and how it may evolve?

Over the past few weeks, I have read numerous reports on the prospects for 2013. Initial conclusions are that there is a herd instinct to point to similar overall forecasts for countries and regions, but enough commentary on details to become confused about what might actually happen in regions of the world and in specific industries and their firms.

Regions, countries, industries and firms

A first issue is whether it makes sense to talk about the prospects for countries and regions. A region such as Europe and Asia has many countries, some coupled by economic and trade agreements. North America consists of two countries, linked to Mexico through NAFTA to make three. Russia is on its own but talked about in terms of the BRIC countries of Brazil, Russia, India and China. Geographically, the world is also split into so-called sovereign nation states, some of which have remarkably straight boundaries, as in Africa and between Canada and the US.

 Increasingly, economic interaction does not correspond to national borders as seen by the growth of international trade, and investment of all types from direct investment to short term monetary transactions. Does it make sense then to talk about the prospects for countries or even regions of the world, when borders have become so porous to trade, financial transactions, the movement of persons and communications?

Communications technology has further increased the erosion of borders and barriers established politically. Local political decision-making can be effective when discussing garbage pick-up, street cleaning, water and sewage services, but in many areas where states claim sovereignty often they cannot enforce it and may willingly relinquish it by signing international agreements. While some favour creating more countries, such as Quebec, Scotland and regions of Spain, others negotiate further cooperation between countries. Compared with the1950s when the total number of sovereign countries was in the double digits, the number is now about 200 with numerous agreements which actually weaken the sovereignty which nations claim to want.

Another way to look at and forecast global economic prospects is to ask how firms are going to perform and prosper and the industries to which they belong. A firm engages in producing a product (good and/or service) or a range of products and is diversified. It is more or less vertically integrated, now referred to as being part of a supply chain. A multinational firm will have its activities spread over geographical and political space, and its fortunes will depend on how it manages these operations which have a technical, spatial and political dimension. Some are more successful than others. Note that Ed Whitacre, the former CEO of ATT, was fingered in 2009 to become the CEO of GM when it emerged from bankruptcy proceedings. He served in this capacity until Sept 2010 with the aid of a $52bn investment from the US government and $9.5bn from the Canadian government. Whitacre had no previous experience of the automobile industry but had management skills which allowed him to lead the GM turnaround. How is it possible to predict the likelihood of success when a new leader is put in place, and was success due to his leadership?

Back to the economic prospects for 2013 and the longer run. I feel there may be less uncertainty about by how firms and industries are likely to perform, than how countries and regions may prosper. Those who think otherwise can diversify their investments in an ETF that covers a number of firms in an industry, country or region of the world or some combination of these three, or they can invest in a fund with a mix such as Thai equities and fixed income instruments. The opportunities for different strategies are numerous but the investor looks for help from forecasts. The investment opportunities for which individuals may have the most information is not a region, country, industry or firm but things like real estate in the area where they live, and hobbies which they pursue such as books, jewelry, stamps and art collecting.


Online education and distance learning

February 6, 2013

Affordable ways will be found for future generations to take advantage of post secondary education, but it won’t look like the way it does today. Aside from universities, community colleges will increasingly provide entry to the work force for well paying jobs using online learning and combining the instruction which both sets of institutions provide. The flexibility offered to students in terms of timing and costs will reduce the financial barriers which they their grandparents and parents may face.


When a twelve year old schoolgirl from Pakistan appears on a panel with Bill Gates, the President of MIT and Larry Summers at a session of the 2013 Davos World Economic Forum, it is probably worth taking note. The topic for discussion was the future for distance education and online learning, and can be viewed at 

The past

As backdrop, distance education is not new but the means of delivery is, and will likely have a major impact on how education services are delivered, the opportunities for teachers and students, and the undertaking and distribution of research findings. When the full impact will be felt is unknown, as Larry Summers stresses in the video, since the idea and practice is not new.

Correspondence courses, the Open University in the UK, MIT open courseware, courses delivered on television with tapes available for replay at the students’ convenience are all examples of the lecture component of distance education. The difference today is that the Internet provides a means of delivery which magnifies the opportunities for connecting the best teachers with students anywhere in the world who have access to the technology. Not everyone does, but this population is growing rapidly. It seems surprising that the education industry has been slow to adapt to the opportunities, or perhaps it sees them as threats. Less teachers may be needed and those like myself who enjoyed a tenured existence will find diminished opportunities. Governments may however experience cost savings.

Present and future

Online learning is a branch of distance education. It can apply to all stages of education but is discussed here in terms of post secondary education especially at universities and colleges. These institutions offer a package of services, teaching, with courses/seminars/laboratories and research. Onsite education provides accommodation and meals plus a whole range of activities such as sports, clubs and various forms of organized and casual social activities. For payment purposes these are all bundled together and some private universities will charge over $50,000 a year for the onsite experience. The parts can now be more easily unbundled and priced separately. Publicly funded universities may cost the student less in terms of fees with the balance paid for from taxation, and sources like foundations.

Universities supply classroom instruction with assignments and laboratories depending on the discipline. These can be offered separately from accommodation and other aspects of student life. And the student’s experience will differ as does taking a correspondence course at home versus on campus with lectures and accommodation. What is likely to change with internet technology is the delivery of the courses, with students able to design the timing and location of their coursework, and arranging to participate in other aspects of student life in ways which may not involve a university or college.

The interaction of students on campus can be replaced in part by online interaction, which some instructors have found to be a positive learning experience for themselves as well as their students. The students teach each other and the instructor becomes aware of what aspects of the instruction need to be improved.

By unbundling the university experience, the students can pick and pay for what they want and can afford. Providing credentials for the courses taken will be an important part of the process, and ultimately the market will decide which courses are worth higher salaries. Even today, the university brand name is most important for the initial job, and after that it depends on a person’s performance.

A frequent comment about online courses is that it is not the same as an on campus experience. Clearly true, but new possibilities open up for those who cannot afford to attend a campus, and for students anywhere in the world who have internet connections. One of the robust findings of development economics is that development is positively correlated with female education. If the same is true for both sexes, then the prospects may be improved for those presently living in poverty.

Universities also provide research output valuable to society. Those faculty capable of producing the best research may not be the best teachers so that experimentation with the technology will be required to provide both outputs.


A business model

Experimentation is underway to develop a business model for online learning. Some like Athabaska University in Northern BC offer only online courses and require students to pay upfront to take the course. Others provide the courses for free, but require payment to take the exam and receive a course credit. If provided by a private firm, the credit may or may not be accepted by an employer, but in at least one instance a university has accepted for credit a privately supplied online course. At the University of Wisconsin students requiring to complete their course credits can take online courses and never attend the university for these in order to gain a degree. Undoubtedly, further models will be tried and a number may turn out to be cost effective as students and universities become familiar with the offerings, and learn from the experiences of others.

Carpe Diem and prospects for our grandchildren

February 1, 2013

Each day seems like the countdown to the end of holidays. At boarding school I was home sixteen weeks each year, a month at each of Christmas and Easter, two months in the summer, and at school for the remaining time. During the holidays I counted the days to the inevitable return to school. Late in my eighth decade, the situation is similar. The end is in sight, carpe diem the motto, and decisions to be made for what do with the time remaining.

As a start, I would like to try to pass on to my grandchildrens’ generation things that I have learned often the hard way, as well as things which I think may affect their lives. This coincides with another interest, which is trying to understand the economic, political and social changes now taking place in the world. While these and other disciplines are taught separately, they are, in my mind, highly interconnected, although university departments continue to engage in turf warfare. Questions which arise are, what is happening in the global, national and local economies, and how can the next generation prepare for these changes and their likely effects.

Davos 2013 World Economic Forum

The 2013 Davos meeting lists five metrics of the global economy, by country: GDP annual growth rate, government debt to GDP ratios, income inequality, unemployment and CO2 emissions – details are listed at:

The data focus on a macro and business cycle approach to economic conditions to which inflation rates might be added. Many countries are currently experiencing low inflation, low growth rates, higher than desired unemployment, high or rising debt to GDP ratios. CO2 emissions are a more recent addition to these indicators, but surely welcomed by Al Gore who stands to gain about $70 million from the sale of Current TV to Al Jazeera, a firm backed by the government of oil producing Quatar.

One question to ask is whether business cycle analysis is the most useful way to understand the global economy. Or are we experiencing, as some suggest, a type of industrial revolution which is affecting how economic conditions are changing. Some see the present as the second industrial revolution. The first started in the 1800s and continued to about the 1980s.  Others like Jeremy Rifkind divide the time differently and see it as a third revolution:

“The great pivotal economic changes in world history have occurred when new energy regimes converge with new communication regimes. When that convergence happens, society is restructured in wholly new ways. In the early modern era, the coming together of coal powered steam technology and the print press gave birth to the first industrial revolution. It would have been impossible to organize the dramatic increase in the pace, speed, flow, density, and connectivity of economic activity made possible by the coal fired steam engine using the older codex and oral forms of communication.

In the late nineteenth century and throughout the first two thirds of the twentieth century, first generation electrical forms of communication—the telegraph, telephone, radio, television, electric typewriters, calculators, etc.—converged with the introduction of oil and the internal combustion engine, becoming the communications command and control mechanism for organizing and marketing the second industrial revolution.

A great communications revolution occurred in the 1990s. Second generation electrical forms of communication—personal computers, the internet, the World Wide Web, and wireless communication technologies—connected the central nervous system of more than a billion people on Earth at the speed of light. And, although the new software and communication revolutions have begun to increase productivity in every industry, their true potential is yet to be fully realized. That potential lies in their convergence with renewable energy, partially stored in the form of hydrogen, to create the first “distributed” energy regimes.”


Whether it is the second or third revolution many would agree that major changes are taking place in numerous sectors. For example, communications technology is affecting industries and activities such as banking and finance, advertising, publishing (newspapers, magazines, books, blogs), postal services, telephony, music, video (TV, film), education, the provision of government services and military and defense activities such as the use of drone aircraft, and those industries where there can be further substitution of capital for labour, and the outsourcing of production.

Those who study the effects of technology suggest that changes todate are the first five percent of what is to come. My lay conclusion is that major changes are under way with implications for governments, firms, non-profit organizations (religious, charitable, educational, hospitals and others), and for individuals. This is where the rubber hits the road for future generations. Can our generation provide any useful advice for their education, training and the careers which they may want to pursue? Frankly, I am doubtful, but further discussion and input from others might lead to something useful.

What’s been happening?

One symptom of recent changes is what is taking place in the labour force. For Canada, the Dec 2012 labour force surveys shows 79% of the labour force in services and 21% in goods producing industries, 18% in manufacturing and 2% in agriculture. Thirty years ago the percentages would be lower for services and higher for manufacturing. The trend throughout North America is for increased employment in services at the expense of goods production in general and manufacturing in particular.

Associated with these changes is the substitution of capital for labour, the agricultural sector being a prime example, but also in manufacturing; and the unbundling of services so that those  previously undertaken in manufacturing, for example, are now outsourced to service sector firms with some services outsourced abroad, such as call centres and printing. Some foreign outsourcing is now returning to North America for various reasons. For example, at times it is hard for Canadians to comprehend foreign accents, and in manufacturing, a small printer type machine through layering can produce inexpensively a customized machine part. These developments may return jobs to North America.

So who has benefited from these developments. A September 2011 Atlantic article, “Can the Middle Class Be Saved?” by Don Peck examines how technical change has affected job opportunities and educational requirements in the US labour market. Canada is likely to be similarly affected.

“College graduates may be losing some of their luster for reasons beyond technology and trade. As more Americans have gone to college, MIT economist David Autor notes, the quality of college education has become arguably more inconsistent, and the signaling value of a degree from a nonselective school has perhaps diminished. Whatever the causes, “a college degree is not the kind of protection against job loss or wage loss that it used to be.”

Without doubt, it is vastly better to have a college degree than to lack one. Indeed, on a relative basis, the return on a four-year degree is near its historic high. But that’s largely because the prospects facing people without a college degree have been flat or falling. Throughout the aughts (2000 to 2010), incomes for college graduates barely budged. In a decade defined by setbacks, perhaps that should occasion a sort of wan celebration. “College graduates aren’t doing badly,” says Timothy Smeeding, an economist at the University of Wisconsin and an expert on inequality. But “all the action in earnings is above the B.A. level.”

“ For more than 30 years, the American economy has been in the midst of a sea change, shifting from industry to services and information, and integrating itself far more tightly into a single, global market for goods, labor, and capital. To some degree, this transformation has felt disruptive all along. But the pace of the change has quickened since the turn of the millennium, and even more so since the crash. Companies have figured out how to harness exponential increases in computing power better and faster. Global supply chains, meanwhile, have grown both tighter and more supple since the late 1990s—the result of improving information technology and of freer trade—making routine work easier to relocate. And of course China, India, and other developing countries have fully emerged as economic powerhouses, capable of producing large volumes of high-value goods and services.

In March 2011 the national (US) unemployment rate was 12% for people with only a high school diploma and 2% for those with a college degree.”

The complete article is worth reading. It leans more to the view that North America is experiencing a rapidly unfolding industrial revolution than a typical business cycle recession.

As usual comments would be appreciated and suggestions of other readings on this topic.