Archive for the ‘Education’ Category

Services are everywhere, some well and some less well paid

February 4, 2017

Economic policy is being driven by the belief that good paying manufacturing jobs are being lost and replaced by lower paying service sector jobs, and that the manufacturing jobs can be recovered by protectionist trade policies and subsidies.
It is the case that the share of employment classified as manufacturing is declining and that of services increasing, but the reasons and implications need to be understood. This phenomenon is occurring in all developed countries. A similar change took place in earlier times, when the share of employment in agriculture declined while agricultural output increased. The loss of agricultural jobs was offset at least in part by growth in other parts of the economy, especially manufacturing. What needs understanding today are overall changes in the economy and how jobs classified as manufacturing and services are recorded.

Employment data by firm and industry are collected on a plant and enterprise basis where the enterprise may consist of several plants. Each plant typically employs a combination of manufacturing and service sector personnel. The former include assembly line workers and the latter accounting, legal, secretarial and others. While the latter appear in national statistics as employees in the manufacturing sector, they are actually providing service-type employment.

If a firm decides to contract out the accounting and legal work to service sector firms which specialize in these activities, then manufacturing employment declines and services employment increases. Overall employment may remain unchanged.
(By the way a similar phenomenon occurs when plants and firms are allocated to industries. If a plant produces mainly automobiles but some bicycles, it will be allocated for reporting and data collection purposes to the industry where most of the production occurs, in this case automobiles. The bicycle industry will in turn under-report production of those bicycles produced in the automotive industry).

The loss of jobs in manufacturing can occur because manufacturing firms reorganize their operations by outsourcing service sector jobs. The reverse may be true if they insource certain services. The former case may be one reason for the loss of manufacturing employment. As technological change occurs, manufacturers are continually changing their production processes. The use of robots for humans on assembly lines will reduce the number of assembly line manufacturing workers, but increase the number of workers required to service the robotic equipment, positions that did not previously exist.

The services-manufacturing dichotomy means that a worker who uses a wrench on the assembly line is classified as a manufacturing employee, while a worker who programs a computer to instruct the robot to do the same work is a service worker. The distinction between what is considered manufacturing and services work can be messy.

Magnus Lodefalk, who has studied this issue for both Sweden and other industrialized countries, notes the following: (Review of World Economics (2014) 150:59-82)

Manufacturing in industrialised countries is intensifying its use of services, and there are indications that the share of services in total turnover is rising. On the input side, the ratio of bought-into value added services has increased since 1995 across all manufacturing industries, and in-house services production has also expanded. The manufacturing sector increasingly employs mathematicians, engineers, computing professionals and business professionals. Services used or produced by manufacturing firms include research and development (R&D) services but also extend to knowledge or intangible capital services more generally, as well as to services such as telecommunication and transport. On the output side, the share of services in total turnover also has grown since the mid 1990s for some countries. Regarding export, Lodefalk studies Sweden and finds that manufacturing’s service exports have more than doubled between 1998 and 2006. There are arguments for the ability of services to support exports in manufacturing. Services may help firms to overcome costly informal barriers, such as asymmetric information, in international trade. Changes on the demand side in industrialised countries are also likely to favour manufacturing firms that increase the services content of their offerings.”

 

 This is not to ignore the simultaneous growth of low paid service sector jobs in food and beverage operations and homecare businesses among other. What is happening is the simultaneous growth of highly paid skilled jobs in manufacturing and some services, and the growth of low paid service sector jobs in certain areas. The medium skilled jobs are in decline or growing slowly. A TED lecture by David Autor (Dec.2016) is worth viewing as it sets out how the skill structure of the labour force changes and is always changing.
The implications include the need for retraining existing members of the labour force and assuring that young people, new entrants, get the right skills. There is nothing new about such advice except that the speed of change may be faster now and educational and training institutions slower to provide the required skills. People can expect this to happen throughout their working lives.

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Security versus Abundance

January 9, 2017

Economics is a discipline often introduced by focussing on scarcity, the scarcity of resources to satisfy human and animal wants, although the latter are usually ignored. An alternative approach is to focus on underutilized resources as illustrated by Uber and Airbnb. Both illustrate the absence of scarcity. Cars spend much of their lives parked and not providing transportation services, except as an option good for people to use when it suits them. Uber arose as owners decided that they could use their cars to make money when they were not needed to provide the owners transportation. The cars were underutilized resources and a way was found to make use of them. Scarcity was not the issue underutilization was.

The same could be argued for Airbnb where owners had space in their homes for others to use. Scarcity of living space could be reduced if not overcome in many societies if a process of sharing was organized. Bed and breakfast arrangements have been around for years and Airbnb is just a way of extending these hotel-like activities.

Anything which is a public good tends to be underutilized such as the text of a book, an empty park, road or beach. At home, wardrobes and chests of drawers hold clothing which is not being used. A surplus rather than scarcity is the issue because people want choice and are prepared to use their incomes to create options, but these require creating access to a surplus of clothing on hand.

Other examples illustrate not-scarcity, a surplus or underutilized resources include:

Cars being driven with no passengers, only the driver.

Truck owners try to avoid dead-heading by arranging full loads for their lorries travelling in both directions between two points.

Shops with unsold goods, especially when expensive and held for a long time. Annual sales are one way of disposing of surplus goods.

Buildings such as schools and universities which are only used for part of each day, and part of each year. Accommodation and lecture rooms are often hired out for other uses.

Empty warehouses and buildings of all kinds.

Trained workers unable to find paid work. OK, scarcity of jobs is the flip side to unemployment.

Underutilized resources occur with the sun in terms of both heat, light and energy as well as with wind, tides and waterfalls.

Recycling is a way of reducing scarcity by making more intensive use of resources.

This is not to suggest that scarcity is unimportant in examining economic issues, but to note that especially in high income societies, the issues are also often those of coping with underutilization not scarcity. If the focus is switched to developing countries, then there is obvious scarcity related to items like health, education, housing, safety, food, and water. And in developed countries examples of scarcity can be found. It just seems misleading to initiate the study of economics without noting that scarcity is not the only issue to address. Where scarcity is paramount is in the finite number of hours in the day, but these too can be underutilized.

Meeting with remarkable men – one occasion

January 3, 2017

In July 1966, I was fortunate enough to be introduced to and have lunch with Ronald Coase, the 1991 Nobel prize winner in economics. His citation included two articles, The Nature of the Firm and the Problem of Social Cost. Coase was a close friend of Basil Yamey his colleague at LSE and my PhD supervisor.

Coase and Yamey had undergraduate degrees in accounting and business before pursuing academic careers as economists. Both were interested in how firms worked and how and why transactions took place. For Coase, theory was derived from observation, and while he was not averse to mathematics, he felt it should come after studying actual agreements and how conditions and obligations were established.

In 2003, at age 93, Coase gave the Coase Lecture at the University of Chicago Law School. He said that he found it odd to be giving the Coase Lecture as every time he spoke it was a Coase lecture. What is of interest to economists today is his description of how the Nature of the Firm evolved, first as an undergraduate essay in 1929 which was turned into a published article in Economica in 1934, but which in 2003 he considered an undergraduate essay. At the time, he said the article drew no attention unlike his second famous article The Problem of Social Cost.

As a student while studying business and accounting at LSE Coase was awarded a travelling scholarship to the US where he visited a number of firms observing how production was organized at the plant level as well as at head office. A combination of lectures, onsite visits and interaction with other students, Coase viewed as a recipe for the development of both theories and policy alternatives. One implication today is the importance of both the school you attend and the calibre of fellow students. The two are probably related.
The lecture is posted on the University of Chicago Law School website under 2003 Coase Lecture.

Where will the jobs be? (2)

July 12, 2016

Those who subscribe to a “lump of labour” view believe that there is only so much work to be done, and when, for example, machines substitute for what was previously done by humans there is nothing more, or something less, for workers of any age, sex or race to do. I and many others don’t believe this is the case, but there are serious questions about what displaced workers will do and, for example, whether they can be retrained for other jobs.

In thinking about this question, consider the following, in no particular order:

  1. In countries like Germany and Japan, the population is ageing and the concern is for a future workforce shortage. This explains Germany’s welcome for refugees and displaced persons from the Middle East and Africa. Japan so far is reluctant to dilute its native population with foreigners, and will reap the consequences if it fails to do so. As people are living longer, the present retirement age can be extended providing partial relief, but there is a limit.

 

  1. Unemployment due to the need to adapt to changing technology – the Schumpeterian case of creative destruction – that is the introduction of different ways to produce familiar as well as new goods and services, gives rise to the need for retraining. This is easier for some, say younger folk, than others, but is an option that almost always occurs in similar circumstances. How fast workers can adapt is an issue. For example, a change from manual work to engaging with digitized production processes may require more of a generational change than a simple retraining course. If the change is too slow or virtually impossible then other measures, preferably of a temporary nature, can be tried.

 

  1. Young people have the flexibility to aim for employment in areas where demand is growing in both low and high skilled occupations, and to take courses accordingly. It is pretty obvious that in higher income countries there is strong demand for service sector employees in food and other types of retail operations. The job vacancy signs are posted in store windows as well as in help wanted electronic and other billboards. No, they don’t pay well, frequently offering minimum wage but they exist. Some taking these jobs may decide to experiment themselves by starting their own businesses.

 

  1. There is an active market for caregivers for old people (like myself) and for children in rich and poor countries as well as for healthcare workers. Where available nationals won’t apply for these jobs, temporary or permanent foreign workers are often hired. The work is there. The locals don’t want to do the jobs. In general, employment is increasing in the service sector in middle and upper income countries. There is no shortage of work, often a shortage of the type of work people may be willing to do.

 

  1. The educational and training paths may be out of whack with available job opportunities. A higher percentage of the population in upper income countries now go to university than previously, but the available jobs may not need degree training. Often a rewarding career in the trades benefits from attending community colleges where skills required from emerging technologies can be acquired. Past emphasis on the three Rs may now need the addition of skills like computer programming and apprenticeship-type programs. (I learned the basics of Fortran programming in the 1960s, and whereas I never followed this up and could not earn a living at it, I know what is involved. It may now be a necessary and rewarding skill in many industries subject to the use of computers.)

 

  1. There is considerable research available that addresses the question of where future job opportunities lie. I will refer to these in a future posting.

 

None of the foregoing suggestions involve rocket science. They do suggest ways of looking at the future labour market and its required skills. They do indicate a willingness to be adaptable and engage in life-long learning, something that recent technology facilitates. In my view, there is no fear of a finite lump of labour syndrome.

 

Where will the jobs be?

July 11, 2016

Global affairs is a stew with many ingredients and seasonings.  The flavours vary in different parts of the world. As of summer 2016, they include a US election, the fallout from Brexit, war and terrorism in the Middle East and parts of Africa, a stuttering Chinese economy and politics in the South China Sea, tensions on Russia’s European borders and events in numerous other places. Keeping track is challenging, let alone trying to understand how they interact.

 

An analysis of international affairs used to be simpler or at least appear to be. Parts of the world were not as connected as they are today, largely as a result of falling communication and transportation costs. These have lead to changes in the way people move, where and how they travel, as well as how, and the frequency with which they talk to each other.

 

When I moved to Canada from the UK over 60 years ago, it took ten days to travel from London to Vancouver by train, boat and train. A long distance phone call was exorbitant, the $3.00 per minute in 1962 dollars would translate into over $21.00 in today’s dollars. You just did not call. Snail mail and telegrams were a cheaper substitute. Few today using the internet would know how a telegram was transmitted and its cost. One result is that information and events which seemed to be unconnected no longer are, meaning that analysis and forecasting of events are much more difficult….at least for me.

The future for jobs?

Consider the issue of jobs and employment. With the mechanization of many jobs, how will future generations be employed? This question is frequently posed to grandparents enjoying , at least at the moment, a comfortable retirement. The following is one way to think about it.

First, reflect on what has happened to employment and occupations since the 1900s. The level of unemployment (employment) has fluctuated, but except for the 1930s and a few shorter periods it has been around 5% or less. WW2 solved the unemployment crisis and brought women into the workforce for wartime, if not later peace-time, production. It provided an enormous fiscal stimulus, and the immediate postwar period lead to civilian spending which was depressed during the war. When I first studied economics, a big macro question was whether there would be a return to the depression years. It did not happen for what now appears to be obvious reasons, but didn’t at the time.

Second, technological change always brings employment impacts in terms of level and type of jobs. Around 1900, about 25% of the labor force was in agriculture, today it is less than 2% in North America, while farming output has grown enormously, and with it rising labour productivity. But this took place with the growth of jobs associated with mechanization, and the development of improved strains of meat and crops. In a sense, jobs in agriculture morphed into jobs in machinery, equipment, agriculture research labs and firms producing new and improved plants and animals.  These were not counted as farm workers but in an indirect sense they were.

 

Similar adjustments took place in other industries as technology peculiar to those industries took hold, none more so than recently with the introduction of computers, the internet and all that. Jobs in almost all industries except perhaps hairdressing and undertaking have been affected. As new technologies are introduced, some jobs become obsolete while others open up often requiring a different type of education and training.

 

One difference is that today’s technological tsunami may be having a faster and perhaps more devastating effect on jobs than did the previous agricultural one. It has translated understandably into a political backlash as seen in both the US (Trump, Sanders and the dislike/distrust of Clinton) and Europe with Brexit, and the rise of mainly right wing political parties seeking to distance their countries from immigration, the EU and its bureaucracy.

 

How will this all pan out? Only God, Allah, Buddah or Brigham Young probably knows. I don’t. My gut instinct is that over time economic adjustments will be made that are not too disastrous for those of us and our children, who at present enjoy a remarkably high standard of living, at least relative to a century or even half a century ago. What it will require is for many existing workers to be retrained, and for new entrants to the labour force to receive a different type of education/training.

What type of education/training?

In the last 50 years, the proportion of people attending university has risen markedly as many feel that a degree is necessary for lifetime success. The data show that those with a degree tend to have higher lifetime incomes, than those with only a high school diploma. But at the same time many successful entrepreneurs were university dropouts including Bill Gates from Harvard – later he received an honorary degree from the university. People with technical training can often earn six figure salaries. Granted these are a small proportion of the population and workforce, but they point to one road to employment opportunities.

In recent years, community colleges providing education and training in the trades are experiencing increased enrollment as young people, and older people who have lost their jobs, receive training suitable for today’s workforce. This is merely a continuation of the idea apprenticeships and that education is a life-long process and not just undertaken at the start of life. A combination of university courses and trade skills is one option, as is a mix of academic courses and work related activities including apprenticeships. All point to adjustments being made and the need for these to occur during a person’s working life.

 

More on what and where are the jobs of the future? A topic for a future posting.

 

The Third Wave by Steve Case – Review

May 1, 2016

When historians come to write about the birth of the internet and globalization, they will research what the entrepreneurs did and what they thought. Steve Case will be one of those sources, and his book, The Third Wave, An Entrepreneur’s Vision of the Future (Simon and Schuster, 2016) will an important read. Walter Isaacson, who provides the book’s forward, will be another source. Among his publications, Isaacson has written The Innovators: How a Group of Inventors, Hackers, Geniuses, and Geeks Created the Digital Revolution (Simon and Schuster, 2014). Both authors assess where we have come from and where we may be going.

Case’s title stems from Alvin Toffler’s The Third Wave published in 1980, and described by its publisher’s blurb as:
Sweeping across history and the future, this stunning portrait of a new civilization springing up across the globe…. It reveals the hidden connections among today’s changes – in business, family life, technology, markets, politics and personal life.

Toffler’s Third Wave, a follow-up to his Future Shock published in 1970, describes events following the agricultural and industrial revolutions. Case, on the other hand, examines the third wave of the internet revolution…..or a third wave of what Toffler was describing as his third wave.

In 1980, Toffler could only imagine how economies and societies might develop. Thirty-six years later, Steve Case, provides an update and leads the reader into an idea of what the future of the internet might bring. It is written by someone who has played a major role in this ongoing revolution both as an entrepreneur, and as a person who has known other entrepreneurs and their companies. He is described as follows on the US Presidential “Jobs and Competitiveness” website”:

Steve Case is one of America’s best-known and most accomplished entrepreneurs and philanthropists, and a pioneer in making the Internet part of everyday life.    Steve co-founded America Online (AOL) in 1985, when the Internet was in its infancy.  Under Steve’s leadership as Chairman and CEO, AOL became the world’s largest and most valuable Internet company.  AOL helped drive the worldwide adoption of a medium that has transformed business and society.  AOL’s early focus on ease of use and social media set the stage for its rapid growth, and at its peak nearly half of Internet users in the United States used AOL. In 1992, AOL became the first Internet company to go public, and was the best performing stock of the 1990s, with a 11,616% return.   At the peak of the Internet boom, Steve negotiated what remains the largest merger in business history, bringing together AOL and Time Warner in a transaction that gave AOL shareholders a majority stake in the combined company.   To facilitate the merger, Steve agreed to step down as CEO when the merger closed in 2001.  He served as Chairman of the Board of the combined company (then known as AOL Time Warner) until 2003.

Steve Case provides a rich menu of observations on the internet revolution and globalization. My choices derive from my tastes. Other diners should read the book to find what satisfies their appetites. In the interests of brevity, I will summarize mine, in no particular order, as follows.

  1. The road to entrepreneurial success is never smooth. Many projects never make it, and the ones that do proceed often face dead-ends and are forced to take new routes. Nothing new in this, but Case provides chapter and verse of how it worked for him. Many entrepreneurs are reluctant to document setbacks.
  2. Entrepreneurial success is often a case of getting the right team together to deal with different aspects of the project, where the members feel free to criticize (assess) each other. This is similar to what happened with a successful comedy team like Monty Python, where success resulted from a team effort by individuals who had to suppress their prima donna genes.
  3. Individuals who succeed in internet related endeavours need not have much or any post secondary education. They will often read in a wide range of subjects, play mind games like chess or solve a Rubik’s Cube, experiment with machines in their garage or basement, and have a sports related interest like basketball, fitness, running, yoga, or tai chi.
  4. Once a firm is set up and receives venture capital, it may carry on for a time losing money and having to depend on angel investors. Maintaining good relations with those supplying the money in the early stages is crucial, or the project will often die on the vine.
  5. Steve Case provides a clearly written case of what worked and what didn’t in his own case. He illustrates how success often depends on having the right team of players providing various inputs. Often one person is celebrated as the successful entrepreneur, but it is because he (or occasionally she) has a support group that makes it possible.
  6. Unlike many in the private sector, Case explains the importance of the role of government in nurturing new ventures, which are going to upset the way existing industries are organized. As technology affects industries, so governments will have to make policy changes to ensure that the economic and social benefits filter down.

 

  • Familiar internet related names include, Geoff Bezos, Sergey Brin, Steve Case, Bill Gates, Steve Jobs, Pierre Omidyar, Larry Page, Steve Wozniak, Mark Zuckerberg, and companies like Amazon, AOL, Apple, eBay, Facebook, Google, and Microsoft…try matching people with companies. These names are related largely to the first two waves of the internet. What Steve Case writes about is how these and other companies will affect individuals, industries and economic activities in the future.
  • For example, education and health care absorb a large share of resources in all countries. They are expensive to run and often have inefficiencies which can be reduced by the use of technology. Education is experimenting with online classes. At one time I thought they might replace many onsite classes, but what seems to be happening is that onsite lecturers are often providing online versions of their courses to accompany the lectures. Students have the option of attending the live lecture and an online version, or only the online version. If the live lecture is at 8.30am, it’s not difficult to imagine what the choice will often be. Another issue is to decide how to give a credential for taking an online course which is recognized by employers, a not unsolvable problem, especially if there is money to be made.
  • Healthcare is developing means to monitor and prescribe for patients at a distance which can revolutionize the way these services are delivered. The technology is involved with medicine in many other ways.
  • Airbnb in 2015 was valued at $25bn. It is the largest hospitality provider in the US and does not own a single hotel (Case 2158 on eBook edition)….a challenge to the hotel industry.
  • Uber has shaken up if not destroyed the traditional taxi industry. The company does not own a single car, but acts to provide the service. The next stage, driverless cars and more importantly driverless trucks will bring further radical change to the taxi and trucking industries. Watch out for protests by truck drivers.

Many more examples could be quoted about how traditional economic sectors will be affected, and there is much more to garner from this book. I strongly recommend it to anyone interested in how entrepreneurship works, and how these evolving technologies will impact economies and societies. It is a must read for entrepreneurs, and for those of us with grandchildren who are going to live in this changed environment.

Searching for employment openings

April 17, 2016

The third industrial revolution beginning around the 1960s has forced many occupations and industries to alter the way they operate. For example, all branches of the media, education, health care, the configuration of industries and occupations have undergone some transformation. Over time, different skills are needed requiring existing workers to be retrained, and new workers to receive the necessary training.

Consider two examples:

  1. Farming, over the past hundred years, has gone from being less labour to more capital intensive with mechanization, new strains of grains and breeds of cattle. More output is produced using both the product of researchers working in labs and less direct farm labour. In the past, refrigeration and railroads made an enormous difference to both output and the distance between producer and consumer. Those losing their farm jobs either had to retrain or move to another occupation. Adjustments were easier for some than others.
  2. Computers and the internet have an enormous impact on the way many goods and services are produced and distributed. Authors can deliver manuscripts electronically to publishers, who in turn make them available for readers to peruse and buy online. Cut out of this business are printers, wholesalers, bookstores and libraries, although the last may loan hard copies as well as eBooks.

In earlier times, changes occurred with the introduction of steam, the internal combustion engine and electricity. It is debatable which of these have had the greatest impact, and perhaps it is unimportant to know the answer. What is of interest is who is affected, and how capital and especially labour can adapt to the changes today.

The adjustment process is often associated with the argument that good, meaning higher paid, manufacturing jobs have been lost, while there has been a growth of lower paid unskilled jobs. Some, especially older workers, may find it difficult to retrain at all. For example, those employed using metal print type found it difficult to adapt to computer typesetting. Some did, while those entering the labour force have the opportunity to receive the education and training required by the technology in use today.

 

Employment statistics today show the allocation of firms to industry classes defined in earlier times, when the inputs and the technology used by these firms were different.

Consider agriculture. Employment in agriculture is about 2% of the Canadian labour force today, compared with around 40% in 1900, while agricultural output has expanded enormously. This is due to the output of the farm machinery industry (eg. tractors and combine harvesters), refrigeration, transportation, research into the production of new strains of grains, vegetables and fruit amongst others. Those working in these industries are counted as employees of these industries, not as agricultural employment. The loss of farm related jobs is not as great as imagined.

Consider automobile manufacturing. Output is more automated now than in the past, requiring less labour on the production line. At the same time, persons are needed to build, program and maintain the machinery used in production. These won’t be counted as part of automotive employment but as part of other industries. Similar changes can occur when a manufacturing firm has an accounting and legal department, and then decides to contract out the work to independent firms. Manufacturing employment declines and services employment rises. The output may remain unchanged.

A survey of employees by wage level does show that the proportion of lower wage and part-time jobs has increased. Why? It can mean that existing workers have not adjusted to the requirements of different industries and sectors, and may do so in the future. It may be that new workers are not receiving the type of training required by firms. More students do seem to be gravitating to community colleges, where trades are taught, either in conjunction with university classes or as a separate course of study. The conclusion that Canada is losing well paid jobs has to be understood in context.

An undergraduate degree in the arts does not hold out good job prospects, unless accompanied by postgraduate study, and work experience mixed in with academic study. A strong CV includes volunteer as well as paid work while studying and definitely during vacations. It may start with baby-sitting, gardening and dishwashing. There is no shortage of these types of jobs. Also an employer will search the internet for postings and communication by an employee applicant. Nothing is confidential and never has been.

A bleak future for democracy

April 2, 2016

Student governance at the University of Ottawa illustrates how the practice of democracy has been ably passed on from older to younger generations. Low voter turnout with a first past the post system, absence of financial accountability, and refusal to provide information are three examples of how the student council operates.

Aedan Helmer in the Ottawa Citizen, A2, April 2, 2016 notes that:

  1. About 8% of the 36,000 eligible voters took part in the latest election for the Student Federation. The unopposed president received less than 5% of the electorate (1699 votes) in a first past the post system.
  2. Each voter paid about $175 in dues to fund the council which collects $5 million dollars annually. The elected executive members get paid for their services.
  3. The outgoing executive inherited a surplus of nearly $10,000, and left a deficit of over $514,000 to the newly elected executive.
  4. Part of the deficit is due to the premiums paid for an optional health and dental plan for students where rising costs have not been addressed by successive councils.
  5. The Council has imposed a de facto gag order on elected members talking to the media.

 

Successive elected council members have learned from their elders how the system works and how to work the system. This example does not bode well for democracy.

Funding higher education

February 28, 2016

Water bed economics or how entitlements can have perverse effects

What is good news for Ontario students from low income families may not be good news for the education which they hope to receive. One reporter wrote that university administrations, faculty associations and student groups all hailed the changes.

What they wish for is greater affordability for low income students. But what will they get?  Ontario universities will have one source of revenue reduced. How may they respond? The alternatives are to raise fees for students with family incomes above $50,000 a year, to ask the Ontario government to make up the difference, or to cut costs. The first will not be welcomed by the affected families; the second will be resisted by a government already running a deficit; and the third can result in lower quality education and the migration of students to universities outside Ontario leading to a further loss of fee revenue.

This is not to argue against aiding low income families sending their children to post secondary institutions, but alternatives need to be considered. Australia provides one example. Students are able to borrow in order to attend university. Repayment is not required until the student has graduated and is employed, and the terms vary with the earning power of the student. The details are more complex but the aim is to make education available to all qualified persons regardless of income.

Granting an entitlement without explaining the likely consequences may be a good way to buy votes, but can result in unfortunate costs. This is a case of water bed economics. Exert pressure in one place and it will cause a bulge elsewhere.

Technology comes to post secondary education

March 10, 2015

 

Introduction

The plight of sessional lecturers is a lesser issue, compared with the probable plight of all lecturers and the universities where they work. Online degrees at a fraction of the cost of on campus degrees pose real competition. So far online has not eaten into the on campus experience, but it will as soon as these course are seen as providing an official credential. And that will begin to happen soon – or another of my predictions will be proved wrong.

You can stop here and read Kevin Carey’s New York Times article of March 5, 2015, “Here’s What Will Truly Change Higher Education: Online Degrees That are Seen as Official.”

 

The potential of online

Higher education has become ridiculously expensive with the combination of fees, away from home living costs and lost income from not working. The on campus experience has features not available from online learning, but there are other ways of gaining this experience. Many students today are on campus and on their cell phones and pads anyway, interacting with other people and web material electronically rather than face to face. Universities, in order to compete for students, have turned the on campus experience into a country club-type ambiance with athletic facilities, social clubs, sports medicine clinics, restaurants, shops and services not directly related to traditional delivery of disciplinary learning.

 

Those who want this full monty educational experience will have to pay for it, and the Ivy League and Oxbridge experience will be less affected. Those more concerned with an education in a narrower sense will now be able to afford it with a credential which employers recognize. I know, the narrower experience is not what education is all about, but there are now more efficient ways to get a sound education in a cost efficient manner, plus the time and means to buy the other aspects (the country club trimmings) as well. At least, that is what Kevin Carey argues and it seems to make sense.

 

The tsunami-like technological changes which have hit the banking, movie, music, television, telecommunications, publishing (books, newspapers and less so magazines), retail and manufacturing industries is coming to education. Many instructors in schools and colleges are already embracing the technology in their teaching in traditional institutions. Classroom lectures are often available as power-point presentations, sometimes online before the live lecture. A student has the option of attending the live lecture but need not, and online discussion groups may also exist.

 

Off-campus learning started way back with correspondence courses, and in the 1960s with televised courses, the Open University in the UK, and today online courses. (Carleton University was one of the early providers of televised courses with tapes available for student use, but it never experimented with the technology to develop other options. I once attended a lecture where the course was given on a screen in a lecture room, darkened like a movie theatre. A student next to me watched for a few minutes, and unimpressed said she was going to the do her laundry. I have no idea whether she watched the tape later, but it forever reminded me to try to be interesting when lecturing, or as L.A.G.Strong, a literary critic wrote “Think of the reader not yourself. Make everything interesting. Write about everything – even linoleum.”)

 

This raises the current dispute involving part time or sessional lecturers who argue that their work load has increased without a commensurate increase in remuneration. If their contractual terms have been broken, or if they want to strike for better terms, the procedures are available to do so. Here I want to take note of the market for university instruction.

 

Teaching as a type of outsourcing

Outsourcing abroad and temporary foreign workers are two sides of the same coin. If the price is right, work will be sent from Canada a high wage country to a low wage country. If the work has to be performed in Canada, then foreign workers are brought to Canada. The latter occurs for agricultural workers especially at harvest time, for home helpers and in areas like Northern Alberta where there is or has been a resource boom. All use some temporary or part time workers. A form of this takes place in universities.

Opportunities occur for part-time workers in higher education where two types of teaching labour are employed. Tenure track employees receive detailed screening and are evaluated in their first years of employment before being granted tenure, a contract which provides a high degree of income security. Some may not receive tenure. A second type of worker are part-timers, sessional lecturers hired to teach a particular course or series of courses at a much lower salary. These are not expected to undertake administrative chores or research, and so they perform a different type of job.

 

Since at least the 1960s, classes in Canadian universities, especially at the first year level in the arts and social sciences, have been taught by sessional lecturers. Over time, their use has increased as student enrollment has risen in total and as a proportion of the 18 to 24 age group.

 

The economics of this process is straightforward. More students require more resources, teaching and other. This is paid for either by raising student fees or through taxation. There is no free ride and “water bed” economics applies – change in one area inevitably causes changes elsewhere. When a change occurs in one part of the educational market, say more students, increased resources are required to supply the demand. Full time faculty is the desired path but teaching can be provided at a lower cost with sessionals. The quality may not be the same but as Quebec students have shown, many are not prepared to pay higher fees. The quality of their education will suffer but this seems to be acceptable, at least at the moment.

 

Over time the number and share of courses given by part-time teachers has risen. What are the consequences? For the university, teaching cost increases are reduced. Flexibility is maintained by the nature of the sessional contract. Quality control of teaching can be managed for sessionals who are evaluated after each course by the students. Poor ratings result in teachers not being rehired. It is far more difficult to dismiss a tenured employee even with poor student course evaluations.

 

There are issues which arise with the use of student evaluations with students and their parents lobbying and expecting to get high grades, and faculty catering to these expectations. Research on this topic shows that there has been grade inflation not only in schools but in universities. Both full and part time university teachers are subject to these pressures. With online courses, the pressure for grade inflation should be reduced. Firms will want to show that the credentials they issue are seen as valuable and informative to employers.

 

At the high school level in Ontario, the proportion of graduates who are Ontario scholars has steadily increased since the late 1960s when province wide exams were abolished and now each school grades its own Grade 12 students. Those with an 80% graduating average has risen from 20% in the 1960s to 60% today. (I have discussed this in a Aug. 12, 2014 posting.) The Ontario government is reluctant to provide the time series data for this conclusion, but teachers and former students will confirm this.

 

Another aspect of the teaching market is that while university courses may be taught by teachers who may not have a tenure track position, some are taught by those who have a full-time job in another area, but want to do some teaching and are willing to accept the terms and lower university payments.

 

As suggested above, the future will likely see an increased delivery of online courses which will affect both the demand for regular university courses at particular institutions, and a reduced demand for faculty both full and part-time. Today’s dispute over sessional lecturers relates to conditions prevailing in the past not the future.

 

Kevin Carey notes that full time enrollment is increasing, as universities are still seen as the places where credentials are recognized by employers. It will take time for universities to incorporate online teaching and for other institutions to establish the value of their credentials. My guess is that the changes will come from the demand side as students (and their parents) discover ways to reduce educational costs and still get recognized credentials.