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An Ominous Threat to Middle Class Social Mobility- UPDATED

October 12, 2011

Part I. The Tragedy and Short Sightedness of Strangling the State’s Golden Goose

Let me start by saying that I am not an alarmist, nor a doom-and-gloom type.  Like many scientists, I am kind of neutral on the future. I believe in forecasting good or bad things only insofar as the data is rock solid and the modeling well thought out. Most pop-prognostication is characterized by neither.  However, two clearly accelerating social-economic trends are not only indicative of the current economic strife so many Americans feel, but are also signals of potentially worse scenarios to come.  And they are related.  The income disparity between the executive class and average employees is at an all time high.  Currently for every $1 of average employee pay, executives make $300.  Even in the wild and swinging 1980s (the so called me-decade or “Greed-is-good” decade) it was about 25 to 1. And this is despite the fact that average American worker’s productivity has increased substantially, even through the recession, while their median incomes have stayed flat or declined.  The second reality is somewhat more particular to California, but given the influence, both economic and cultural, that this most populous of the states exerts on the rest of the union, I think that it’s worth paying attention to.  Schools in the University of California system (consistently regarded as the best public university system not just in the U.S., but in the world) are quickly pricing themselves out of the reach of the middle class.  As a product of the UC system (both as an undergraduate and doctoral student) when it was still affordable to my middle class parents, it breaks my heart to think my kids may not have the same opportunity.  The arguments below represent Part I o f my thesis.

Over the last few years the State’s budget allocation to the UC system has been cut by over 1 billion dollars.  A similar thing has happened at the Cal State level.  The cuts have been presided over by both Republican and Democratic governors, although you are more likely to get at least some token resistance by Democratic state legislators during budget negotiations. The cuts always seem to get enough votes to go through.

We are systematically destroying the one proven conveyance of social mobility and economic productivity that was essentially affordable to all.  Study after study has confirmed that CA reaps 3 to 5 dollars for every dollar spent on the UC and Cal State systems.  Poll after poll of the major non-government job creators in CA also report the same thing.  When you ask them what they need from CA’s workforce, somewhere in the top three answers is better educated applicants. In fact, a recent report out of CA’s neighbor to the East, Nevada, makes the case even more clearly. Nevada has among lowest tax burdens on business and corporations in the entire United States.  It also has the lightest regulatory load on business of just about any state in the union.  And yet, Nevada cannot seem to attract business to open up shop there.  In fact, Nevada has the dubious honor of leading the nation in four categories defining economic collapse; specifically the highest unemployment rate, the highest personal bankruptcy rate, the highest home foreclosure rate, and the most severe drop in median family incomes.  What’s going on here? Aren’t low taxes and low regulation the two pillars of business growth that we keep hearing about? The University of Las Vegas decided to try to find out and surveyed businesses that were candidates for relocation or start-up, but ended up not coming to Nevada.  The number one reason cited by these would-be job creators?  The belief that there were not enough college-educated Nevadans to fill the positions that these companies would be offering.

Obviously, this goes beyond Nevada and even beyond the present day circumstances.  We are reducing the entire workforce’s ability to respond to the new jobs and employment sectors that we cannot even predict at the moment.  We can say, with a fair bit of confidence, that a young adult with an engineering degree from UCLA will be in a better position to respond to these changes than someone with a high school GED or an AA from a community college.

Another legitimate question is why the UC and Cal-State appear to be such attractive candidates for budget cuts.  First, and most obviously, they are big outlays for the state (a touch over 3% of CA’s budget), and so cuts simply seem more appropriate to big budget items. But the more important reason may be the implicit sense that the crown jewels will survive.   UCLA could go fully private tomorrow, and still easily enroll over 20,000 students.  We are theoretically half-way there, with UCLA getting more from student tuition than state revenue for the very first time in history.    UCI, UC-Berkley, UC San Diego and perhaps UC Irvine could do likewise. There is more than enough demand among upper middle class and wealthy families to fill those lecture halls even as tuitions continue to rise (by over 90% since 2003).  The reputations, rigor and added value of these universities are more than competitive with even the best of the private universities in California, such as Stanford, Cal-Tech and Occidental.  The working class and poor will also largely escape the consequence of the cuts as they will continue to benefit from financial aid and scholarships.  In fact, if you factor in the increased financial aid, tuition for the poor and working class has remained relatively flat. It is the middle class that will suffer the most.  In fact, it’s already happening.  A recent report out of the UC showed that from 1999 to 2009, the number of students qualifying for financial aid and needs-based scholarships rose by 61%.  The number of affluent students, with family incomes of more than $149,000, went up by 73%. What about students of middle class backgrounds?  While their total numbers did rise by 15% (i.e., at a 4X to 5X slower rate of growth), their representation on the campus dropped from about 50% in 1999 to 41% in 2009.

Not to put too fine a point on it, but if the state of CA does not invest in the UC and Cal State system, the regents and trustees will simply keep raising tuition and fees,  while increasing class sizes (because fewer professors will be hired to teach those classes) until the budgets are balanced.  It is as simple as that.

So is this free market capitalism at work?  If a product is desirable, and there are people who can afford it, well then, why shouldn’t it go up in cost?  Let me go out on a limb here and say that just like police service or a fire dept, this is where the tenets of basicfree-market capitalism should not apply.  Education is a SOCIAL GOOD.  It benefits everyone collectively, whether or not you yourself attended or have children/relatives who did.   Even if you manage to maintain a high standard of living for yourself, do you really want to live in a world with ever increasing numbers of uneducated, unemployed young adults?  All you need to do is look to the many countries around the world characterized by that sort of demographic change to see the consequences.   Furthermore, education is among the most efficiently produced social goods we have.  Compare the cost of sending a kid through the 4 or 5 years required for a UC undergraduate degree to that of paying for unemployment, or incarceration, or welfare (all MUCH more likely for those with only a high school education) and you begin to understand the notion that providing an affordable and effective avenue to a baccalaureate degree is much more of an investment than a cost.

Part II–The  increasing income gap between the wealthy and middle class, and what it’s bad for EVERYONE (that includes the wealthly!)

Coming soon….

One Comment
  1. Hello.This post was extremely interesting, especially because I was searching for thoughts on this subject last Friday.

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