The Real News on Labour’s Plan For Nationalisation and Workplace Democracy

In this 15 minute video from the Baltimore-based The Real News network, host Aaron Mate talks to Leon Panitch, professor of political science at York University about the proposals announced at the Labour party’s conference last month that Labour intended to renationalize some of the privatized utilities, introduce profit-sharing schemes and workplace democracy in firms with over 250 members, in which 1/3 of the board would be elected by the workers.

The video includes a clip of John McDonnell announcing these policies, declaring that they are the greatest extension of economic democratic rights that this country has ever seen. He states that it starts in the workplace, and that it is undeniable that the balance of power is tipped against the worker. The result is long hours, low productivity, low pay and the insecurity of zero hours contracts. He goes on to say that Labour will redress this balance. They will honour the promise of the late Labour leader, John Smith, that workers will have full union rights from day one whether in full time, part time or temporary work. They will lift people out of poverty by setting a real living wage of ten pounds an hour.

McDonnell also says that they believe that workers, who create the wealth of a company, should share in its ownership and the returns that it makes. Employee ownership increases productivity and improves long-term decision making. Legislation will be passed, therefore, for large firms to transfer shares into an inclusive ownership fund. The shares will be held and managed collectively by the workers. The shareholders will give the workers the same rights as other shareholders to have a say over the direction of their company. And dividend payments will be made directly to the workers from the fund.

Commenting on these proposals, Panitch says that in some ways they’re not surprising. McDonnell stated that Labour would inherit a mess. But his remarks were different in that usually governments use the fact that they will inherit a mess not to go through with radical policies. Panitch then talks about Labour’s commitment to bring the public utilities – rail, water, electricity, the post office – public ownership, pointing out that these used to be publicly owned before Thatcher privatized them. McDonnell particularly focused on water, before going beyond it, citing the 1918 Labour party constitution’s Clause IV, which Blair had removed. This is the clause committing the Labour party to the common ownership of the means of production, distribution and exchange, under the best form of popular administration. And unlike previous nationalized industries, these will be as democratically-run as possible. Councils would be set up in the water sector made up of representatives of the local community and workers’ representatives to be a supervisory council over the managers in the nationalized water industry.

They then go to a clip of McDonnell talking about the nationalization of the utilities. McDonnell states that the renationalization of the utilities will be another extension of economic democracy. He states that this has proved its popularity in opinion poll after opinion poll. And it’s not surprising. Water privatization is a scandal. Water bills have risen by 40 per cent in real terms since privatization. 18 billion pounds has been paid out in dividends. Water companies receive more in tax credits than they pay in tax. And each day enough water to meet the needs of 20 million people is lost due to leaks. ‘With figures like that’, he concludes, ‘we cannot afford not to take it back into popular ownership’.

Mate and Panitch then move on to discussing the obstacles Labour could face in putting these policies into practice, most particularly from the City of London, which Panitch describes as ‘the Wall Street of Britain’, but goes on to say that in some ways its even more central to financialized global capitalism. However, Panitch says that ‘one gets the sense’ that the British and foreign bourgeoisie have resigned themselves to these industries being brought back into public ownership. And in so far as bonds will be issued to compensate for their nationalization, McDonnell has got the commitment from them to float and sell them. He therefore believes that there won’t be much opposition on this front, even from capital. He believes that there will be more resistance to Labour trying to get finance to move from investing in property to productive industry.

He then moves on to talk about Labour’s plans for ten per cent of the stock of firms employing 250 or more people to go into a common fund, the dividends from which would passed on to the workers up to 500 pounds a year. Anything above that would be paid to the treasury as a social fund for meeting the needs of British people and communities more generally. Panitch states that this has already produced a lot of squawking from the Confederation of British Industry. Going to giving workers a third of the seats on the boards, Panitch states that it has already been said that it will lead to a flight of capital out of Britain. He discusses how this proposal can be radical but also may not be. It could lead to the workers’ representatives on these boards making alliances with the managers which are narrow and particular to that firm. The workers get caught up in the competitiveness of that firm, it stock prices and so on. He makes the point that it’s hardly the same thing as the common ownership of the means of production to have workers’ sitting on the boards of private companies, or even from workers’ funds to be owning shares and getting dividends from them. Nevertheless, it is a step in the right direction of socializing the economy more generally, and giving workers the capacity and encouraging them to decide what can be produced, where it’s produced, and what can be invested. And if it really scares British and foreign capital, this raises the question of whether they will have to introduce capital controls. Ultimately, would they have to bring the capital sector into the public sphere as a public utility, as finance is literally the water that forms the basis of the economy?

Mate then asks him about Labour’s refusal to hold a second referendum on Brexit, which angered some activists at the conference. Labour said that any second referendum could only be about the terms of the exit. Panitch states that people wanting Britain to remain in a capitalist Europe try to spin this as the main priority of the party’s members, even Momentum. He states that this is not the case at all, and that if you asked most delegates at the conference, most Labour members and members of Momentum, which they would prefer, a socialist Britain or a capitalist Europe, they would prefer a socialist Britain. The people leading the Remain campaign on the other hand aren’t remotely interested in a socialist Britain, and think it’s romantic nonsense at best. He states that the Corbyn leadership has said that they want a general election as they could secure an arrangement with Europe that would be progressive without necessarily being in Europe. They would accept the single market and a progressive stand on immigration rather than a reactionary one. They did not wish to endorse a referendum, which the Tories would have the power to frame the question. And this is particularly because of the xenophobic and racist atmosphere one which the initial Brexit vote was based. Panitch states that he is a great critic of the European Union, but he would have voted to remain because the debate was being led by the xenophobic right. He ends by saying that capital is afraid of the Trumps of this world, and it is because of the mess the right has made of things here in Britain with the Brexit campaign that capital might give a little bit more space for a period at least to a Corbyn government.

This latter section on Brexit is now largely obsolete because Labour has said it will support a second referendum. However, it does a good job of explaining why many Labour supporters did vote for Brexit. The editor of Lobster, Robin Ramsay, is also extremely critical of the European Union because of the way neoliberalism and a concern for capital and privatization is so much a part of its constitution.

Otherwise, these are very, very strong policies, and if they are implemented, will be a very positive step to raising people out of poverty and improving the economy. Regarding the possibility that the representatives of the workers on the company boards would ally themselves with capital against the workers, who put them there, has long been recognized by scholars discussing the issue of workers’ control of industry. It was to stop this happening that the government of the former Yugoslavia insisted that regular elections should be held with limited periods of service so that the worker-directors would rotate. Ha-Joon Chan in his books criticizing neoliberal economics also makes the points that in countries like France and Germany, where the state owns a larger proportion of firms and workers are involved in their companies through workers’ control, there is far more long-term planning and concern for the companies success. The state and the workers have a continuing, abiding interest in these firms success, which is not the case with ordinary investors, who will remove their money if they think they can get a better return elsewhere.

My concern is that these policies will be undermined by a concentrated, protracted economic warfare carried out against the Labour party and the success of these policies by capital, the CBI and the Tories, just as the Tories tried to encourage their friends in industry to do in speeches from Tweezer’s chancellors. These policies are desperately needed, but the Tory party and the CBI are eager to keep British workers, the unemployed and disabled in poverty and misery, in order to maintain their control over them and maximise profits.

What the Fight For 15 Could Get Us

Published by Anonymous (not verified) on Fri, 12/10/2018 - 6:00pm in

Workers across the country are struggling to make ends meet. Could 15 dollars an hour solve the problem?

Amazon Concedes $15 Floor Wage, Bernie Sanders Plays Minor Role In Significant Victory

Published by Anonymous (not verified) on Sat, 06/10/2018 - 11:00pm in


Amazon, wages

Amazon’s announcement last week that it would boost the wages of its lowest paid workers to $15 an hour in time for this year’s holiday rush, was not a generous gift from its owner Jeff Bezos, reportedly the wealthiest man on earth. It was also not, as some would like us to believe, a miracle wrought by the intervention of Vermont Senator Bernie Sanders. It was a strategic concession on the part of Amazon in the face of its own public relations needs, competitive pressures from its near-peers, pressure from transnational cooperation among its unionized European workforce, and to a minor degree the STOP BEZOS bill introduced by Sanders which proposes to tax large corporations for the amount their employees use in federal aid programs.

Just Released: Are Employer-to-Employer Transitions Yielding Wage Growth? It Depends on the Worker’s Level of Education

Published by Anonymous (not verified) on Sat, 29/09/2018 - 1:00am in

Gizem Kosar and Kyle Smith

 Are Employer-to-Employer Transitions Yielding Wage Growth? It Depends on the Worker’s Level of Education

The rate of employer-to-employer transitions and the average wage of full-time offers rose compared with a year ago, according to the Federal Reserve Bank of New York’s July 2018 SCE Labor Market Survey. Workers’ satisfaction with their promotion opportunities improved since July 2017, while their satisfaction with wage compensation retreated slightly. Regarding expectations, the average expected wage offer (conditional on receiving one) and the reservation wage—the lowest wage at which respondents would be willing to accept a new job—both increased. The expected likelihood of moving into unemployment over the next four months showed a small uptick, which was most pronounced for female respondents.

The SCE Labor Market Survey, which has been fielded every four months since March 2014 as part of the broader Survey of Consumer Expectations (SCE), provides information on consumers’ experiences and expectations regarding the labor market. The data, together with a companion set of interactive charts showing a subset of the data that we collect, are published every four months by the New York Fed’s Center for Microeconomic Data. As with other components of the SCE, we report statistics not only for the overall sample, but also by various demographic categories, namely age, gender, education, and household income. The underlying micro (individual-level) data for the full survey are made available with an 18-month lag.

The remainder of this post provides more detail on one major finding from the latest survey data collected from July 2017 to July 2018. Additional results are available in the press release.

Job Transitions

Labor market transition rates (such as job-to-job or employed-to-unemployed transition rates) are some of the most important metrics that summarize the dynamics of the labor market. The chart below reports the current labor market status of those who were employed four months ago. We see that the proportion of those who are still employed has increased from 93.6 percent in July 2017 to 96.8 percent in July 2018. In addition, the rate of transitioning to a different employer rose from 3.8 percent in July 2017 to 4.7 percent in July 2018. Although respondents who were employed four months ago show a higher rate of transitioning to a new employer compared to a year ago, we observe some interesting differences across education groups.

 Are Employer-to-Employer Transitions Yielding Wage Growth? It Depends on the Worker’s Level of Education

The chart below illustrates how the rate of transitioning to a new employer, among respondents who were employed four months ago, has been diverging since July 2017 between those with and without a college degree. The rate of transitioning to a new employer for respondents who do not have a college degree reached 7 percent in July 2018. In fact, this is the highest level this series has recorded since its start in July 2014. On the contrary, the rate of transitioning to a new employer has been on a downward trend for college graduates since July 2015, and it reached a series low of 1.6 percent in July 2018.

 Are Employer-to-Employer Transitions Yielding Wage Growth? It Depends on the Worker’s Level of Education


Economists care about job-to-job transitions primarily because such changes are key to understanding the evolution of wage growth. Job switching, or employer-to-employer reallocations, is shown to be a sufficient statistic for average wages; positively correlated with real and nominal wage growth; and a good predictor for both wage growth and wage inflation. In the overall sample, we observe that the average salary of full-time workers essentially remained constant in July 2018, compared to a year ago. The chart below shows the average salary of full-time workers with and without a college degree, separately. We observe that even though the job-to-job transitions of the respondents without a college degree have been on the rise since July 2017; the average full-time salary for this group declined slightly from July 2017 to July 2018, by approximately $4,700.

On the other hand, the average full-time salary of the workers with a college degree increased by $5,800 from July 2017 to July 2018. The results indicate that the positive relationship between job-to-job transitions and average wages does not hold for the period after July 2017. We observe a negative relation between job-to-job transitions and average wages in this period, for the respondents without a college degree.

 Are Employer-to-Employer Transitions Yielding Wage Growth? It Depends on the Worker’s Level of Education

Reconciling the Trends in Transitions and Earnings

The fact that college graduates are experiencing a rise in average full-time salary in tandem with a declining rate of transitioning to a new employer may be reconciled with employers’ retention policies. In other words, the trends we see are suggestive evidence of more aggressive wage responses by employers in order to retain their employees. In fact, we observe an increase in the percentage of respondents with a college degree who are satisfied with their wage compensation, a rise of 6 percentage points, from July 2017 to July 2018. We also see a slight uptick in this group’s satisfaction with nonwage benefits during the same time period.

Workers typically switch jobs for offers with higher wages, better nonwage amenities, or better wage prospects in the long term due to the new employer having a higher productivity (or a combination of these). Since we don’t observe an increase in the average full-time salary of the respondents without a college degree, we next examine whether they have access to better nonwage amenities. When we look at these respondents’ satisfaction with nonwage benefits, we see that the percentage who are satisfied with their nonwage benefits remained constant in July 2018, compared to July 2017. On the other hand, we observe a significant 11.5 percentage point rise in the proportion of respondents without a college degree who are satisfied with the career progression opportunities at their current jobs. This result is suggestive of the "option-value effect," or in other words, that workers might be willing to take a wage cut to move from low to high productivity firms that will be able to offer larger wage increases in the long term.


Results of the July 2018 SCE Labor Market Survey point out a rise in employer-to-employer transitions and essentially no change in the average annual salary for full-time workers, compared with a year ago. However, in this post we show that these results and the interpretation of these findings differ considerably based on the education level of the respondents. For more details, visit the SCE Labor Market Survey home page.


The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Kosar_GizemGizem Kosar is an economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

Smith_kyleKyle Smith is a senior research analyst in the Bank’s Research and Statistics Group

How to cite this blog post:

Gizem Kosar and Kyle Smith, “Just Released: Are Employer-to-Employer Transitions Yielding Wage Growth? It Depends on the Worker’s Level of Education,” Federal Reserve Bank of New York Liberty Street Economics (blog), September 28, 2018, https://libertystreeteconomics.newyorkfed.org/2018/09/just-released-are-....

Jeremy Corbyn on Arms to Saudi Arabia, the Environment, the Living Wage and University Education

This is a short video from RT of just under two minutes, in which the Labour leader gives his views on Britain selling weapons to Saudia Arabia, Donald Trump’s disastrous attitude to the environment, the living wage, and that university education should be free.

Arms to Saudi Arabia

Addressing the Labour party conference, Corbyn states that whilst he obvious wants us to send all the aid necessary to deal with the consequences of the war and the bombing, the best thing to do is to stop the war altogether and to begin that by ending our supply of arms to the Saudi coalition that is undertaking that bombardment.

The Environment

Corbyn explains that Donald Trump is saying that he wants to walk away from the Paris climate accord and tear up all those decades of environmental campaigning that got us over that hurdle to that place, are totally wrong. Corbyn states that our movement has to be as strong on environmental protection and eco-protection as it is on social justice, because that is the way we protect the future for all of us.

The Living Wage

He declares that he does not think there is anything particularly extreme in saying a living wage should be for all workers at ten pounds an hour. You should have rights at work from the time you start your work.

On University Fees

He admits that Labour’s proposal is expensive, but he thinks it’s the right way to invest our money. It was to end college and university fees in order to make further and higher education free for everyone that wants to undertake it.

These are excellent policies and are certain to draw fire from the Tories and Blairites. There was a piece in the I this weekend about the massive growth in British arms exports. It’s supposed to have grown by 83 per cent last year.

And it was under Thatcher and Major that student grants were axed, and tuition fees introduced under Tony Blair, though they were raised massively by the Tory – Lib Dem Coalition.

As for Trump’s position on the environment, this is almost omnicidally dangerous. Some environmental scientists, according to the press, believe that we may actually only be ten years away from the tipping point where global warming is irreversible. We have to protect the environment, if we are not to bequeath our children a ruined, poisoned, dying world.

Now watch the Tories, the Lib-Dems and the right-wing press go absolutely berserk telling everyone that this’ll all be bad for the economy, that businesses won’t be able to afford it, that it’ll make our exports uneconomical, and repeat all the old tropes about ‘high spending Labour’ and that this will lead to more tax rises ad nauseam. Of course, none of this will be connected to the fact that very many Tory MPs have strong links to the arms and petrochemical industries, and that too many MPs across the House are millionaire managing directors. Quite apart from the fact that any tax rises Labour may make will be placed on the extreme rich, not the poor, who can’t afford it. It’ll be the complete reverse of what the Tories and New Labour have done.

Eisenhower’s Speech Warning about the Military Industry Complex

Published by Anonymous (not verified) on Fri, 21/09/2018 - 2:58am in

This short video from RT, posted on YouTube, was under the title ‘Speeches that Still Matter’. It’s American president Dwight D. Eisenhower’s speech of January 17th, 1961, warning America about the threat posed by an unrestrained military-industrial complex.

After a few words about the structure of society at the beginning of the snippet, Eisenhower declares

We must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defence with our peaceful methods and goals so that security and liberty may prosper together.

It has become one of the classic speeches in modern American history, and is referred to whenever activists and politicians criticize the military-industrial complex. Because since Eisenhower’s time, it has grown and seized power. The American military machine and armaments industry sponsors American politicians, and generals, senior civil servants and politicians frequently take up positions on the boards of armaments firms after their military or political career has ended. And the American government gives billions, if not trillions to its weapons manufacturers and armed forces.

I’ve read left-wing analyses of this situation which suggest that this is a deliberate policy of the American government to stimulate the economy. It’s a form of Keynsianism, but as the right-wing ideology of free trade and laissez-faire prevents the government from openly stimulating the economy through public works projects and a proper welfare support network that allows the poor enough to purchase the goods and services they need, which will also stimulate production and industrial growth, the only way the government can actually do so is by giving more and more money to the arms industry.

And all those planes, tanks, ships, missiles, guns and bombs have to be used.

The result is endless war in which small countries in the Developing World are invaded and their leaders toppled, their industries and economies plundered and seized by American multinationals, and Fascist dictators or sham democracies are installed instead. All in the name of giving more profits to the military machine. If you want an example, think of the close connections between the Bush family and the massive industrial conglomerate Haliburton.

When Martin Luther King said in one of his speeches that America was the chief exporter of violence in the world today, he had a point. And our government under the Tories and Blair has been no better. Blair lied to us to get the support of the British public for the Iraq invasion. Maggie Thatcher promoted British arms exports, as did Blair, as did Cameron, drooling all over the ‘wonderful kit’ produced in that BAE factory in Lancashire.

And all the while ordinary people have seen services cut and the infrastructure of countries – roads, railways and so on – left to decay by the profiteering firms that should be maintaining and building them. There are cuts to public services and even more attacks on welfare payments, all in the name of ‘austerity’, ‘making work pay’ and the other lies and buzzwords used by the right to justify their impoverishment and victimization of the poor. And this is done to give massive tax cuts to the already bloated rich.

It’s high time this was stopped, the military-industrial complex reigned in, the wars for their profits ended, and the government invested instead in proper economic growth, domestic industries, infrastructure, public services, a proper welfare state and medical care, and giving working people a proper, living wage.

Vox Political on the Tories’ Proposed Privatisation of the Fire Service

Published by Anonymous (not verified) on Sat, 15/09/2018 - 11:04pm in

Yesterday Mike put up a piece showing precisely what the fire service would like if Brandon Lewis gets his way and privatizes it. His piece follows an article in Mirror Online. The Mirror obtained a letter in which Lewis calls for new laws, which would allow fire and rescue organisations in England to contract these services out to other providers. This could result in all 46 fire and ambulance services being sold to private industry. Lewis says in his letter that he realizes this would be controversial, but defends it as it would give the fire and rescue authorities more choice over whom to contract their services.

As Mike shows, it’s a rubbish idea, and one that will ultimately cost lives. He gives a very short scenario portraying how the privatized service would operate. A householder would phone up their local fire brigade to ask for help. They’d then get a reply telling them who the current provider is, which firm is currently sponsoring them, before finally asking them how they’re going to pay for it. By this time, the fire’s out of control and their house is burning down. The private fire service then informs the customer that they’ll bill their descendants.


This plan is, of course, pure idiocy, and Mike’s absolutely right about how it would operate. This is another idea the Tories have stolen from Rothbard’s wretched Libertarians. Rothbard was an anarcho-capitalist, who believed that all state functions should be taken over by private industry, including the courts. They were solidly behind Ronald Reagan, and it was the Libertarians in the Conservative party who formed the party’s base for Thatcher.

Obviously, while Thatcher wanted to privatise everything that wasn’t nailed down, as a believer in a ‘strong state’ she definitely wouldn’t want to do anything so radical as sell off the courts or the armed forces, although the Tories had a pretty good go at selling off the forces’ support infrastructure, like various barracks, as revealed at the time by Private Eye. And way back c. 1991/1992 Virginia Bottomley wrote a glowing piece the Depress or Heil looking forward to the privatization of the police and their replacement with private security forces.

And the privatized future Mike portrays in his article is all too plausible. It’s what happened in the past. Viewers of the antique shows on the Beeb, like Bargain Hunt, will recall that every so often the presenters came across a house plaque dating from the 18th century. These plaques were to show that the householder was registered with an insurance company against fire. If fire broke out, the local fire brigade would come round to put the fire out. But they did this only for those, who were insured with them. If you weren’t insured, then they let your house burn down.

The Tories have been trying to cut down on the fire service for a very long time as part of their general campaign of cuts, including to the firemen and women’s pay, conditions and pensions. And the fire brigade union has fought against them. This looks like another attempt to break the brigade’s resistance by selling it off to a private contractor, just like the Tories have done to the personnel and their unions in other sectors of the state.

I don’t doubt that they’ll present this as a new way the brigade can raise necessary funds outside of taxpayer’s money, just like the part-privatization of the NHS was intended to allow GPs and other service providers to raise money from private industry. It’ll also be presented as still giving the people of a particular area uniform coverage while in fact removing the state’s obligation to do so, just as Andrew lansley’s vile Health and Social Care Law of 2012 removes the state’s obligation to provide health care. And just as the Tories want to introduce and increase charging within the NHS, so they’ll introduce charges into the fire and rescue services.

The result will be tax cuts for the very rich, as usual, while the people in the fire services will be placed on drastically reduced pay and conditions, and those unable to afford private fire protection will be left to fend for themselves. Just the Tories have done right across the entire economy.

The Fundamentals of the Amazon Economy

Published by Anonymous (not verified) on Thu, 06/09/2018 - 5:00pm in

Just where are your taxpayer dollars going?

Education’s Role in Earnings, Employment, and Economic Mobility

Published by Anonymous (not verified) on Wed, 05/09/2018 - 9:00pm in

Rajashri Chakrabarti and Michelle Jiang

LSE_Education’s Role in Earnings, Employment, and Economic Mobility

Amid dialogue about the soaring student loan burden, questions arise about how educational characteristics (school type, selectivity, and major) affect disparities in post-college labor market outcomes. In this post, we specifically explore the impact of such school and major choices on employment, earnings, and upward economic mobility. Insight into determinants of economic disparity is key for understanding long-term consumption and inequality patterns. In addition, this gives us a window into factors that could be used to ameliorate income inequality and promote economic mobility.

We hope to answer the following questions:

  • Do school and major choice significantly affect differences in employment and earnings?
  • Do these differences persist in the long term?
  • Do certain educational background characteristics promote upward economic mobility more than others?

To answer these questions, we use a data set that matches earnings and employment data of college cohorts with corresponding college-cohort characteristics, college characteristics, and enrollment, obtained from the U.S. Department of Education. We analyze labor market outcomes data for fall freshman entry cohorts in the 1997-2007 period. Labor market outcomes include earnings and employment, measured in the medium term (six years after enrollment) and the long term (ten years after enrollment), with earnings conditional on employment. Our selectivity measure comes from Barron’s Profiles of American Colleges (2001), which ranks schools based on their acceptance rates, students’ median entrance exam scores (on the SAT and ACT), the grade point averages for their freshman classes, and the percentage of freshman ranking in the top of their high school graduating classes. For simplicity, we classify four-year colleges in the top three of Barron’s six tiers as “selective” and the rest as “nonselective.”

After controlling for invariant characteristics of counties where the colleges are located, invariant characteristics of cohorts, and time-variant characteristics of cohorts (such as cohort size, racial composition, gender composition, family income, and parental education), we analyze the effect of college choice (two-year versus four-year; public versus private not-for-profit and private for-profit; and selective versus nonselective) and major composition (calculated as the percentage in “Arts” [arts and humanities], “Business,” “STEM” [science, technology, engineering, and math], and “Vocational” fields) on labor market outcomes and economic mobility (defined below).

First, we explore whether college choice and major choice affect medium-term earnings and employment measured six years after enrollment. For four-year colleges, we find that college type and selectivity strikingly matter, as does major (see the chart below). For enrollees who attend selective colleges, we find an earnings premium of 11 percent compared with similar students (along the dimensions defined above) who attend nonselective colleges. By contrast, for-profit college attendance leads to 17 percent lower earnings relative to attendance at private not-for-profit four-year colleges. The right panel in the chart casts light on the returns to various majors relative to Arts and depicts the percentage change in mean earnings of a cohort in a school if the share of a certain major in that cohort goes up by 10 percentage points. The chart shows that STEM majors have the highest earnings premium followed by Business majors. If a school cohort increases its share of STEM majors (relative to Arts majors) by 10 percentage points, there is a 6 percent increase in that cohort’s earnings six years after enrollment. These findings are qualitatively similar for two-year colleges.


While this data is not charted here, we find that the employment effects are relatively modest in comparison to the earnings effects. Selective college enrollment leads to only 1 percent higher employment than nonselective college enrollment, while for-profit enrollees have a 4 percent lower probability of employment relative to their counterparts in private not-for-profit colleges. The employment and earnings results collectively imply a markedly higher job quality for selective college and not-for-profit enrollees.

For long-term earnings measured ten years after enrollment, we find that college-type effects become more pronounced, while major-choice effects remain similar (see the chart below). Attendees of selective colleges find themselves with a 20 percent premium in earnings compared with nonselective college students. For-profit attendees experience 18 percent lower earnings than students enrolled at private not-for-profit colleges. Meanwhile, a 10 percentage point increase in a college cohort’s share of STEM majors (relative to Arts majors) gives a 6 percent boost to its students’ average earnings, while a 10 percentage point increase in a school’s share of Business majors (relative to Arts majors) provides a 3 percent long-term earnings premium. In contrast, employment probabilities remain similar in the long run for these comparison groups. This indicates that the quality of jobs, rather than the probability of employment, is more relevant for the broadening of the earnings distribution across individuals.


Next, we consider economic mobility. Following prior work, we define economic mobility as the phenomenon by which individuals move up or down the income distribution over time. Our chart below presents differences in mean earnings six years after enrollment between students in the top and bottom terciles of family income at the time of enrollment in a four-year institution. We continue to include the various covariates and invariant characteristics in our regression as described above.

The average earnings gap between enrollees in the top and bottom terciles in our sample was $6,348. We find that for-profit college attendance widened income disparities in our data, increasing the earnings gap by $7,428 (+117 percent), compared with private not-for-profit college. In contrast, four-year public college serves as an equalizer by decreasing the earnings gap by $1,584 (-25%) compared with four-year not-for-profit college. In addition, selective college attendance decreases the earnings gap by $2,736 (-43%) relative to nonselective college attendance. A 10 percentage point increase in Business majors and STEM majors relative to Arts majors exacerbates the gap by $1,586 (+25%) and $181 (+3%) , respectively, while a 10 percentage point increase in Vocational majors relative to Arts majors decreases the disparity by $170 (-3%).


In the long run, however, the inequality penalties for for-profit schools decrease in intensity, while the equality premium for public school increases. While patterns for other majors are approximately the same in the medium term as in the long run, a STEM major becomes more of an equalizer.

Earnings and employment outcomes are clearly heterogeneous across college and major choice. We see that these choices matter much more for earnings than employment, which suggests that school and major choice play a large role in job quality. Overall, we find large positive premiums to selective college attendance and choice of a STEM major, and find large penalties for for-profit college attendance. In the long run, premiums and penalties related to college type further accentuate, while premiums to major remain similar to what they are in the medium term. Recent trends in college enrollment, which show marked decrease in for-profit enrollment, imply that overall earnings of college graduates should improve in the medium and long terms due to this factor. In terms of economic mobility, we find that selective colleges are particularly equalizing (conditional on access). Further, we find that attendance at for-profit colleges has led to wider income gaps subsequently, despite catering overwhelmingly to low-income students. These findings have important implications for policy, specifically for “gainful employment” regulations, which stipulate that educational programs must offer worthwhile preparation in a recognized occupation to be eligible for student-assistance funding under the Higher Education Act, and the recent start of a rollback of these provisions. They also highlight the importance of the availability of information about college and major choices since these choices can matter not only for labor market outcomes but also in affecting income inequalities in the medium to long term.


The views expressed in this post are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the authors.

Rajashri ChakrabartiRajashri Chakrabarti is a senior economist in the Federal Reserve Bank of New York’s Research and Statistics Group.

Michelle Jiang
Michelle Jiang is a former senior research analyst in the Federal Reserve Bank of New York’s Research and Statistics Group.

How to cite this blog post:

Rajashri Chakrabarti and Michelle Jiang, “Education’s Role in Earnings, Employment, and Economic Mobility,” Federal Reserve Bank of New York Liberty Street Economics (blog), September 5, 2018, https://libertystreeteconomics.newyorkfed.org/2018/09/educations-role-in....

Real US Wages Are Essentially Back At 1974 Levels, Pew Reports

Published by Anonymous (not verified) on Mon, 27/08/2018 - 12:00am in


Jobs, wages

On the face of it, these should be heady times for American workers. U.S. unemployment is as low as it’s been in nearly two decades (3.9% as of July) and the nation’s private-sector employers have been adding jobs for 101 straight months – 19.5 million since the Great Recession-related cuts finally abated in early 2010, and 1.5 million just since the beginning of the year. But despite the strong labor market, wage growth has lagged economists’ expectations. In fact, despite some ups and downs over the past several decades, today’s real average wage (that is, the wage after accounting for inflation) has about the same purchasing power it did 40 years ago.