Should we tax robots low so they work for us humans, or high so that we humans remain competitive?

Rana Foroohar references “a recent report into the US labour market conducted by the McKinsey Global Institute found that… the biggest reason for the declining labour share, according to the study, is that supercycles in areas such as commodities and real estate have made those sectors, which favour capital over labour, a larger part of the overall economy”, “The silver lining for labour markets”, July 1.

“Do we have a supercycles that favour capital over labour”? At least with respect to real estate, especially houses, the “supercycle” we have is caused by bank regulators much favoring credit to what’s perceived as safe over credit to what’s perceived as risky, without one iota of importance assigned to the need of allocating credit efficiently to the real economy.

Then Foroohar refers to the problem: “shifting labour market dynamics will sharpen the political divides that already exist. Many “left behind” cities are home to more Hispanics and African Americans. Job categories that will be automated fastest are entry-level positions typically done by the young. Meanwhile, the over-50s are at the highest risk of job loss from declining skills”. As “The solution” Foroohar writes; “shift policy to support human capital investment, just as we do other types of capital investment”

Sir, unfortunately it is so much more complicated than that. Just the problems with student debts we currently hear about, evidences that we might not really know about how “to support human capital investments”.

Before social order breaks down, we need to start considering the need to generate decent and worthy unemployments, creating an unconditional universal basic income that serves somehow as a floor and decide what to do with AI and robots. Should we tax these low enough so that they do as much jobs as possible for us humans, or should we tax them high enough for us humans to remain competitive for the jobs they do?

PS. On “a mere 25 cities and regions could account for 60 per cent of US job growth by 2030”, may I venture those cities will not include those with the largest unfunded social benefit plans.

http://perkurowski.blogspot.com/2007/01/should-not-higher-education-be-more-of.html

http://perkurowski.blogspot.com/2012/04/we-need-worthy-and-decent-unemployments.html

http://myubi.blogspot.com/2017/01/my-universal-basic-income.html

https://perkurowski.blogspot.com/2017/02/here-some-disorderly-lose-cannon.html

@PerKurowski

What if Robert Smith had asked the college and its professors for some assistance in paying off the student debts?

Sir, I refer Andrew Edgecliffe-Johnson story on billionaire Robert Smith announcing during a graduation ceremony that he would pay off the for many students enormous debt. “Philanthropist with a gift for surprise” May 25

Indeed, it was a great initiative, at least for the fortunate students but, to evaluate its full significance, you would have to know what assets Smith had to sell, or what services he could not buy, in order to pay off those debts.

But, that said, had Robert Smith said he’d pay off 85% of all graduating Morehouse College’s students’ debts, if only their professors and that college, those who got all the money from that student debt, paid off the other 15%, that could really have been a game changer. 

PS. http://perkurowski.blogspot.com/2007/01/should-not-higher-education-be-more-of.html

@PerKurowski

We need student debt service data, for each university, so as to allow the market to help correct some education failures.

Sir, Dennis Gerson, in reference to a recent article by Sheila Bair on student debts writes: “What she fails to address is the repayment of the income share agreements by college graduates earning the minimum wage, service industry minimum wage plus tips, or those who fail to graduate from college. A substantial portion of student debt and defaulted debt falls into these categories.” “US universities need to fix cost problem they created”

For a starter if university students end up earning too little or do not graduate, then that could be as much or more the failure of the university than the student’s. By just putting out information of each university indicating the respective overall default rate of their students, the market would help to correct much of what is going on... not all.

PS. Higher education should be much more of a joint venture.

@PerKurowski

Yes, higher education must be much more of a joint venture, for all involved.

Sir, Sheila Bair is absolutely right that “proceeds from student debts go to colleges, while the risk of repayment falls on borrowers and, if they default, on taxpayers provides little incentive for schools to contain costs [which] provides little incentive for schools to contain costs.” As a solution she refers to “income share agreements” where universities provide some funding and students pay back a small share of their income over some years. “An investment model to put US students through college”, March 15. 

Since in a 2007 Op-Ed I asked whether higher education should not be more of a joint venture, I fully agree with the orientation of these proposals. 

That said I would not leave it solely as a student to college/university level. I believe that professors should also have skin in the game, and so perhaps their retirement plans should include a clear linkage to how their students did.

And why leave it at that? Why not think of securitizing those possible future participations in earnings so as to provide some upfront money to cover expenses? And what about insurance companies investing in these? And what about some students crowdfunding their tuition fees?

Where I do part though from Bair’s opinion, is on the concept that high earning students could/should subsidize the study costs of lower earning professions. That could cause some unexpected distortions, and it is much more a general societal responsibility, which the higher earning - higher tax paying already share.

PS. Sir, over the years I have written several letters to you on this subject... but 😒

@PerKurowski

For better transparency should newspapers have a section of “Journalism” and one of “Political Activism”?

Sir, Rana Foroohar discussing the issue of ever growing student debt, ends her review of Devin Fergus’s book “Land of the Fee”, with: “Perhaps the new generation of millennial socialists rising in the US should make this the issue they tackle first”, "Slow bleed" August 18.’

What’s wrong with plain millennials? Do they have to be socialists? Or is Foroohar more than a journalist an activist?

Sir, since many years I have been arguing that higher education should be much more of a joint venture between the students and their Alma Maters; and that financing preferentially educational costs would just leave over-indebted students and enriched professors. Just as financing preferentially house purchases benefits those who have invested in houses, much more than those who want a house just to be their home.

Here below are two of my tweets that I think cut over political lines, but that therefore might not be of too much interest to redistribution or polarization profiteers.

1. “Instead of taking on debt, perhaps students should go for crowdfunding their study costs, offering to pay a percentage of their incomes during their first 15 after graduation years. If so would not investors want their professors to have some skin in the game too?”

2. “Would insurance companies be willing to invest in the future by financing students against a percentage of their first 15 after graduations years of income? Would IRS be willing to certificate the incomes of these students for the investors?”

I have now ordered, “Land of the Fee” and so I will keep my comments till after I read it. That said I am sure I will again have to ask: Where was FT when regulators risk weighted sovereigns 0% and citizens 100%? Where was FT when regulators allowed banks to leverage 62.5 times only because an AAA rating issued by human fallible rating agencies was present? Where is FT on that all the real benefits of securitization do not accrue those securitized, much the contrary securitization profits are maximized when hurting the most? 

@PerKurowski

Solving problems by raising taxes and having bureaucrats have a go at these, only risks to complicate matters further

Sir, Rana Foroohar writes: “College students who manage to graduate do so with the highest average levels of debt in the country, since state funding has been so dramatically cut over the past several years. Meanwhile, roughly half of the population has only a high-school degree, which guarantees them a $15-an-hour future.” “New Hampshire: a tale of two Americas” July 29., strangely in that FT’s Weekend Magazine I do not receive as a subscriber in Maryland, USA.

That begs two sets of questions: First, is not ample availability of student debt a much larger driver of high student debt than lack of state funding? Would university fees be nearly as high if these were not so easily financeable? Is not student debt a business driven more by financial profiteers than by pure educational considerations? If students already find it hard to repay their debt, is it logical for taxpayers to foot that same bill? In short should not higher education be reorganized more in terms of being joint ventures between students and universities?

Second, in these times of robots and automation, how on earth can Foroohar presuppose having more than a high school degree would guarantee the young a more than $15-an-hour future? And if she supports the idea of a $15 an hour minimum wage, what does she suggest to do with all those who with or without high school degree cannot reach up to that bar.

Sir, much of this easy talk of solving coming problems the usual statist way by raising taxes and having bureaucrats have a go at it, only risks to complicate matters much more. As a Venezuelan I know that to prevent social order from breaking down is always better than trying to reconstruct it. We are facing a new world, we now already need decent and worthy unemployments. A universal basic income, funded with real money, which provides a step stool to reach up to the gig economy, seems like the only real, peaceful tool at hands… though of course the redistribution profiteers hate it as it diminishes the value of their franchise.

Foroohar also writes: “My husband… employs cleaners, plumbers and tradesmen, some of whose parents worked in the same jobs for his mother. It’s hard not to think of this as a kind of neo-serfdom, given the lack of other options for those without a college degree.”

Well I am sure that there will come a day, quite soon, when many with a college degree will deeply envy the income of plumbers, especially if these are serving the one percenters.

PS. This article strangely appears only in that FT’s Weekend Magazine I do not receive as a subscriber in Maryland, USA.

@PerKurowski

Our societal radar does not record sufficiently many crucial problems and less do we discuss their possible solutions

Sir, Gillian Tett refers to JD Vance’s “Hillbilly Elegy” April 28.

The author, having faced “a family and culture in crisis” and in order to “combat a culture of instability, irresponsibility, anger and pessimism, made worse by opioid addiction’ suggests, besides the reintroduction of [some] military service, giving extended family members easier adoption rights over troubled children, enabling people receiving housing vouchers to move beyond poverty-stricken ghettos, and, most crucially, encouraging business to work with schools and community colleges to reshape education for teenagers, with more mentoring and apprenticeships.”

Ms. Tett concludes, “These are profoundly sensible steps. But they are also notably not measures that are getting much attention from Trump, let alone from the Democrats. Therein lies the tragedy of America today.”

Absolutely, it is a tragedy, but not only of America. Too much is not recorded timely by our social radars, or if identified then becomes horribly distorted, most often by those who want to profit, monetary or political, from the solutions.

For example: The world is facing structural unemployment, among other by robots and automation becoming more and more efficient. But was that talked about during the last election? No! It was not as politically juicy as going after, or defending, immigrants. If it had been discussed the Mexican wall could have been a non-issue.

In such a jobless world, in order to remain viable societies, we would have to create decent and worthy unemployments, which would probably have to include some sort of universal basic income? But was that talked about during the last election? No!

Also, for our economies to be able to move forward we have to stop current insanely risk adverse bank regulations, that refinances up to the tilt the safer present and past, while refusing financing the riskier future. Is that distortion discussed? No way Jose! If you do they might not invite you to Davos.

Instead populists agitate for instance with realities such as some few billionaires holding more wealth than half of the world’s population…while conveniently ignoring how un-transferrable such wealth really is… or scream about all the “cash stashed away” as if that cash was cash.

To have a chance to leave something reasonably workable to our grandchildren, we need to dramatically realign many incentives and fight those who are marketing solutions only to profit on these. In that respect here follows some of my wishes:

That we are able to keep the fiscal income lean since that is the only way to guarantee the fiscal spending does not get mean.

That we fight tooth and nail against all redistribution profiteers. By for instance creating carbon taxes that helps to save the environment, but that have all its revenues shared directly, equally, among citizens.

That we develop guidelines that help us classify credits, and as a consequence debts, into legitimate or odious.

That we make the pension plans of academics of the universities entirely contingent on how it goes for their students. As a minimum their pension funds should hold all the education loans that were given out in order to pay their salaries.

And of course, please, we must get rid of the so useless and so dangerous risk weighted capital requirements for banks.

@PerKurowski

How many university professors know they are educating kids for jobs not to be had?

Sir, Mo Ibrahim writes: “the more time young people in Africa spend in education, the more likely they are to be unemployed… It highlights the worrying mismatch between the skills our young people are taught and those needed by the contemporary job market. This is a recipe for frustration and anger” “Africa’s youth, frustrated and jobless, demand attention”, April 13.

Scary! But it is even scarier if we connect this to Rana Foroohar “Dangers of the college debt bubble”, April 10 and Alex Pollock’s letter of April 12, “Colleges are acting like subprime loan brokers”.

A question. In our universities how many of the professors might be aware of the slim chances of their students’ landing a job in the future that will allow them to service their student debt and have a life… and still say nothing?

In many occasions over the years I have written about the needs to better align the remuneration of professors, at least their pensions, with the future of their students.

It is amazing to see so many professors criticizing bankers for poaching their clients while they de facto behave just the same. Load up the kids with loans, so that we can collect (bonuses) today! 

It will not work, and it will come back and bite us all.

PS. If I owed a student loan I would ask for a debt to equity conversion, offering a percentage of my after tax earnings over a certain amount for a definite number of years.

http://teawithft.blogspot.com/2010/04/if-incentives-are-correctly-aligned-all.html

http://onechildonevote.blogspot.com/2007/01/should-not-higher-education-be-more-of.html

PS. We need worthy and decent unemployments

@PerKurowski

Martin Wolf, forget for a while the usual numbers. The society needs all men on deck for much more important tasks.

Sir, when you don’t know what to do, you might spend sometime putting a drawer in order, or sharpening some pencils. That’s the impression I get from Martin Wolf’s “British business is starting to look more Italian” March 10.

There are too many new challenges building up fast and on steroids, and those numbers Wolf so insistently feeds his readers with, might also risk chaining us to no longer valid economic realities or models.

How are we to best manage (and measure) the effect of all those salaries paid to humans that are disappearing because of robots and automation?

How are we to get the decent and worthy unemployments, which a structural lack of jobs indicates we will need more and more?

If we go for something like a Universal Basic Income, do we have the tools needed to measure their adequate levels? A correct dose UBI dose could be magical, but an excessive one, extremely poisonous.

What would happen to Britain and Italy, if their robots do not measure up in capacity to for instance Germany’s?

With risk weighted capital requirements for banks our most important risk takers are told not to take risks, while, without a blinking of an eye, we allow our young to take on debt to study what we all suspect will not generate them any repayment capacity.

Regulators allow a low 20% risk weight for what is so dangerous to banks as what’s rated AAA, while imposing a 150% risk weight on the so innocuous below BB-… and tenured economist or finance professors do not even question that.

Where are the societal debates on all these issues? For instance were there any mention of robots in the recent Brexit and US president election processes?

Martin Wolf, at least for a while forget numbers which importance might have been superseded by events. We need all men (good and bad) on deck.

PS. Of course, just in case “all men” includes all women too.

@PerKurowski

Is not graduation time a bit late to inform students: “There is more to university than money”?

Sir, Nancy Rothwell, the president and vice-chancellor of the University of Manchester, writes: “Each year I tell graduating students that if they leave university with only a degree and greater “earning power”, I consider we have failed them. A university experience should be about so much more than this.” “There is more to university than money” April 16.

Absolutely! But is not graduating time a bit late to disclose that? How much debt would students dare to take on in order to pay the tuition fees, if the request of admission papers contained a: “Warning, universities are more than about making money”.

By the way, has there recently been some academic research on the evolution of the remuneration of professors? These Piketty days, it would be interesting to see how that has evolved.

In 2007 I argued that higher education should be more of a joint venture between professors and students. Of course I did not mean all the professors’ salaries were to be based on the earning powers of students. As I said, I fully agree that universities are much more than that, but, some better alignment of incentives, seems to be much called for.

It would seem that just like easy house financing translates into higher house prices, easier education financing just translates into higher tuition fees. But, I may be wrong, so as I said research is needed… any papers coming up on this?

PS. Someone commented. "There must be a little sadism involved here, since graduation time is precisely when students most begin to think of money."

@PerKurowski ©

Could one sue one’s Alma Mater for a partial valueless education, in order to pay back part of one’s student debts?

Sir, it is hard to know what to do with the so astounding information that Lucy Kellaway provides us with: “Over the past 10 years the 17 valueless companies have outperformed the others in the FTSE 100 Index by about 70 per cent” “Hands up if you can list what your company’s values are” October 5.

First question would have to be to clarify whether those results means valueless as in absence of values, or, hopefully, valueless as in absence of declared values.

The second, if I may, would be to try to figure out how much debt MBA students around the world have taken on, in order to learn about the extreme importance of declaring corporate values. Maybe there is a valuable class action lawsuit against their Alma Maters coming down their way.

@PerKurowski ©  J

If the incentives are correctly aligned all bonuses make sense.

Sir, John Kay in “When a bonus culture is just a poor joke” April 28, that he would have felt insulted if as a teacher he were to receive a bonus from a student on the successful completion of a course.

Why should he feel that way if the incentives were well aligned? You see it is really not the completion of a course that matters, as Kay seems to believe, but what you do in life with that completion. In this respect let me share with Kay some brief paragraphs I posted on one of my umpteenth blogs a couple of years ago.

Don’t give your teacher an apple; offer him a couple of basis points in your earnings instead.

Parent and students need some way of sorting through the reams of college information in order to make rational investments, but may I remind you that even when finding the absolute perfect college that you might benefit from aligning the incentives better.

In this respect what I am currently recommending my young friends when they take off for their MBA is that they offer a couple of basis points on their first 10 years earnings to those teachers they feel could best advance their careers…it makes wonders! 

Aligning the incentives could in the long run also be the best way of getting information for the picking of a college to, as education should in fact be a joint venture between students, teachers, and colleges.