It's all about human capital, people

"Today, money flows toward people who also have knowledge, advanced skills and the relentless determination to find a better way. Michigan, historically, has not grown enough of this kind of talent. That kind of change will take time and an evolution of our education system."

-- Ron Dzwonkowski, the fine now-retired associate editor of the Detroit Free Press, from his last column.

It’s become embedded in conventional wisdom that the Great Recession is the worst economic calamity since the Great Depression. Maybe that’s why people aren’t paying much attention to what we’ve learned from it … except for the thousands of Michiganders who are still out of a job.

Consider the data recently assembled by economists at Georgetown University:

* Nationally, people with a high school diploma or less lost 5.6 million jobs during the recession. The same people also lost 230,000 jobs during the so-called "recovery".

* Those with a community college degree or some college education, lost 1.75 million jobs in the recession, but they also gained 1.6 million jobs during the recovery.

* People who had a college degree or better gained 187,000 jobs during the recession. And those with a BA or better gained 2 million jobs during the recovery!

The conclusions are so stark and so simple it’s a wonder every politician now running for office isn’t jumping up and down: Workers with a high school diploma or less bore the absolute brunt of the recession, while job gains during the recovery were confined to those with education beyond high school.

Here’s another way to look at the same point, thanks to the federal Bureau of Labor Statistics. In Michigan in 2010 (the last year for which I could find data), unemployment among those with no high school diploma was 26 percent, while 18 percent of those with a high school diploma were jobless. Workers with a community college degree showed 10 percent unemployment, while only 5 percent of those with a bachelor’s degree or better were unemployed.

Another way to put it is that there are 77,000 jobs going unfilled in Michigan today because employers can’t find workers with the necessary skills – skills that to not necessarily require a college degree.

I talked with Michigan State University economics professor Charles Ballard about what it takes to attract good-paying jobs to Michigan. Tax breaks? A better business climate?

Nah. "Number one is having skilled workers. Number two is having skilled workers. Number three is having skilled workers."

Although it’s slow, what’s beginning to happen in Michigan is an emerging consensus that the absolute key to our prosperity as a state and security for our people is an unprecedented, focused, long-term emphasis on investing in the human capital of our citizens. 

"Human capital" sounds like a business term, and it is. 

It’s the sum total of the education, skills and talents of people. Investments in capital goods – new plant, equipment, R&D, even human beings – are typically measured by return on investment -- "ROI." This is a number that shows how much a capital investments pay off over their life. A positive ROI is essential; a high ROI is good. The data show conclusively that investments in human capital return higher ROIs than any alternative asset class.

Like many other things, how we describe things goes a long way to how we understand them … and what we do as a result of our understanding. 

Right now, we chop investments in human capital into various artificial categories: Early childhood. Kindergarten through 12th grade. Community college. Four-year college. Graduate school. 

What’s the difference? They’re all aspects of what should be a seamless web of investments in human capital that begins at birth (better, with good pre-natal care) and ends whenever a person figures he or she has enough skills to proceed through the work force. 

That we have come to denominate various parts of our human capital system according to whichever bureaucracies happen to manage it is a perfect argument against governments running stuff.

Beyond terms, though, the fact is clear: If you don’t have a education and skills beyond a high school diploma, you’re toast.

The question is whether Michigan politicians – and Michigan citizens – recognize indisputable fact and have the guts and the will to do something about it beyond paying lip service in an election year.

Editor’s note: Former newspaper publisher and University of Michigan Regent Phil Power is a longtime observer of Michigan politics and economics. He is also the founder and chairman of the Center for Michigan, a nonprofit, bipartisan centrist think–and–do tank, designed to cure Michigan’s dysfunctional political culture; the Center also publishes Bridge Magazine. The opinions expressed here are Power’s own and do not represent the official views of the Center. He welcomes your comments via email.

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Thu, 09/27/2012 - 11:33am
"Workers with a high school diploma or less bore the absolute brunt of the recession, while job gains during the recovery were confined to those with education beyond high school." Maybe it has to do with the quality of the diploma, the knowledge that the diploma represents. We haven't heard it lately, but was it so long ago that we have forgotten how many graduates couldn't even read their diploma. "it’s a wonder every politician now running for office isn’t jumping up and down:" Why be so surprised, maybe because it would require hard choices and holding people and programs accountable. Think of the years leading up to 2008 what Michigan politicians were willing to hold their programs accountable? “Number one is having skilled workers. Number two is having skilled workers. Number three is having skilled workers.” I wonder, if that is the case then why don't they simply spend more to bring workers from elsewhere? Cost does matter. "long-term emphasis on investing in the human capital of our citizens." The problem with this concept is that each individual has to make the first investment, they need to want to be educated, they need to make the sacrifice to get that education, and they need to risk the attitudes of those around them. All the money we have can go into education (tax those employers untill they have no profits), but unless the kids want to learn we will not grow Michigan's 'human capital'. "If you don’t have a education and skills beyond a high school diploma, you’re toast." WRONG! If you don't have the knowledge and skills that provide value to an employer you will not earn as much as you want and most likely will be unemployed. I suspect that the reason we have so many people with large school debts is that the degree they have didn't justify its cost because they don't have the desired knowledge and skills. Until it is recognized that education is based in the individual's desire and their persistence the systems will fail. Kids from economically 'poor' surrounding succeed and kids with 'rich' surroundings fail because of their choices not the systems they are in. Michigan businesses were built by individuals making choices, inspite of what governement does, they had a desire, they has a persistance, they were willing to take risks, they were willing to sacrifice. A person's education is their business.
Charles Richards
Thu, 09/27/2012 - 2:13pm
Mr. Power would have us believe it is a simple matter of investing more in education, but I doubt the problem is that simple. What is the point of increasing the supply if the problem is lack of demand? Admittedly, the inner cities have an inadequate supply of quality education. But even in that case there seems to be a lack of desire on the part of some students and their parents to take advantage of what is available. Character, the willingness to defer gratification are essential prerequisites for success. Mr. Power does not address the intractable problem of how we inculcate those traits.
Thu, 09/27/2012 - 11:04pm
I'm sorry, but the data don't back up this argument. Michigan's HS graduation rate has hovered around 75 percent (for white students) and 53 percent (for black students) since 2001. The rate of Michigan residents who have college degrees rose between 2009 and 2010, according to the U.S. Census Bureau data. Between 54 and 60 percent of residents of Michigan are college graduates, according to the U.S. Department of Education. Human capital, educated human capital, is not the problem. Our HS and college graduation rates are comparable to other states' rates in the Midwest. Our state and its residents spend billions on education each year. With a pot of K-12 funding larger than the Gross Domestic Products of entire countries such as Costa Rica, Latvia and Tunisia, Michigan parents and taxpayers should be able to expect a K-12 education system that delivers excellence, not mediocrity passed off as proficiency. If our state is willing to step in when black majority districts have financial woes, it seems an equally good use of state resources for officials to step in when white majority school districts have significant and long-standing K-12 educational achievement gaps. If Michigan schools in Black majority districts are failing their Black students, and schools in the state’s white majority districts are failing their Black students, what we end up with is New Jim Crow: Together but Unequal—all for the bargain price of $40+ billion dollars per year. Throw more money at education? How about we invest more money at programs aimed at reducing childhood poverty and childhood hunger, both of which are rampant in Michigan? How about we lengthen the school day? How about we light a fire under the entire education system in the state to graduate non-whites and whites at the same rates?
Jeffrey L Salisbury
Sun, 09/30/2012 - 8:02am
College-for-All? Maybe. Maybe not. Career counseling for All? You bet! The Bureau of Labor Statistics Reports 20 Occupations with the MOST job growth from 2010 and projected through 2020 are and will be --- Top 20... 1. Registered Nurses - 2 year degree 2. Retail Sales - on the job training 3. Home Health Aides - some training after high school 4. Personal Care Aides - some training after high school 5. Office Clerks, General Office Workers - some training after high school 6. Combined Food Preparation and Serving Workers, Including Fast Food - some training after high school 7. Customer Service Representatives - some training after high school 8. Heavy and Tractor-Trailer Truck Drivers - some training after high school 9. Laborers and Freight, Stock, and Material Movers, Hand workers - - some training after high school 10. Postsecondary Teachers (colleges and universities instructor) - Master's Degree required 11 Nursing Aides, Orderlies, and Attendant 12 Childcare Workers 13 Bookkeeping, Accounting, and Auditing Clerks 14 Cashiers 15 Elementary School Teachers, Except Special Education 16 Receptionists and Information Clerks 17 Janitors and Cleaners, Except Maids and Housekeeping Cleaners 18 Landscaping and Groundskeeping Workers 19 Sales Representatives, Wholesale and Manufacturing, Except Technical and Scientific Products 20 Construction Laborers So, get your high school diploma - look for a part-time job while you are in high school in a field you enjoy, think about a trade or vocational school, perhaps even a community college certificate or degree program in nursing, sales, health care, business, food service, truck driving school, heavy equipment operating school etc. For a complete list accounting for some 70 percent of the work force...
Jeffrey L Salisbury
Sun, 09/30/2012 - 8:03am
Total - Fastest Growing - not necessarily the MOST openings... Personal Care Aides Home Health Aides Biomedical Engineers Helpers--Brickmasons, Blockmasons, Stonemasons, and Tile and Marble Setters Helpers--Carpenters Veterinary Technologists and Technicians Reinforcing Iron and Rebar Workers Physical Therapist Assistants Helpers--Pipelayers, Plumbers, Pipefitters, and Steamfitters Meeting, Convention, and Event Planners Diagnostic Medical Sonographers Occupational Therapy Assistants Physical Therapist Aides Glaziers Interpreters and Translators Medical Secretaries Market Research Analysts and Marketing Specialists Marriage and Family Therapists Brickmasons and Blockmasons Physical Therapists Dental Hygienists Bicycle Repairers Can you see the pattern students and parents? Combine the jobs with the most openings and the ones that are growing the fastest... that is to say where the need is soon expected to be the greatest... you can literally count the jobs requiring a 4-year degree on 1 or possible 2 hands - out of 60-plus occupations. So why you ask is there all this talk of raising standards and graduation requirements and making course work more "rigorous"? Because I say, the college and universities and banks and financial institutions want to see more and more students enrolled in college and borrowing more and more money and buying more and more school supplies - books - and electronic devices. College-for-All? Maybe. Maybe not. Career counseling for All? You bet!
Jeffrey L Salisbury
Sun, 09/30/2012 - 8:04am
Phil – The Common Core movement is talking career readiness (some), but we have not and will not see the career part fleshed out; the curriculum is still all college prep, no differentiation of coursework for different abilities or interest levels of students and their parents. And in large part because of that and the focus on the odd combination of “college for all” – “pre-school for all” – “testing for all” - the national drop-outs crisis will NOT abate, so long as we continue to waste billions of dollars and hours and days trying to inch up the scores of our lowest test-takers. The way to avoid labor shortages in Michigan and across the country and to really make effective use of dollars would be hiring and then properly training more career/guidance counselors at the junior high school and high school levels offering more hands-on experiences, work release programs and apprenticeships in the fields of endeavor indentified in the Bureau of Labor Statistics reports. But sadly I feat that corporations will only continue to make profit, and employers will simply maintain an adequate supply of cheap, relatively-compliant applicants because that, after all, is what “competing in a global economy” is truly all about. “When you control a man's thinking you do not have to worry about his actions. You do not have to tell him not to stand here or go yonder. He will find his ‘proper place’ and will stay in it. You do not need to send him to the back door. He will go without being told. In fact, if there is no back door, he will cut one for his special benefit. His education makes it necessary.” from The Miseducation of the Negro