Yesterday, I wrote about the silliness of requiring a file clerk to have a college degree. This morning, a friend sent me the following note about the narrowing of opportunity in modern America:

Random thought inspired by the NYT article re: requiring BAs for everything and your post, especially the note about your IT team and their varied backgrounds, which is far less likely to be true today.

It seems to me that a similar version of that narrowing-entry option is occurring in many fields

You've written in the past about how the top banks have steadily narrowed the pool of candidates whom they'll consider - e.g., only 5-6 schools will even be looked at. A similar phenomenon has been occurring in law as well, and not just post-08 . . . even before the recession.

Not sure I have a handle on the larger meaning of it all: it just seems like a generalized phenomenon to me that entry pathways are narrowing all over

He also pointed me to a telling passage in Diary of a Very Bad Year, Keith Gessen's interviews with a hedge-fund manager:  

In my last post, I mentioned the college earnings premium.  It's real, and it's huge.  Just look at the difference that education makes to earnings potential.  The difference applies to everyone from entry level workers to the highest earners; in fact, the top earning high-school dropouts don't average much better than the bottom-earners with advanced degrees:

You can see the big discontinuity between education levels: high school dropouts, high school graduates, and those with some college tend to be clustered at the bottom, while the incomes of the educated pull away.

Here's the data organized by educational level, instead of income quartile:

Last September, I wrote a lengthy cover story asking whether a college diploma is still worth it.  In some sense, it obviously is--there's a substantial wage premium for college graduates.  But in other ways, it's very much an open question.  For starters, the marginal kids who we are now adding to college classes may not get the benefit of the degree: they're more likely to drop out, and less likely to have the complementary assets, like connections and social capital, that help maximize the value of your BA.  

More worrying is the way in which a BA is now becoming a minimum requirement for jobs that simply don't require any of the skills you learn in college: receptionist, file clerk, secretary. The New York Times has a lengthy article exploring this phenomenon through the lens of a law firm which requires everyone, even the lowliest clerical worker, to have a college degree:

This prerequisite applies to everyone, including the receptionist, paralegals, administrative assistants and file clerks. Even the office “runner” — the in-house courier who, for $10 an hour, ferries documents back and forth between the courthouse and the office — went to a four-year school.

“College graduates are just more career-oriented,” said Adam Slipakoff, the firm’s managing partner. “Going to college means they are making a real commitment to their futures. They’re not just looking for a paycheck.”

Dan Kois wants airlines to stop allowing people to recline their seats:  

Ding! Instantly the jerk in 11C reclines his seat all the way back. The guy in 12C, his book shoved into his face, reclines as well. 13C goes next. And soon the reclining has cascaded like rows of dominos to the back of the plane, where the poor bastards in the last row see their personal space reduced to about a cubic foot.

Or else there are those, like me, who refuse to be so rude as to inconvenience the passengers behind us. Here I sit, fuming, all the way from IAD to LAX, the deceptively nice-seeming schoolteacher’s seat back so close to my chin that to watch TV I must nearly cross my eyes. To type on this laptop while still fully opening the screen requires me to jam the laptop’s edge into my stomach.

Obviously, everyone on the plane would be better off if no one reclined; the minor gain in comfort when you tilt your seat back 5 degrees is certainly offset by the discomfort when the person in front of you does the same. But of course someone always will recline her seat, like the people in the first row, or the woman in front of me, whom I hate. (At least we’re not in the middle seat. People who recline middle seats are history’s greatest monsters.)

"Where are all the customers?" asks an internal Walmart email published by Bloomberg last week.  "And where's their money?"  Another email states "In case you haven't seen a sales report these days, February [month to date] sales are a total disaster . . . the worst start to a month I have seen in my ~7 years with the company."

Brad Plumer notes that Walmart sales are often a bellwether for the rest of the economy.  Should we be freaking out?

I'm all for a modified limited freakout.  To be sure, Walmart is likely to be disproportionately affected by the changes we've recently made in government policy.  Ending the payroll tax holiday probably cut substantially into the disposable income of Walmart's "value oriented" customers.  And because the debt ceiling deal was an eleventh-hour negotiation, the IRS couldn't process tax returns as fast.  Normally, they'd be starting to roll out around now, ballooning Walmart's sales with once-a-year investments in stuff like furniture and electronics.  

So there's reason to hope that this effect is 1) temporary and 2) somewhat Walmart-specific.  So why freak out at all?

I saw this item on TaxProf, and like many of you, I gaped, and then cringed:  

The instructor at the West Virginia public institution included some possible news sources, such as The Economist, BBC, CNN and The Huffington Post. But the instructor also specified that two sources could not be used. One was The Onion, which the assignment notes "is not news" and "is literally a parody."

The other barred source is the one that got the instructor -- Stephanie Wolfe -- scrutiny this week. She banned articles from Fox News, writing: "The tagline 'Fox News' makes me cringe. Please do not subject me to this biased news station. I would almost rather you print off an article from the Onion."

Just as I gaped and then cringed when an obscure state-level GOP official made repulsive, inhuman jokes about a dead kid on Twitter.  Which got me thinking about how these incidents play out in the media space, and in our brains.  

Dear Blogger:

I write to ask your opinion on where to divide $2000 per month of disposable income between emergency savings, retirement, school loans, college savings for my son, and my own school loans. I'm a 34-year-old man, and this March, I will pay off my consumer debt, completing a financial turnaround that took me from the brink of bankruptcy in January 2011. Since then, I've settled $15,000 in credit card debt for about $6,000; short sold my severely underwater house in Detroit; and paid off about $25,000 in other, mostly unsecured, debt. This leaves only my school loans ($145,000 from law school at 6.8–7.9%, and $20,000 from undergrad at 4.25%). This took some discipline, and landing a job at a law firm didn't hurt.

After paying bills and other commitments (such as child support), I have about $2000 per month left over. I have about $4300 in emergency savings, and I estimate that I need $2000 per month to live comfortably and continue to pay child support. I have $2600 in my 401(k), and I'm putting in $1700 per year because I feel I need to put at least something in there. I have not opened a 529 plan for my son, but I plan to do so soon, and I'll probably add some token amount (like with my 401(k)) until I get my student loans paid off.

I've stretched the $20,000 undergrad loans over 20 years—at 4.25%, those loans don't need to be sucking up cash that I could put toward the law-school loans. I'm making graduated payments (currently $1200 per month) on my seven law-school loans (totaling $145,000). I plan to overpay on one loan at a time, resulting in progressively lower monthly payments as I knock off loans the minimum payments of which then get rolled into the overpayment. I make too much money to deduct my school-loan interest.

Laura at 11D posts a very solid list of recommendations for people embarking on post-high school education.  

• Don't get an AA degree anywhere but at a super cheap community college. Go to a local community college, live at home, and get a part time job.
• Don't take out anymore than $15,000 in loans. 
• Try your damnest to get done in four years. 
• Don't choose a school based on the college atmosphere. 
• Never get a Masters Degree in anything, except if it is guarenteed to increase your salary. 
• Never get a PhD in anything.
• Never get any degree in a profession that doesn't require a degree. (You don't need an AA degree in party planning, for example.)
• I would like to tell people to avoid schools where the professors don't actually teach any courses, but it's hard to find positive examples anymore.
  

I'd add just a few things:

1.  Work for a year before you go to college; you'll get much more out of the experience, and you won't need to borrow as much

There's no question that there was a fair amount of mortgage fraud during the financial crisis.  But where did it come from?  Actually, that's not the right question: we know where it came from.  Borrowers and mortgage brokers falsified the documents.  

This is obviously not good, but you can almost see how it started.  When banks started using hard cutoffs enforced by computer systems, you would get the crazy result that someone with an income of $50,150 would qualify for a mortgage, while someone with an income of $50,000 would not.  Now, there is no one making $50,000 a year for whom $150 is the difference between keeping current, and foreclosure--not when they could close the gap by picking up a couple of shifts at Pizza Hut.

So mortgage brokers started cheating a little to get around an irrational system, and by the time that the bubble was in full roar, they weren't just cheating a little.  Private debts and child support payments were left off applications, fake sources of income were invented, the need for a second mortgage was concealed, investors were misrepresented as primary residents.  The loans that investors were told they were buying were not quite what they got.  And many of those loans, naturally, ended up in default.

But did the originators know?  Naturally, they maintain that they didn't.  A new paper by Tomasz Piskorski, Amit Seru, and James Witkin, however, suggests that they did:  

The other part of President Obama's minimum wage policy, which I didn't really mention yesterday, was the proposal to index it for inflation.  I didn't mention it because as far as I can tell, this is dead letter--Democrats like being able to bring up the issue every few years, and Republicans aren't fan of anything that automatically increases the minimum.  

Nonetheless, I think it's interesting to ponder.  And what I want to ponder is this:  what does indexing do to the effectiveness of monetary policy?  

One of the main benefits of inflation (a little bit of inflation, anyway) is that it eases the burden of "sticky wages".  Which is to say that people don't like their wages to go down.  In theory, if productivity drops, employers can lower wages to match the new reality.  In practice, they apparently can't, so they fire people instead.  

Inflation allows you to lower the real value of peoples' wages by just not giving them a raise, while not triggering the complex emotion response that a pay cut engenders.  

It’s easy to see why Barack Obama wants to raise the minimum wage.  It’s popular with his base.  It’s popular with unions, who dislike competition with low-wage labor.  And it doesn’t cost the government anything ecept the cost of printing some new posters telling people what the minimum wage is.  

But is it a good policy idea?  

The three main considerations are the same as for any economic policy: who does it help?  Who does it hurt?  And what is the effect on growth?  

It’s obvious who benefits from a higher minimum wage: people who get minimum wage jobs.  In theory, it may also boost the incomes of people who are making near the minimum wage, as employers raise those wages to ensure that these are “better than minimum wage jobs”—though in this labor market, I wouldn’t bet on it.  

He ended up in basically the same place I did, though starting from a different perspective:

Anyone who has been through this annual exercise at the White House would recognize the tell-tale signs. The phrase “I will direct my cabinet to come up with executive actions we can take,” which came quite early in the speech in relation to energy and environmental policy, is the policy staffer’s worst nightmare in a State of the Union address. It’s your boss saying you failed. It means that after months of meetings and dozens of memos, the White House, OMB, and the relevant cabinet agencies couldn’t even agree on executive actions to take, let alone on a proposal to include in the budget or to press for in Congress. I thought it was strange that Obama would put that declaration of failure so early in the speech. Why not raise your key 2014 budget proposals first—that’s generally what the State of the Union is for—and then do cleanup on the issues that some constituencies want to hear about but that you weren’t able to pull off? If you look at State of the Union addresses from the past few decades, that’s usually how they work.

As the speech went on, though, the reason became clear: There were no 2014 budget proposals. The president didn’t even mention his forthcoming budget—again, that’s usually a big part of what this speech is for. And he didn’t make any significant proposal for reforming any government program, for launching any new one, ending any old one, or doing much of anything in particular that he hasn’t been pushing unsuccessfully for years. It was like an eighth-year State of the Union address, not a fifth-year one.

You have to try to cover up such things, of course, especially if you’re a Democrat, and so the president did speak of all manner of obnoxious federal micromanagement initiatives with fancy names—manufacturing hubs, a “partnership to rebuild America,” a challenge to “redesign America’s schools,” an “Energy Security Trust,” and so on. But you know what these things are? They’re nothing. They’re the headings that the wonks in a Democratic White House put at the top of otherwise blank memos at the beginning of a process that, months later, is supposed to end up with a budget and a State of the Union address. And here they were at the end of that process with barely more meat on their bones than when they started. Some of these proposals might “happen” and some of them will not, but there won’t be any difference between the two.

I said in my last post that the president wasn't proposing much that was truly transformative.  But if it works, there was one proposal that truly could have lasting (positive) effects on society: his suggestion of universal, high quality pre-school.  

There is evidence that pre-school makes big differences if it's done right.  Both the Perry Pre-School Project, a groundbreaking experiment conducted in Ypsilanti in the early 1960s, and the Abcedarian experiment performed in North Carolina in the early 1970s, seem to have made substantial improvements in the life outcomes of the kids they served.  They did not turn the children into middle class college graduates, but it did improve school graduation rates and reduce the likelihood of a criminal arrest.  A team lead by economist James Heckman, who is one of the smartest guys around on educational research, estimates that the return on investment for Perry's pre-school program are 7-12%.  

So what's not to love?  It seems like the sort of idea that no one could possibly oppose.  Nonetheless, there are three big questions about the president's proposal that need to be resolved before we move forward:  

1.  Should it be universal?  Liberals like universal programs because they build widespread support for the benefit.  Their customary tagline, when people propose means testing or otherwise narrowly targeting the neediest, is that "a program for the poor is a poor program".  

Looking back on yesterday's predictions for last night's State of the Union speech, I find that most of my most pessimistic predictions were confirmed.  Lots of symbolic nods towards base-pleasing issues like infrastructure, manufacturing, early childhood education, and climate change but little in the way of specific plans--on climate change, he resorted to a vague threat to use executive orders if Congress wouldn't pass something.  He talked about the budget, but spent most of that section implying that we could fix these problems by taking more stuff from rich people, if only the GOP weren't such obstructionists.  He was not making the case to his own party for real reform, or even offering up a serious starting point for negotiations.  He is preparing for a streetfight, one in which the prize is not "What sort of deal do we get to fix the budget?" but "Who takes the blame when we don't?"  

His supportes will say that the GOP has left him no choice.  This may be true (though the level of obstruction has clearly moderated since the election.)  It's dispiriting either way.  

Yesterday I closed with a quote from Bill Galston:  

The inauguration speech, says Galston, "stated coherently and elegantly the ensemble of beliefs that animate the coalition that returned Obama to power.

Obama's second inaugural address, Bill Galston of Brookings recently said, can be viewed as "the last speech of the 2012 campaign".  Like most inaugural addresses, it was long on rhetoric and short on concrete agenda items.  

Tonight, Obama the candidate is once again replaced with Obama the president.  This will be the first preview of what he wants to accomplish in this second term.  

At the moment, that's amazingly unclear.  The 2012 campaign was possibly the most information free election in recent history; at the end of it, the only thing we'd really learned was that Obama isn't a wealthy hedge fund manager.  So this State of the Union will be particularly important.