The Working Man, Unemployment, and Education

I am so tired of politicians (of both parties) saying they want to protect, or call for tax cuts for, or pass legislation that favors the working man. They carry on as if what they refer to as “the rich” never worked. Isn’t it ironic that (the late) Senator Ted Kennedy (D-MA) was a vociferous mouthpiece for the working man, having never worked in profit-making business a day in his life.

Minimum Wage and The Working Man Champion

Kennedy was a life-long champion for the working man, a living wage, and a minimum wage, but he often put politics ahead of reality. While introducing his amendment to increase the federal minimum wage to $7.25 an hour in 1998, Kennedy chose to ignore the economic reality of mandated wage increases. For example, “Decades of research show that increasing the minimum wage creates job loss for low-skill employees while providing the majority of benefits to non-poor individuals who are not raising a family on a single minimum wage income,” said Employment Policies Institute’s director of research Craig Garthwaite. Garthwaite continued, “Senator Kennedy also claims that raising the minimum wage is a minority issue, but he declines to mention that adults suffer four times more employment loss from a minimum wage increase than other affected employees.” Why, you may ask, is this paragraph here? I want some of Kennedy’s tactics to be exposed, and to show that Kennedy was a grandstanding politician, looking for anything that would gain him publicity.

Who Earns Minimum Wage?

Data from the Department of Labor show that most minimum wage-earners are young, part-time workers and that relatively few live below the Poverty line. If Congress is serious about helping the working poor, it should look elsewhere than raising the minimum wage. Consider the following table:

This table shows (clearly?) that there is a relation between education level and minimum wage. So the higher the education level, the less likely that a worker will make minimum wage. Or, conversely, higher levels of education equate with a lower chance of earning the minimum wage. And, by extension, higher levels of education equate with higher earnings, the “rich.”

Unemployment and Education

Rob Valleta and Jaclyn Hodges of the San Francisco branch of the Federal Reserve have analyzed the history of unemployment in the U.S. Examine the authors’ chart below that shows the unemployment rate by education level:

The pattern between the level of education and unemployment is clearly illustrated by this chart. Where the average rate of unemployment for those without high school diplomas rarely dips below double-digits in even the best of times, for college graduates, the rate of unemployment hasn’t risen above 4% in the worst of times.

Education and Wealth

I started helping other faculty with their studies and with statistics. One of the subjects most often studied was the relationship (correlation) between education and wealth. For over 40 years that relationship has existed. More education is highly, directly correlated with higher wealth, and the potential for higher wealth. For example, consider the following two examples.

Getting an education is work. Studying for exams and preparing assignments can become quite a bit of work. And the amount of work increases as the amount of education increases.

Making a decision is work. In fact, making a good, informed decision means quite a bit of work. Look at the decision-making process. A popular one is a five-step process, illustrated below.

1. Need Recognition & Problem Awareness
2. Information Search
3. Evaluation of Alternatives
4. Make the Decision
5. Post-Decision Evaluation

Each of these steps is both time-consuming and a lot of work! Good decisions don’t “just happen.” And the process is never ending – Step 5 creates a new situation, calling for Step 1 all over again.

Add to the process the pressure of making a decision that can affect family, business, and all the employees, and (repeatedly) making a good decision can be a lot of work. And many business owners would gladly trade their decision-making responsibilities for factory or assembly line “work.”

A study by the RAND Corporation draws a correlation between education and wealth. The primary observation from this study is that there is a correlation between education and wealth. This observation is not surprising since degrees of higher learning generally lead to higher paying occupations, advancement and job security. The key is to be able to produce results, and education provides that ability. The more value you provide to your employer, the more likely you will be to keep your job and earn more money.

Another study produced these (national and individual) results: At the national level, a country’s wealth (measured by GDP per capita) and the education of its population (measured by in-school years expectancy) are highly correlated. A similar link can be observed at the level of individual households. Households whose members have a higher level of education are usually wealthier than households with less educated members.

Yet another study finds that the correlation between a higher education and career advancement is no secret. An education is in everyone’s best interest, not to mention the increase in salary that usually comes with an increase in education. Career advancement is very important, especially to those people who have been working in the same industry, perhaps even for the same company, for some time.

So?

So the next time you hear a politician refer to the working man, please remember this post! Realize that there is a relationship between (1) education and unemployment, and (2) education and wealth. And realize that the educated and decision-makers also work!

But that’s just my opinion.