Wisconsin offers innovative degree option

The University of Wisconsin system has introduced a potentially revolutionary way to make college degrees more accessible, reports today's WSJ.  The UW Flexible Option will allow students to take modular online courses when they want to.  It will allow them to take tests that certify they have mastered course material and get college credit.  So if you learned something through your own reading or experience or took a MOOC course, now you can get academic credit certifying that you have that knowledge.  Various UW campuses will be rolling out degree programs based entirely on a combination of flexible online courses and credit by exam.

The program is being seen as a big plus for the 20% of Wisconsin residents who have some college credits but lack a degree.  UW-Milwaukee will be the first school to offer degrees this fall with undergraduate degrees in diagnostic imaging, information science, and nursing plus masters degrees in nursing.

I looked very hard and could find no information on tuition rates for these new programs (aside: this tends to be the most difficult bit of data to obtain on any university website).  WSJ reports that tuition will be significantly cheaper than the $6900/year average for undergrads in the UW system. 

I applaud the innovative approach.  I also hope the online students can still find the time to head to the UW-Madison student union and enjoy a pitcher of Ale Asylum Hopalicious with classmates on the shore of Lake Mendota.  

Employers looking for BFFs

Great recent piece in Bloomberg Businessweek on what employers are looking for.  Although spreadsheet skills, a firm handshake, and eye contact are still on the list, more and more are looking for whether you are a good "cultural fit."  First interviews now are likely to contain questions such as "What's your favorite movie? What's your favorite website? What's the last book you read for fun? What makes you uncomfortable?," all of which are in the 50 most common interview questions. 

The article cites a recent study by Kellogg's Lauren Rivera which concludes that employers do not necessarily hire the most skilled candidates. One also must wonder if this interviewing process results in greater conformity and less true diversity. 

By the way, my answers are "The Godfather," Kentucky Sports Radio, Solzhenitsyn's "Cancer Ward," and blood.  Think I could get hired anywhere?

US News ranks online program #42

US News came out with its first ranking of online MBA programs this week.  In a ranking of 128 schools, the Jenkins MBA came in at #42.   We scored well on faculty credentials and admissions selectivity; we have work to do on student engagement and technology, at least according to US News. 

Washington State clocked in at #1, followed by Arizona State, Indiana, Florida and Cal State-Fullerton.  UNC-Chapel Hill declined to participate. 

With an online program that has only been in existence for 16 months, I think this is a reasonably good showing.  I also am confident that we will do much better the next time around. 

College still worth a lot

I have seen dozens of stories over the last four years that purport to show that a college degree is not as valuable as it used to be.  It is true that unemployment of college grads has gone up and salaries have fallen off.  But this does not mean college has become a poor investment.  One must compare how college grads fare compare to those without college degrees to see the full picture.

Last week NYT ran a story about a study supported by Pew Charitable Trust that focused on those age 21 to 24 in the current recession.  Here are the key findings:

People with four-year college degrees saw a 5 percent drop in wages, compared with a 12 percent decrease for their peers with associate’s degrees, and a 10 percent decline for high school graduates.

Among those whose highest degree was a high school diploma, only 55 percent had jobs even before the downturn, and that fell to 47 percent after it. For young people with an associate’s degree, the employment rate fell from 64 percent to 57 percent.  But those with a bachelor’s degree started off in the strongest position and weathered the downturn best, with employment slipping from 69 percent to 65 percent. 

College grads are having a harder time, but others are having a much harder time.  

Is there still a payoff to the MBA?

Monday's WSJ ran a front page article about how MBAs are having such a tough time in the job market.  Two facts are undeniable: (1) student debt levels are rising and (2) MBA salaries are flat.  This certainly implies that the return on investment has declined.  What it does NOT imply is that the return on investment is zero. 

The article makes the common journalistic fallacy of not asking the key question: compared to what?  For those contemplating the MBA, the key comparison is the income path with an MBA versus the income path without one.  Even if MBA salaries are about the same as they were five years ago, they continue to be considerably higher than salaries of college graduates without a graduate degree. 

Still, the MBA is not an instant ticket to success for everyone.  The article points out that while companies value the skills associated with the degree, they value work experience even more. 

Fiscal cliff notes

I was asked repeatedly by family and friends over the holidays whether their taxes were going to skyrocket if Washington failed to get a deal before the year ended.  My answer: As long as neither party saw a clear gain from going over the cliff, you can count on a deal.  Just as in the case of the debt limit deal in summer 2011, both sides waited until the last minute to cut a deal.  Just as in every case when there is a big deal in Washington, lots of pork (that has received next to zero publicity from mainstream media) was shoveled in at the last minute.  And even better, the general public was greatly relieved that, at least for 99% of Americans, taxes would not be going up. 

Here is where you have to give the Washington pols a lot of credit: the drama over the extension of the Bush tax cuts kept everyone's eyes off of all of the other tax increases that kick in with the arrival of 2013: a 2% increase in the payroll tax for everyone, a 2.3% tax on medical devices, and a 3.8% tax on investment income for those in high income brackets. 

Of course the revenue generated from all of the new taxes, including those imposed on the top 1%, will not come anywhere close to keeping up with the growth of spending on entitlement programs.  If anything, each party seems to have hardened its position in the last go around of talks with Republicans saying that this is all the extra revenue they will sign off on from tax increases and Democrats refusing to make any serious compromises on the growth of entitlement spending. 

Feds cut losses, to sell GM stock

No surprise, now that the election is over.  This piece on the US News website (link courtesy of Real Clear Markets) lays out the math.  GM initially received $50b and paid back $23b when in "went public" in 2010.  Shares are now trading at $25 and they would have to reach $52 for taxpayers to be made whole.  Most likely, taxpayers will not see the last $10-12b.

The article reminded me about GM's global operations.  Even though GM now makes money on the cars it manufactures in the US, its European operations are still running in the red.  So US taxpayers ended up subsidizing jobs overseas as well as here; not sure we will hear much about this from the pols who supported the bailout. 

Google off the antitrust hook?

Monday's WSJ reports that Google and the Federal Trade Commission are close to signing an agreement under which Google agrees to change some business practices and the Feds walk away from the litigation option.  Google controls about two-thirds of the search business in the US.  That might be enough to statistically qualify as a monopoly, but as a former FTC employee put it: "We don't want to punish monopolists just for being monopolists."  Lacking evidence of harm to consumers, the FTC apparently concluded it had no case.

The European Union will continue to pursue its case against Google.  The outcome could very well end up being different on the other side of the pond, where harm to competitors (e.g., Microsoft) is grounds for antitrust action. 

University presidents' salaries on the upswing

Income inequality has been increasing in the US since the 1970s.  Today's NYT has a blog post by Steven Rattner looking at the pay gap between university presidents and faculty over the last decade.  Data compiled by the Chronicle of Higher Education show that at the 50 wealthiest universities faculty salaries increased by 14 percent between 2000 and 2010 while salaries of presidents increased by 75 percent. 

What have the presidents done to receive such large pay increases? Most universities still hire their presidents from a pool of academics, a pool that is the same size today as it was in 2000.  Rattner notes the possibility that the jobs of university presidents have become more demanding (which is just what CEOs of private corporations say) but (a) this is an argument that cannot be tested against data and (b) it is obviously a self-serving argument.  University presidents in the 1960s and 1970s had to deal with demonstrations and riots on campus; seems to me their jobs were much more stressful than those of their current counterparts. 

Michigan passes right to work

Michigan became the 24th state to pass a right to work law this week.   Right to work laws give employees at unionized workplaces the right to be employed at those establishments without having to join the union or pay union dues.  Proponents say these laws protect employee rights at the workplace.  Unions say that employees have a choice between unionized and open shop opportunities and that right to work laws allow nonmembers to be freeloaders. 


Economic research indicates that right-to-work laws have an impact on employer location decisions.  As for wages, my NC State colleague Walt Wessels was quoted in WSJ as saying "you can't find any effect of right-to-work laws on wages."

My take: the main effect of right to work laws is that it reduces union dues revenue.  This reduces the payoff to unions from making attempts to organize workplaces in right-to-work states.  It also cuts back on union's ability to influence the political process.  It will be interesting to see if other states in the Great Lakes region such as Minnesota, Ohio and Wisconsin adopt right-to-work laws in the months ahead.  And it will be really interesting to see if the law ends up creating desperately needed employment opportunities in Michigan. 

Can Pandora ever make money?

WSJ reported last week that Pandora is a classic case of the old adage: "We lose money on every transaction but we make it up on volume."  Pandora must pay record companies and artists $0.0011 every time a listener hears a song.  With 59.2m users these costs rose to $65.7m in the third quarter of this year.  Pandora depends on ad revenue to make its business model work, but there are fewer advertising opportunities on mobile devices than laptops and desktops.  Hence, as more Pandora customers shift their listening to iPhones and iPads, Pandora gets squeezed.  Its stock dropped 18% in one day last week. 

Pandora's response: one would think it might raise its ad rates or start charging users on mobile devices.  But no!  Instead we have them (along with other internet music operations) trying to push the Internet Radio Fairness Act (IRFA) through Congress before it adjourns.  Currently the rates paid by Pandora and other internet-based music providers are set by the Copyright Royalty Board.  The board has set higher rates for Pandora than for satellite or cable radio.  Pandora screams foul, but in actuality the rates seem to reflect historical circumstance more than anything else.  Cable radio and Sirius have been around longer and they received a better deal when they entered the market.  To make things even more confusing, traditional over-the-airwaves radio pays zero royalties. 

IRFA would lower rates paid to artists and recording companies, making Pandora potentially profitable.  Another bill would force all players up to the Pandora rates.  My question: would we be better served if all broadcast entities had to contract with the music owners rather than cut deals in Congress?  Spotify, which lets you pick the songs you want to hear, is partially owned by the major recording labels.  Maybe this is the business model Pandora, Sirius and broadcast radio should be adopting. 

NC hog farms lure server farms

As all long-time NC residents know, we are the second largest hog producing state in the country, which means we also have an abundance of what I will politely call hog waste.  This has been a blight on our water supply and landscape for some time.

But this story I saw cited on Real Clear Markets says that there is a silver lining to the black ponds of hog waste: an alternate source of energy that is attracting the likes of Apple and Google to the state.  Apple is looking at using hog waste to claim renewable energy credits to power its new facility in Maiden NC.  Google is partnering with Duke Energy and researchers at Duke University to determine how much power can be extracted hog waste. 

I find it quite ironic that as much as we pride ourselves in all of the high tech activity in the RTP energy, it might be the byproducts of a traditional industry that help draw even more high tech activity to the state.  In economic terms, we can say that hog farms and server farms are complements in production. 

Exporting natural gas good for economy

Lead story in today's WSJ is about a soon-to-be-released US Department of Energy study that shows free trade in natural gas is good for the economy.  As any student who has completed the first two weeks of MBA 505 would say: "Do you really need to do a big government study to show this?"  Well, apparently yes because some law requires that such studies be performed for energy exports to any country that does not have a free trade agreement with the US.  (And most do not, but that is a subject for another rant for another day.)  The study had to be done before an export permit can be issued. 

Rebuilding after Sandy

Two Wharton professors write in an NYT op-ed today about how the country can better prepare itself for future coastal disasters like Sandy.  Most coastal residents do not buy flood insurance, even though the price is subsidized.  Wind insurance is covered by homeowners policies, the prices of which have risen dramatically in recent years.  Some states pool wind damage risks, which in effect means that those living inland subsidize premiums for those living near the coast. 

This is a tough problem, as tens of millions of people live in areas which could have severe storm damage (and this includes Raleigh which took quite a hit in 1996 from Fran).  Market pricing is always a good place to start, and certainly would discourage building and living in coastal areas.  But there is a close analogy between homeowners and health insurance here; unless you can make them buy it, most coastal residents would drop coverage when faced with market rates.  Also, Sandy destroyed homes in all price ranges.  The wealthy might afford actuarially-priced insurance; the middle class and the poor, not so much. 

WSJ: Must Have Job Skills for 2013

Employers want more than basic competency, WSJ says.  Here is what makes a job candidate stand out:

1. Clear communication: both verbal and written
2. Personal branding: Facebook and Twitter can make you or break you
3. Flexibility: Ask not what your employer can do for you; ask what you can do for your employer
4. Productivity improvement: Be anticipatory and proactive

Bloomberg Businessweek rankings

Last Thursday the Bloomberg Businessweek ranking for full-time MBA programs was announced.  For the first time NC State’s full-time Jenkins MBA was eligible to be listed.  This has been one of the key long-term goals of our program.  Our program is only 10 years old, so getting on this list is an important achievement.  There are literally hundreds of schools in the US that would like to be on the list but do not meet the size and quality criteria.

There were 114 schools globally who were invited to participate in the survey, 80 of them were American schools and the rest were in Canada, Europe and Asia.   We were ranked #63 in the US.  This is higher than our most recent US News ranking (#78).  In fact it is higher than we have ever appeared in US News except for 2008 when we were #59.

The Bloomberg Businessweek ranking is based on student satisfaction (45%), employer satisfaction (45%) and faculty research productivity per capita (10%).  The student satisfaction scores came from a survey of full-time students who graduated in May 2012. 

We did well in one dimension that did not enter into the rankings, but is important to students: affordability.  Only eight programs in the US had lower tuition and fees than we do.

Bloomberg Businessweek will do its next survey of full-time MBAs in two years.  Next year, it will do a survey of part-time MBAs, where we ranked #30 in the US last year.

Moving up in the rankings requires a joint concerted effort from students, faculty and staff.  The faculty and the staff will make sure that the program is up to date and prepares students well for successful careers.  Students will dedicate themselves to taking full advantage of opportunities and supporting the program, especially when they become alumni.  As we all strive for excellence and improvement, the Jenkins MBA will rise in the rankings and become more visible in the years ahead! 

A different take on labor force shrinkage

Just ran across a couple of references to Chicago economist Casey Mulligan's new book on the Great Recession: The Redistribution Recession.  In light of yesterday's post, I feel obligated to post on Mulligan's explanation of why the labor force has shrunk so much.  Mulligan puts much of the blame on the stimulus package itself for eroding the incentives to work.  Expansions in the availability of unemployment benefits, housing assistance and food stamps explain as much as half of the decline in employment and hours, Mulligan argues, by eroding the payoff from working.

Here is an example from a Forbes piece by John Goodman I saw yesterday: 

Mulligan gives the example of a two earner couple — each earning $600 a week. After the wife gets laid off she obtains a new job offer, paying $500 a week. But after deducting taxes and work related expenses her take home pay would be $257. Since untaxed unemployment benefits total $289, clearly she is better off not working.

I have not had the chance to read Mulligan's book, so it is hard for me to evaluate his analysis and compare it to Robert Moffitt's work that I cited in yesterday's post.  WSJ reviewer Stephen Moore puts Mulligan's work in perspective by saying

By the way, Mr. Mulligan doesn't challenge the claim that a surge in unemployment benefits, food stamps and other subsidies may have been desirable to prevent hunger or severe poverty for out-of-luck families or unemployable people traumatized by the recession. He simply and inconveniently notes that, though increasing subsidies may be compassionate in the short term, it comes with costs in the long term that eventually cause more hardship rather than less. 

Why is the labor force shrinking?

The drop in the employment-population ratio from 63 to 58-59 percent since 2007 is the most striking evidence of the sharp drop in job prospects.  The unemployment rate has recovered from its peak of 10 percent, but the employment-population ratio has not.  Many labor economists, including myself, believe that the employment-population ratio is giving us a much more accurate read on overall labor market conditions than the unemployment rate. 

Today's WP has an article on research by Johns Hopkins professor Robert Moffitt on the causes of shrinkage in the labor force. Moffitt argues that the decline may have started as early as 2000.  He looks at a number of possible causes and finds that declining wages may be part of the explanation; why bother working if the reward is declining?  He mentions rising incarceration rates in previous decades as another possible factor.  Some economists also have mentioned the rising share of the population receiving disability benefits as another key element. 

How regulations can backfire on climate change

Oxford Professor Dieter Helm has a great recent NYT op-ed that illustrates the law of unintended consequences for regulations designed to reduce global warming.  Helm points out that although Europe has invested heavily in green technologies, it has made less progress in reducing carbon emissions than the US. 

The reason?  In the US we have cut down on coal and substituted natural gas.  Both are carbon-based but natural gas is much cleaner.  Europe has cut back on coal usage in its manufacturing processes, but because it is now importing more goods from China there is no net global reduction in coal usage.  Coal that would have been burned in Europe is now being burned in China.  Also some areas in Europe are cutting back on nuclear-generated electricity and are burning more coal.  Helm, like most economists, advocates a carbon tax that would apply regardless of the source. 

Why gas is scarce in NY and NJ

America last experienced lines at the gas pump in the 1970s under Jimmy Carter when OPEC cut back on exports.  Gas lines are back again in NYC and NJ in the aftermath of frankenstorm Sandy and this week's nor'easter Athena.  As we all know, Mother Nature wreaked havoc; shipping terminals have been damaged and many areas still lack power.  Politicians in both states have followed the Carter playbook and adopted odd-even rationing (WSJ report here).  This is expected to last at least two more weeks.

Anyone with a basic level of understanding of economics would immediately consider whether the human element might also be at work.  Let's start with laws designed to prevent price-gouging.  NY will hit gas station owners with a $10k fine for anyone charging 

"unconscionably excessive" prices charged by any party within the chain of distribution for necessary consumer goods and services during a declared state of emergency. Prima facie proof of "unconscionably excessive" includes evidence that (i) of a gross disparity between the amount charged and price for the same goods immediately prior to the abnormal disruption; or (ii) the amount charged grossly exceeds price at which same or similar products.

NJ has a comparable statute. 

Let's also remember that EPA regulations restrict the types of gas that can be sold by location and season.  Ironically gas prices here in Raleigh are cheaper than they have been in years while people in NY and NJ suffer.  Don't you think some trucks could divert supplies if there were an incentive to do so?  As this op-ed from a NJ newspaper points out, higher prices motivate suppliers to find more fuel and encourage buyers to economize. 

Bottom line: there is no doubt that Sandy hit NY and NJ with a wallop but a month of gas shortages is at least in part a man-made disaster,