By Peter Morici
College is too expensive, graduates can't find decent jobs and pay off their loans, and students, parents and educators all share in the blame. Now, President Barack Obama's is proposing a plan that would forgive more student loan debt -- but that will only make a bad situation worse.
More than half of recent graduates are working as waiters, taxi drivers or some other occupation that does not require a college education. The number in minimum wage jobs has doubled since 2007.
Slow growth and a tough jobs market is one reason, of course. But just as important: Too few college students choose tough majors like nursing, engineering and accounting that enjoy a robust demand for graduates. Instead, many still opt for liberal arts subjects, such as politics and history, and emerge with few practical skills subjects such as politics, history and other liberal arts, and emerge with few practical skills for the working world.
Good jobs abound for technicians in health care, computers and other fields, and the Labor Department finds most rapidly growing occupations don't require a bachelor's degree. However, parents fear their children, without a four-year diploma, will lack the flexibility to navigate a lifetime of changing conditions.
If students are lazy and parents are risk adverse, university professors and presidents are far worse. Professors simply teach less and do more research of questionable value than they did in the past. In the 1950s and 1960s, a significant track record of publications was not required for tenure at most undergraduate faculties—advancing the frontiers of science and the arts was mostly the work of professors in post-graduate departments.
Nowadays, professors at all levels must publish to win tenure, but much of what they do adds little value to either the practical world or the advancement of knowledge in a purer sense. But it does require teachers to carry lighter teaching loads. Once tenured, many professors don't publish much, but still keep their light teaching schedules.
University bureaucracies are even worse—presidents and deans often have staffs bigger than CEOs and managers running much larger businesses. And faculties, which make virtually all decisions by consensus, spend endless hours in committees advising presidents and deans, and are supported by mind-numbing bureaucracies, too.
University presidents are politicians, not business managers. They understand who makes the choices (students), who pays the bills (parents) and who they must please in the Alice-in-Wonderland world of university governance—faculty.
They are rational: Instead of encouraging students to study useful subjects and containing sky-rocketing costs, they focus on fund raising and lobbying government officials to facilitate more student loans. Tuition jets into the stratosphere, students amass huge debt, and universities produce a lot of high-quality unemployment.
President Obama is rational, too. Parents, students and former students all vote. Instead of radically refocusing national policy to expand vocational education in high schools and community colleges, he promises to increase the percentage of Americans with four-year diplomas.
His proposed "Pay as You Earn," which came late last year, would forgive billions in student debt with federal dollars. Borrowers in the program would make payments equal to 10 percent of their monthly income, after rent and basic living expenses, and after 20-years of on-time payments would be forgiven of all debt—regardless of how much they had borrowed.
What the program fails to account for is that debt forgiveness simply encourages young people and parents to make poor choices, including borrowing too much. It will also embolden colleges to keep pushing up tuition—things the nation can't afford. It certainly won't help graduates find jobs.
To compete in the global economy and create good jobs at home, America needs workers with the right skills. That means limiting access to college to those who can genuinely profit from a university education, requiring professors to teach more and in on subjects that are truly useful in the workplace, and redirecting more of what the nation spends on education into other channels of vocational training.
By Kara Scannell
A prominent member of the Saudi royal family is at the heart of a US criminal probe into whether Barclays made improper payments in the kingdom, with investigators scrutinising two separate incidents linked to a son of King Abdullah.
The US Department of Justice is investigating two transactions, probing whether Prince Turki bin Abdullah bin Abdel Aziz - a wing commander in the Saudi air force who was recently made deputy governor of the capital city of Riyadh - was paid illicit fees by Barclays, according to six people familiar with the investigation.
The revelation shines another unwelcome spotlight on Barclays' business dealings in the Middle East. The bank remains under investigation in the US and UK over the terms of a crucial capital injection by Qatar in 2008.
In addition to the alleged payment connected to the 2009 award of a Saudi banking licence from the CMA, the local regulator - as reported by the Financial Times last November - Barclays is also being investigated over a separate alleged transaction linked to the prince. This was in connection with earlier attempts by the bank to recover a large loan on which the borrower had defaulted in 2002.
The US authorities' enquiries threaten further damage to the kingdom's international ties. Its relations with the UK and the US have been under strain for much of the last decade over prosecutors' inquiries into BAE Systems and its dealings with another Saudi prince. The US authorities went on to fine BAE $400m in 2010 for improper business dealings in the kingdom and in Europe.
Barclays acknowledged in a statement that the bank had appointed Prince Turki, "acting through his corporate entity, Al Obayya, to advise it on strategic issues in the Kingdom of Saudi Arabia, as well as on its CMA licence application".
It added: "Barclays is fully co-operating with the investigation. Barclays is not aware of any improper payments made to the CMA or any of its officials relating to the grant of a securities licence." The bank disclosed in February that it was being investigated by US authorities in connection with the US Foreign Corrupt Practices Act though gave no details.
According to two people familiar with the case, the loan, worth about $900m in total, had been taken out to develop military compounds which were then leased to the Saudi defence ministry.
More from the Financial Times
A dispute arose between the bank and the Saudi government because the bank claimed the loan carried a form of government guarantee. The matter escalated to a lawsuit filed in New York by Barclays and Dresdner Bank, another of the syndicated lenders, against the Saudi ministries of finance and defence. The lawsuit was settled in 2003, according to court records.
Prince Turki was approached to try to resolve the matter, according to people familiar with the case.
While other banks were also involved in the lending syndicate it was Barclays that led the operation to recover the money. The DoJ is investigating whether any fixing fee was paid to the prince or his company.
In the later banking licence application, the authorities are similarly scrutinising Prince Turki's role in the grant of the licence in 2009.
In a statement Al Obayya denied being party to any "improper conduct". It said the prince was a minority shareholder and held no executive role. Its relationship with Barclays had been to support it "with various practical and administrative tasks relating to the establishment of its presence in the kingdom." It added that it "would have been in no position to influence the process" of obtaining a licence "as the process is transparent."
The FT received no response to requests to the prince to comment submitted via email, telephone and letter to his secretary at the office of the deputy governor in Riyadh. The DoJ declined to comment.
By: Yuval Rosenberg
The rising income inequality of recent decades could be headed for a turn. That intriguingly optimistic idea, suggested by J.P. Morgan economist Michael Feroli this week in a note to clients, hinges on some other shifts happening in the economy. And it depends on economists being right about the causes of rising inequality, as Feroli explained:
In other words, over the past few decades, people in developed economies who were educated enough to take advantage of the technological advances won higher wages. Those who couldn't keep up with the technological advances got left behind financially as well. In what economists have described as a race between education and technology, education lost—and so did many workers.
Those trends may have started to turn in recent years, Feroli writes. College enrollment rates have climbed, driven in part by a bad economy that made the investment in education more appealing. A study published last year by the Federal Reserve Bank of Chicago found that college enrollment increased slightly more than would have been expected based on historical trends, with about 2.1 million more people going to school between 2007 and 2010 than trends from earlier in the decade would have suggested.
On top of that, the pace of technological progress may be slowing, Feroli suggests. His evidence: "In the second half of the 1990s, the real price of computer equipment declined at a 24 percent annual rate, indicating an extremely rapid pace of increase in computing power. Over the last five years those prices have fallen at only a 6 percent annual pace, consistent with progress occurring at a much slower rate."
Feroli says some data indicate that structural factors have been closing the gap between "haves" and "have nots" for several years, but cyclical factors—the Great Recession and not-so-great recovery—have overwhelmed that improvement. "As the economy hopefully moves back toward full employment, this alone should reduce inequality," the economist writes. "Furthermore, if the leading explanation of inequality is correct, and recent trends in education and technological advance continue, we could see a further compression of wages."
(Read More: Putting a Price Tag on High School Graduation)
It's reason for optimism, tempered by a few large caveats. First, those recent trends in education and tech could still fall off. People might pull away from school as an improving labor market calls or the rising costs of college scares them off. Technology could gallop ahead once again—and are the real prices of computer equipment a good gauge of technological advancement at this point anyway?
Second, as we mentioned at the top, the economists could be wrong—hey, it's happened before. The technology vs. education theory may not really explain what's caused the income gap to widen.
"The technology story of rising income inequality actually doesn't fit the data when you look at it," says Heidi Shierholz, an economist at the liberal-leaning Economic Policy Institute. "A huge share of the increase in wage inequality is happening within education groups and within occupation groups."
(Read More: Job Picture Improves for Boomers' 'Encore' Careers)
Feroli acknowledges all those risks to his inequality forecast and calls them "legitimate." Still, he writes, "it is not a stretch to say that the next few years have the best chance in a generation to witness a narrowing in income inequality."
Starbucks and Green Mountain Coffee Roasters announced a five-year agreement on Wednesday to to triple the number of Starbucks-branded items made for Keurig single-serve coffee machines, the companies said in a release.
Separately, Green Mountain reported better-than-expected earnings for the fiscal second quarter. Shares shot up 15 percent after-hours.
While Starbucks will remain the exclusive licensed super premium coffee brand on the Keurig K-Cup and Vue platforms, under the new agreement, the company will add Seattle's Best Coffee, Torrefazione Italia coffee, Teavana Teas, and Starbucks Cocoa to the brands offered on Keurig.
In a press release, Howard Schultz, Starbucks' chairman and CEO, said sales of Starbucks coffee K-Cup packs rose more than 75 percent in March compared to the prior year.
"The new agreement also affords us the opportunity to expand our successful K-Cup and Vue pack portfolio of products and brands beyond North America and to market them on a truly global scale over time," he said.
In September, certain patents for the popular K-cups expired, paving the way for others to produce their own machines and pods. Late last year, Starbucks also entered the market for single-serve machines by launching its own, named the Verismo, which analysts viewed at the time as a competitive threat to Green Mountain.
Separately, Green Mountain reported fiscal second-quarter earnings excluding items of 93 cents per share, up from 64 cents per share a year earlier. Revenue increased 14 percent to $1 billion from $885.1 million a year earlier on strong sales of its single serve coffee packs. Analysts were looking for earnings of 74 cents per share on revenue of $1.02 billion, according to estimates from Thomson Reuters.
For the third quarter, Green Mountain expects earnings between 71 cents and 78 cents per share. Analysts currently expect 66 cents a share.
Did you know there’s new information collected about you, every time you go to the doctor? But what happens to that data after you leave? Roughly 80 percent of collected health data is stored in hundreds of different forms such as lab results, images and medical transcripts, making it virtually useless.
That’s why health-care organizations are leveraging big data technology to capture patient information. The idea is to improve health care through care coordination, population health management and patient engagement and outreach.
Marty Kohn, chief medical scientist for IBM Research and a former ER doctor said, “The U.S. lags most other countries in health care. Our health-care system needs a transformation to compare to those around the world. We need to make it more personalized to make it more efficient and safer.”
Kohn offered three examples of how big data is already transforming patient health care at various organizations.
Data-driven decisions: This is when new evidence, or secondary evidence, is drawn from existing data. Big data can search for patient similarities through thousands of characteristics to help diagnose a problem.
Stream computing: In stream computing, data is not collected and stored. It’s used “near real-time,” or the time minus minimal processing delays.
At The Hospital for Sick Children in Toronto, for example, every baby in the neo-natal ICU has vitals monitored and can predict an upcoming problem before it happens. Hospital staff will be alerted to a life-threatening infection up to 24 hours earlier than current practices.
Patient Care and Insight: This third use involves predictive data analysis for high-risk patients.
Kohn said using the information around us will help doctors make better decisions. Technology enables doctors and health-care providers to create better health-care patterns for the future, he said.
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