Friday, July 1, 2016

The innane bigotry of the educated is the reason why Trump's “I love the poorly educated!” is a winner

When Trump said “I love the poorly educated!” we were deluged with both critical news articles and bemused talking heads on TV making jokes - unfortunately in doing so many emphasized their looking down at the "poorly educated" dumb Trump supporters.The critics don't get what Trump does get.

The Democrats don't need to go after the well-educated populations of New York and California because they already have them just like they already have the black and hispanic vote.

On the other hand, without the vote of white "College Have-Not" voters in states like Pennsylvania, Clinton may not win. Or to restate it, "the poorly educated" vote may elect Trump

What their education should tell the bemused anti-Trump crowd is that by themselves they don't provide enough electoral votes to win the Presidency. And Trump seems to know that better than they do.

When in February when Donald Trump said “I love the poorly educated!” he was referring to his core supporters - workers who lost 5.6 million jobs in The Great Recession and since 2010 lost another 181,000 high-skill jobs and 951,000 middle-skill jobs, workers who are increasingly settling for low-skill, low-wage (minimum wage?) jobs or, because of age, settling for partial retirement in near poverty as not only did they lose their 401(k)'s but their "government insured" pensions (see How the Teamsters pension disappeared more quickly under Wall Street than the mob).

The Divide Between College Haves and College Have-Nots

Are the people who lined up to support Trump and Sanders correct when they say America let them down? Even now, what radical changes to the job market - changes not involving costly colleges and universities - are we Democrats proposing to alter the situation?  And what exactly is the situation?

Fortunately, The Center on Education and the Workforce of the McCourt School of Public Policy of Georgetown University (CEW) in a timely manner this week released a study America's Divided Recovery: College Haves and Have-Nots 2016.

Click on image to download the 44 page study!

Here is the key graphic from the study:
Click on image to see a larger version!

What the study explains is: "Nearly all the jobs created in the Recovery time period, 11.5 million out of 11.6 million, have gone to workers with at least some postsecondary education."

To put the matter into stark numbers, its data is summarized in this table:

What the table and graph indicate is that the economic divide between Americans is not the 1% versus everyone else as lefty college graduates like to discuss. Instead the new divide accelerated by The Great Recession is the "College Haves" versus the "College Have-Nots" - the divide Trump is capitalizing on.

And the study explains one more factor that increases the division:
...In America since the early 1980s...the wage premium for college graduates began its meteoric rise. Since that time, access to college programs with labor market value has accounted for as much as 80 percent of increase in economic inequality.

The Economy and the Millennials

Along with the effects of a “College Haves” versus “College Have-Nots” there is the truth about the Millennials who we have seen supporting
  • Bernie Sanders' "socialism" tinged with foreign policy isolationism or 
  • Trump's call for economic isolationism along with foreign policy isolationism or
  • both. 
Saddled with college loan debt and full of promises about the benefits of a college degree, the adult lives of the Millennials are clouded by one key fact which the CEW report makes clear: "The economy is still missing 6 million jobs that would have been created had the recession not occurred."

That truth is contained in this article NOT SO FAST: The myth of millennial entitlement was created to hide their parents’ mistakes which explains:
...The shared experience of Americans who struggled as young adults in the aftermath of the Great Recession is played down in favor of trend pieces on the affectations of privileged youth or the phenomenon of “side hustles.” Analysts puzzle over why young Americans forgo things like banks and marriage and houses, and come up with answers like “preference for urban locations with lots of entertainment and lifestyle choices.”

...But if anything holds this tenuously defined generation together, it is a lack of options. Americans who have lived much of their adult lives in the aftermath of the Great Recession have lower incomes, less mobility, and greater financial dependence on older relatives than any other generation in modern history.

...The inability of older generations to see how the economy has been fundamentally restructured since the Great Recession leads to short-sighted policies that young people, not boomers, will have to live with in the long run.

...The remedy lies not in judging their lifestyle choices—or worse yet, perpetuating the illusion that they have money to burn—but by acknowledging the new economy for what it is: a structural crisis, one that future generations will share.

Who Should They Be Angry At?

So, guess what groups of people are angry. That's right, the College Have-Nots and the Millennials. They are The Angry Voters. But given their current situation, who should the angry people be really angry at?

1. The Banking Industry.

Sure, people are angry that at the beginning of The Great Recession the government in 2009 didn't take a random selection of 100 mortgage bankers out, line them against the wall and shoot them in order to make it clear that their behavior will not be tolerated. That federal regulators and prosecutors put just one poor lower level banker in jail while politicians gave the rest of the banking industry money is mind-boggling to many American people, more than you know. And the American people know that the banking industry has gone right back to business as usual. So anger at the banking industry and government officials can be justified.

2. Employers amd Bill Gates.

Let's examine two facts that are new to our economic and business system since 1980 - college debt and extremely high levels of college-only hiring. Let's begin by looking the phenomenon of extremely high levels of college-only hiring reflected by this chart from the CEW report...

The problem is "poorly educated" in the context of college attendance does not mean ignorant nor incompetent. Nor does "well educated" in the context of college attendance mean competent and well informed.

But the choice was made by someone to hire applicants with at least a bachelor's degree for 72% of the jobs gained since 2010 and with at least some college for another 27%, leaving just 1% for those with only a high school  diploma (or less).

Can this discrimination be justified, given the high increases in college tuition and fees over the past 30 years resulting in young people carrying high student debt?

Can employers like those in Silicon Valley defend this situation against the option of an apprenticeship system such as that used by plumbers and electricians unions where employers paid the apprentice while he/she learned the craft? Where were the well educated Democrats when the concept of trade unions was not developed for coders and others in the technology expansion beginning in 1980?

What is really startling is something in the Acknowledgements of the CEW report (links added):
We are grateful for the individuals and organizations whose generous support has made this report possible: ... the Bill & Melinda Gates Foundation .... We are honored to be partners in their shared mission of promoting postsecondary access and completion for all Americans.
Bill Gates??? He dropped out of Harvard. And Paul Allen, his partner in founding Microsoft, dropped out of Washington State. And yet the Gates Foundation has a division devoted to getting kids ready for, and making them successful in, college.

Those of us who were alive adults before 1980 should have noticed the development of this problem of discrimination in hiring that may not be justified. Again, can employers like Microsoft defend hiring debt-funded college degrees against the option of an employer funded apprenticeship system such as that used by plumbers and electricians unions, where wages are paid to the apprentice while he/she learned the craft? And again, where were the well educated Democrats when the concept of trade unions was not developed for coders and others in the technology expansion beginning in 1980?

Included in the CEW report is a statistical observation about key changes were in our economy:
  • Two of the industries that blue-collar workers with lower education levels historically depended upon for jobs — construction and manufacturing — were especially hard hit in the Great Recession and have not yet fully recovered all the job losses they sustained. Construction employment is still 1.6 million jobs short of its 2007 level. Manufacturing has 1 million fewer jobs than it did before the recession.
  • Office and administrative support is the largest major occupational group overall. These are quintessential middle-skill, white-collar jobs for workers without a college degree. However, in the Great Recession, 1.7 million of these jobs were lost. Only 300,000 of those jobs have been recovered. So, compared to pre-recession employment levels, office and administrative support occupations have experienced the second-highest decline in jobs (1.4 million).
Not included in the report are explanations of why these changes have happened.

3. The Construction Jobs - Mortgage Lenders, The Government and Real Estate Investment Giants.

This is probably the sorest point of the many sore points irritating The Angry Voter.

To simply say that construction jobs have not recovered to pre-2008 levels is to completely ignore the root cause of The Great Recession reflected in this graph of monthly housing construction starts:

Housing construction climbed in the period of the 1990's to mid-2000's because of the loosening of governmental banking rules and lender malfeasance. It created a disproportionate growth in construction jobs followed by a disproportionate crash in construction jobs.

Nonetheless, people bought and lived in those houses, until they lost them. And one could predict what happened next.

Looking around at cheap foreclosure homes on the market and a new expanded tenant base looking for a place to live - all a result of economic policies under Clinton and Bush - another segment of the financial industry expanded as an expansion in publicly traded single family rental corporations, including American Residential Properties, American Homes 4 Rent, Silver Bay Realty Trust, Colony American Homes and Starwood Waypoint Residential Trust.

Having made solid profits directly off of the failed dreams of Americans attempting to obtain or sustain middle class status in an ownership society, as home values rise again and the tenants are leaving to buy homes these companies are now merging and changing strategies by marketing the homes to tenants as explained in Blackstone Tenants Get a Shot at Buying Their Rental Houses:
Selling rental homes to tenants is a way for investors to make more money than they would selling in bulk, and saves them the costs of renovating and carrying the properties until they sell on the open market.

Renters may have better luck buying a home from their landlords than venturing into the open market. Inventory is tight, and home prices nationally are up 32 percent since the 2012 low -- and have risen even more in areas hit hard by the housing crash, with increases of greater than 50 percent in Phoenix and Miami from their troughs. And soaring rents are causing some tenants to view homeownership as more economical.
When "the poorly educated" look at what happened, they see a story.

A scam was developed and marketed to the public by the banking and investment industry - a bunch of con men - with the encouragement of the government during the Clinton and Bush Presidencies.

Home prices were inflated. Mortgages were made available to ordinary people who in other times would have been denied financing because they had only a marginal chance of making their payments. Marginal mortgages were then packaged with other mortgages into marketable securities that received high ratings from the finance industry and were included in ordinary people's 401(k) investment packages.

When the con fell apart, "the poorly educated" and others lost their homes, their jobs, and portions of their retirement investments. The investment industry (the con men), working with the bankers, then bought the homes as an income producing investment at 30 cents on the dollar, profitably renting them out to the newly homeless and the next generation of adults. Now the investment industry, working with the bankers, is reselling the homes for a sizable profit.

Donald Trump, a recognized experienced con man, just points out what "the poorly educated" and others already know. The government, which should be protecting people from confidence scams, facilitated and encouraged this one. And by "the government" we really mean leading members of the Democratic and Republican Parties.

From the point of view of ordinary people, the current economic situation is the result of establishment politicians being complicit in a con. Of course, it is the result of complicity of establishment politicians in the Clinton and Bush Administrations. That's 16 years of Democrats and Republicans in the White House.

So here we are, a serious long-time Democratic politician and an admitted con man (who tore down the Republican Party with a grin) are running against each other for President. The Angry Voters are seriously considering voting for the con man.

4. Imports, Steve Jobs, and Apple.

Regarding manufacturing jobs, the following chart reflects a truth - that there is an apparent correlation between manufacturing jobs lost and increases in imports:

It is not a direct correlation, but The Angry Voter knows that there is a correlation between his or her manufacturing job loss and the increase in U.S. imports between the mid-1990's and now. Yes, there are benefits from that trade, but the benefits have been accruing to corporate interests and stand out like sore thumbs - Apple's offshore cash assets for instance.

In February 2011 President Barack Obama, concerned about the loss of manufacturing jobs, asked Apple CEO Steve Jobs what would it take to make iPhones in the United States?  Job's reply was that those jobs are never coming back.

After that exchange number of financial journals wrote popular stories explaining how Apple couldn't afford to manufacture the phones in the U.S., that it would destroy Apple's economic viability. Except two months before, in December 2010, the Asian Development Bank published a study How the iPhone Widens the United States Trade Deficit with the People's Republic of China which offered this insight:
As shown in Table 3, the gross profit margin of iPhone was 62% when the phone was launched in 2007, before rising to 64% in 2009 due to reductions in manufacturing costs....

An interesting hypothetical scenario is one where Apple had all iPhones assembled in the US. Assuming that the wages of US workers are ten times as high as those of their PRC counterparts and their productivity would be equal in 2009, if iPhones were assembled in the US the total assembly cost would rise to US$65 and total manufacturing cost would be pushed to approximately US$240. Selling iPhones assembled by US workers at US$500 per unit would still leave a 50% profit margin for Apple. As iPhone sales increase globally, that profit margin would also increase. In this hypothetical scenario, iPhones, the high-tech product invented by the US company, would contribute to US exports and the reduction of the US trade deficit, not only with the PRC, but also with the rest of world. More importantly, Apple created jobs for US low skilled workers; those who could not be the software engineers needed by Apple. Giving up a small portion of profits and sharing them with low skilled US workers by Apple would be a more effective way to reduce the US trade deficit and create jobs in the US.
Summarizing, the report says that in 2009 Apple would have had to accept a 50% profit margin instead of a 64% profit margin on iPhones if they had manufactured the iPhone in the United States. What the report doesn't say is that Apple would have paid more taxes inside the U.S. further stimulating the economy and would have had far less cash to store offshore.

(As an aside, if you Google the title of that 2010 Asian Development Bank study you will not find any American newspaper, magazine, TV news website, or blogger website reference to it. On the other hand, Google "Steve Jobs outsourcing" and you will find all those popular fallacious articles explaining why manufacturing iPhones in the U.S. would bankrupt Apple.)

Regarding the issue of imports, the Democrats have a problem. In this election union leaders are struggling. They won't support Trump. But within their rank-and-file many members are supporting Trump. The reasons are obvious according to the Washington Post article Trump’s anti-trade rhetoric rattles the campaign message of Clinton and unions which begins:
Three dozen union workers gathered outside city hall here on Thursday to rally against the global free-trade deals they believe have harmed Americans like them. Their candidate was Katie McGinty, the Democrats’ nominee for Senate in Pennsylvania. But their spiritual leader was Republican Donald Trump.

“He recognized there’s some problems we need to solve,” said McGinty, who is challenging Sen. Patrick J. Toomey (R), a free-trade advocate. “One, we have to stop bad trade agreements.... And two, we have to take the Chinese on when they manipulate their currency and dump goods in our markets.”

Just two days earlier, Trump had delivered a blistering speech at an aluminum recycling plant near Pittsburgh in which he called U.S. trade policies a “politician-made disaster” that has betrayed the working class. McGinty, surrounded by electricians, pipe fitters and steelworkers, declared that while Trump usually spouts “nonsense,” he had, in this case, “recognized a couple of truths.”

Of the many ways Trump, the GOP’s presumptive presidential nominee, has scrambled the 2016 campaign, it is his position on trade that has presented one of the most unexpected challenges for his rival, Hillary Clinton, the likely Democratic nominee. In an election season animated by economic anxiety, Trump, a New York business mogul, bucked Republican orthodoxy and powerful business interests such as the U.S. Chamber of Commerce in an appeal to blue-collar Republicans that helped propel him to victory in the GOP primaries.
When you look at this map...

Click on image to see a larger version!
...the states with the two darkest shades and highest union membership rates (i.e. New York and Illinois) are "Blue States" in a Presidential Election.

States with the middle shade, however, cannot be counted on to go Democratic without the support of private sector union membership - mostly older white "College Have-Nots."

5. Abusive Employers.

Regarding the 1.4 million lost support jobs, you may have read in press reports by reporters who have since lost their jobs that this reduction is due to automation. No it is not.

No one writes about the curious convergence of the advent of the large reduction in support employees with the the long hours worked by most middle management, professional, and semi-professional workers and even their managers.

If you are an old retired worker familiar with those workers and recently you've spent any time around these people you will notice them doing things on computers that used to be done by competent support people - support people who in the 1970's and 1980's cost employers roughly $10 an hour which adjusted for the CPI would be about $30 an hour.

Those 1.4 million lost support jobs represent around $87 billion a year in lost wages and benefits. Where did that money go? Is it being paid to those middle management, professional, and semi-professional workers for their extra 10-20 hours a week worked? Or did it get shunted off into profit lines and CEO pay? Many of The Angry Voters believe they know where it went.

It's the Economy, Stupid

In the end it appears that Donald Trump believes "it's the economy, stupid," a phrase which ironically came from Bill Clinton's campaign strategist James Carville. Trump may understand the political impact better than the Clinton campaign which seems to generate long, boring policy documents fine tuned for educated policy wonks mostly located in New York and California.

Why has the Clinton Campaign focused on long, boring policy statements. Do they do it because they have an innate, inane bigotry against the Trump's "poorly educated?"Maybe at some point the College Have class ought to take a hard look at itself. Have they permitted themselves "educational bigotry" to such an extent that they may inadvertently cause the election of Donald Trump?

The Trump campaign will target the educated Millennials who have experienced no economy other than the recession’s false recovery and college debt, young Americans who believe they have no choice but to live in their parent's basement.

For the most part, as is true for the College Have-Nots, the Millennials don't really understand complex issues like the Trans-Pacific Partnership (TPP) which does not include China - in fact deliberately excludes China - despite what Trump says. The press jumped all over Trumps mistake about China. But just because it doesn't include China that doesn't mean we all shouldn't be wary of Asian imports and the TPP.

Just so you know, historically the TPP is an expansion of the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4) signed by Brunei, Chile, New Zealand, and Singapore in 2005. Beginning in 2008, additional countries joined the discussion for a broader agreement: Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States, and Vietnam, bringing the total number of countries participating in the negotiations to twelve.

As can be seen here, the growth rate of Asian imports in the first decade of the 21st Century were significant without the TPP and even if you ignore China this deserves some consideration:

Click on image to see a larger version!
In approving Brexit some Brits have argued that they would be better off to have individual trade agreements with nations rather than a broad open trade agreement with a number of nations.

In the case of the U.S. and Asia, we should be considering issues related to the U.S. Trade Balance which for that same decade looks like this:

Click on image to see a larger version!
Apparently during that period we consistently had a Trade Surplus with Singapore, Hong Kong, and Australia. That seems good. And maybe it's ok to have a trade deficit with some of the others for reasons of international politics, such as South Korea and Taiwan. But maybe we need to look hard at China plus Japan.

In other words, perhaps we should have individual trade agreements. Oh, wait. We've been told that pro-Brexit voters who thought that were "the poorly educated" who just didn't understand.

Maybe both we as consumers need to take a serious look at China and Apple for lessons on how not to be screwed by imports.Maybe we voters need to do more than just get excited about the likes of Donald Trump and Bernie Sanders.

Maybe as consumers we need to make sure we're not causing unemployment by buying iPhones for no good reason, because even if we are not among "the poorly educated" we may be among the truly ignorant education bigots.

And maybe those middle management, professional, and semi-professional workers should quit working those extra 10-20 hours a week and taking phone calls during vacations, thereby forcing employers to consider hiring adequate support staff. At the least, we ought to ask ourselves why we're the only first world nation that believes our economy can't afford mandatory vacations.

Maybe there is something to be learned from this revolt of "the poorly educated" and the young. What should concern, if not downright scare, the well-educated "College-Have" over-40 lefty is a  46-year-old Pennsylvania white woman who does not have a college degree and who, along with her husband, 20 years ago worked for a company that paid her $20 an hour ($31.06 in 2016 dollars). As I explained in May in The effect of the white white-collar Democrats' class war against white blue-collar American women:
In Pennsylvania 81% of the voting age population is white, 57% are age 45+, 71% do not have bachelor's degrees. These numbers are not significantly different from Ohio or Michigan.

In other words, the voter who may determine who will be President in 2016 will be a 46-year-old Pennsylvania white woman who does not have a college degree and who, along with her husband, 20 years ago worked for a company that paid her $20 an hour ($31.06 in 2016 dollars) actually producing a tangible commodity.

Today she is working in some service work producing nothing tangible making $15 an hour which Bernie Sanders types say should be the minimum wage, saying it without thinking about her. The fact that it's less than half the value of her pay 20 years ago which she thinks is the major problem in her life escapes the Democrats who vocally worry about minimum wage workers.
If you are a well-educated "College-Have" over-40 American who owns Apple products, your decision screwed Americans in manufacturing states whose lives are like that 46-year-old Pennsylvania white woman - because of your ignorance.

If you are a well-educated "College-Have" over-40 urbanite who decided it was better to eat quinoa imported from Bolivia, Ecuador, or Peru instead of grains grown in the U.S., your decision screwed Americans in agricultural regions whose lives are like that 46-year-old Pennsylvania white woman - because of your ignorance.

If you are a well-educated "College-Have" over-40 management or professional worker who has for years worked 60 hours a week, because of your ignorance your choices may have screwed Americans like that Pennsylvania woman who should have been employed as an office and administrative support worker, one who would have been working in those 1.4 million "quintessential middle-skill, white-collar jobs."

If you are a well-educated "College-Have" over-40 California or New York voter who doesn't understand that in Pennsylvania - where voting will matter in November - about 3/4ths of the voting age humans are white "College Have-Nots" then you are ignorant. If for the past 20 years you focused your political chit-chat disproportionately on the plight of inner-city Philadelphia blacks, you may have elected Donald Trump with your ignorance.

 "College-Have" over-40 Americans need to remember all these individual choices when in ignorance they deride Trump's “I love the poorly educated!” remark. It is likely that for the past 20 years they may have regularly reminded people like that Pennsylvania woman that they think "poorly educated" equates to ignorance and irrelevance. That woman may vote (when and where it matters to the country) as a person who unconsciously or consciously is very angry at the "College-Haves."

Finally, and perhaps most importantly, states like Wisconsin have always been supportive of the Democratic Presidential candidate. Likely Wisconsin will be again. But when you read The Uncertain Future of a Middle-Class Stronghold published last month you have to understand that four years from now Wisconsin could be a swing state full of angry white voters.

It could begin to feel lonely to be a a well-educated "College-Have" over-40 voter. And it could feel even lonelier if Clinton is elected and in four years things haven't gotten better for that Pennsylvania woman but they've gotten better for you.

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