Applications of Economics 101

[tskeeter]

finance.yahoo.com/news/buffett-closing-plant-shows-loonie-110001440.html

This article might give you some ideas what happens when you have high labor costs, supported by high minimum wages, and a high cost of government mandated benefits.

[beenherebefore]

True and very sad.

[phil5185]

Derek Friesen thought he would be following in his father's footsteps when he became the third generation of his family to work at H.J. Heinz Co.'s tomato processing plant in his hometown of Leamington, Ontario.  That plan ended six months into his job, when Warren Buffett's Berkshire Hathaway Inc. (BRK/B) and 3G Capital Inc., the ketchup maker's new owners, announced in November the 105-year-old plant would close.

I wonder if Canada has the education problems that the US has?

25 yrs ago, an 18-yr-old Derek could go to a manufacturing Plant (such as Heinz) and begin a career.  But after the US K12 system failed, companies such as Heinz) cannot find new workers to fill our industrial & technical jobs.

US companies had to make changes -
1. Since HS grads can't qualify, advertisements now say "some college required" or "degree required". And that has costs - first, Industry loses the 18 to 20 age segment of the population while they catch-up their education, that cuts the supply of workers. And the workers want to be compensated for the 'extra' education. Ie, labor costs are driven upward. (Econ 101)
2. Most nations have better K12 systems than the US so businesses go offshore with their manufacturing jobs where 18-yr-old interns are available. (more Econ 101)

[tskeeter]

Mar 11, 2014 19:14:56 GMT -5 phil5185 said:

Derek Friesen thought he would be following in his father's footsteps when he became the third generation of his family to work at H.J. Heinz Co.'s tomato processing plant in his hometown of Leamington, Ontario.  That plan ended six months into his job, when Warren Buffett's Berkshire Hathaway Inc. (BRK/B) and 3G Capital Inc., the ketchup maker's new owners, announced in November the 105-year-old plant would close.

I wonder if Canada has the education problems that the US has?

25 yrs ago, an 18-yr-old Derek could go to a manufacturing Plant (such as Heinz) and begin a career.  But after the US K12 system failed, companies such as Heinz) cannot find new workers to fill our industrial & technical jobs.

US companies had to make changes -
1. Since HS grads can't qualify, advertisements now say "some college required" or "degree required". And that has costs - first, Industry loses the 18 to 20 age segment of the population while they catch-up their education, that cuts the supply of workers. And the workers want to be compensated for the 'extra' education. Ie, labor costs are driven upward. (Econ 101)
2. Most nations have better K12 systems than the US so businesses go offshore with their manufacturing jobs where 18-yr-old interns are available. (more Econ 101)

Phil I suspect that the Canadian education system does a bit better than the US system.  A couple of years ago, in response to some crowing about the performance of the Canadian education system by Loop, I did some research.  I came across a Canadian government study that evaluated the educational achievement of Canadian children.  The study determined that children of people who had emmigrated to Canada have a higher level of educational achievement than native born Canadian children.  The explanation?  Canada only allows well educated people to immigrate to Canada.  As a result, the educational achievement of the children reflects the education achievement of their immigrant parents.

On the other hand.  When I went searching for comparable information for the US, I found that the studies determined that children of immigrants to the US had well below average levels of educational achievement.  Those children pulled down the national averages.  Again, the level of education achievement demonstrated by the children was correlated with the education of their parents.  The US has allowed large numbers of poorly educated immigrants, legal and illegal, to live in the US.  In effect, the US has imported poverty and illiteracy.  And it has affected the overall performance of our educational system.  And has made operating our educational system much more expensive, as we try to bring the children of poorly educated households up to the educational level demonstrated by children whose parents were born in the US.  When you couple the fact that kids from poor immigrant families are behind their native born counterparts in educational achievement with the larger than average family size among immigrant families, it places a heavy burden on our education system.

While the US education system has more than it's share of opportunites for improvement.  I think when you compare the US to other countries, you need to consider the material that each of the systems is working with, and whether the populations being studied are really comparable (do the metrics for one country only include university track children, while the metrics for another country reflect a broader population of children).    

[justme]

I'm somewhat surprised he didn't start until mid 20s. Canada has a marked difference between college and university. With the former being similar to our tech schools and the latter being the 4 year degrees. I would think someone going into manufacturing would, at most, go to college.

Wages could also have something to do with it. The daughter of a family friends is making $30/hr as a dental hygienist. I'm pretty sure they don't make that much in the states. And that's a profession you go to college, not university, for up there.

[phil5185]

When you couple the fact that kids from poor immigrant families are behind their native born counterparts in educational achievement with the larger than average family size among immigrant families, it places a heavy burden on our education system.

Excellent point - the demographics of the US is way different now than it was when I went to grade school 65 years ago.  In those days the US K12 system scored highest in the world - now it's about 28th among the industrialized nations. 

[beergut]

Mar 11, 2014 19:14:56 GMT -5 phil5185 said:

Derek Friesen thought he would be following in his father's footsteps when he became the third generation of his family to work at H.J. Heinz Co.'s tomato processing plant in his hometown of Leamington, Ontario.  That plan ended six months into his job, when Warren Buffett's Berkshire Hathaway Inc. (BRK/B) and 3G Capital Inc., the ketchup maker's new owners, announced in November the 105-year-old plant would close.

I wonder if Canada has the education problems that the US has?

25 yrs ago, an 18-yr-old Derek could go to a manufacturing Plant (such as Heinz) and begin a career.  But after the US K12 system failed, companies such as Heinz) cannot find new workers to fill our industrial & technical jobs.

US companies had to make changes -
1. Since HS grads can't qualify, advertisements now say "some college required" or "degree required". And that has costs - first, Industry loses the 18 to 20 age segment of the population while they catch-up their education, that cuts the supply of workers. And the workers want to be compensated for the 'extra' education. Ie, labor costs are driven upward. (Econ 101)
2. Most nations have better K12 systems than the US so businesses go offshore with their manufacturing jobs where 18-yr-old interns are available. (more Econ 101)

I don't think the issue is not being able to find capable workers (how much education and training does it take to fill a can with tomato sauce?), I think the issue is simply labor costs are cheaper elsewhere than in the U.S.

We've seen this since the Industrial Revolution, the way to increase profit is to decrease labor costs, whether that be through innovation in the assembly line, recruiting cheap foreign labor, or outsourcing manufacturing to countries with lower labor costs.

[tskeeter]

Mar 12, 2014 17:23:42 GMT -5 phil5185 said:

When you couple the fact that kids from poor immigrant families are behind their native born counterparts in educational achievement with the larger than average family size among immigrant families, it places a heavy burden on our education system.

Excellent point - the demographics of the US is way different now than it was when I went to grade school 65 years ago.  In those days the US K12 system scored highest in the world - now it's about 28th among the industrialized nations. 

In our local school system, with a large hispanic population, it is reported that children of immigrants perform comparably to native born kids from K through grade three.  At that point, the progress diverges and children of immigrants fall behind.  The difficulty experienced by children of immigrants beyond the grade three level is attributed to Mom having only a third grade education and no longer being able to help her children with school work (Dad frequently has less formal education than Mom).

This report is consistent with a conversation I had with one of our employees while I was working in Chicago.  The employee had emigrated from Mexico in his early teens and had received his high school and college education in the US.  When he was asked to translate some material from Spanish into English, he told the person making the request that he didn't read Spanish.  He went on to explain that he spent his early years on a mountainside in central Mexico and his education in Mexico had ended after third grade.  And, although he spoke Spanish fluently, he had never learned to read Spanish at more than a rudimentary level. 

Since about 5% of the US population is immigrants from Mexico, one can reasonably assume that 10% or more of the school aged population of the country are children of immigrants.  That's a pretty good portion of the school aged population that probably requires remedial assistance to successfully complete high school.  Add to that 10%, other children who need remedial assistance, and the education system is faced with trying to help a lot of kids who are performing at below average levels.  There are so many poorly performing kids that they distort the test results.

I suspect that few other countries in the industrialized world count among their residents such a high percentage of first generation immigrants from third world countries.

[Bonny]

Tskeeter said:

I suspect that few other countries in the industrialized world count among their residents such a high percentage of first generation immigrants from third world countries.

And that's ALWAYS been our history. We started as a big nearly empty (comparatively speaking) country. And I think it's also our strength. Immigrants tend to be highly motivated even if they aren't highly educated. There's a reason they go through all the effort and expense to leave the familiar, often because conditions back home are a lot worse.

During my school years in San Diego, we had large groups of Hispanic, Filipino, Vietnamese and Iranian immigrants. For all practical purposes the only ones who could go "home" were the Filipinos since most of them came in via the US Navy.

[busymom]

I think our efforts to integrate refugees has changed from past generations. My Mom was raised in a small farming community, with a lot of Norwegian immigrants. One day a week, the parents (the fathers) were invited to sit in during school with the children, to attempt to learn English.  The plan was, they would take what they learned home, & teach it to their wives & older children. It actually worked pretty well. My Grandmother learned to speak English, although she didn't write letters in English until she was older.

One local elementary school in recent years has been doing something similar. We've got a number of immigrant families in our community, & I believe it was one evening a week, the students & their parents come to the school to improve on or learn English. Maybe if something like that was available in more communities, students would do better. I know I've been "supervising" my kid's homework for years, & the teachers tell me at conferences that they can always tell which parents are making sure homework is getting done. 

[tskeeter]

Mar 12, 2014 19:21:59 GMT -5 Bonny said:

Tskeeter said:

I suspect that few other countries in the industrialized world count among their residents such a high percentage of first generation immigrants from third world countries.

And that's ALWAYS been our history. We started as a big nearly empty (comparatively speaking) country. And I think it's also our strength. Immigrants tend to be highly motivated even if they aren't highly educated. There's a reason they go through all the effort and expense to leave the familiar, often because conditions back home are a lot worse.

During my school years in San Diego, we had large groups of Hispanic, Filipino, Vietnamese and Iranian immigrants. For all practical purposes the only ones who could go "home" were the Filipinos since most of them came in via the US Navy.

Bonny, you're right, the US has been a land of immigrants since 1620.  I think what's different now from when my great grandfather's family arrived from Ireland in about 1854 is that there wasn't as much of an economic and educational gap between immigrants and citizens as there is today.  A century ago, immigrants brought skills (and the broad shoulders) that fit with and helped to develop the US economy (my ancestors were farmers, DW's immigrant grandfather was a tool and die maker for Dodge Brothers and Ford).  By comparison, I suspect that a small portion of today's immigrants arrive with the skills required for technology worker jobs and the like.  

[Bonny]

tskeeter,

I think I'm more concerned about our native-born kids who seem to have no ambition or drive, especially the boys. Between my nephews and our good friends' kids I don't see a single college graduate. Oh wait, there's one. Took him 7 years to get his college degree. He's 30 and living on disability in his mom's vacation cabin in AZ.

These are kids that grew up in upper middle class environments. They've had access to very good opportunities. There seems to be no pride and desire to be independent and self supporting and way too much focus on their disabilities and how their parents have screwed them up.

I honestly don't get it.

[alabamagal]

I work in manufacturing. We have no problem finding educated workers.

The issues are overregulation in labor, employment, environmental.

I will give you an example of silly regulations.  I work for a chemical company and we have an environmental permit.  We had a recent audit, and got a citation because we didn't have a certification on the diesel engine that runs our fire pump.  We handle lots of chemicals and have to report emissions of hazardous chemicals and ensure they are under are limits.  But to worry about the emissions from a diesel fire pump that we run for 15 minutes a week (to test operations) and hope to never have to run again.  We also have to verify that the diesel fuel we use is on-road diesel and not farm diesel.  But if you have a farm with a tractor that you use every day and use high sulfur diesel, no problem!

That is just one example.

[tskeeter]

Mar 13, 2014 11:24:45 GMT -5 Bonny said:

tskeeter,

I think I'm more concerned about our native-born kids who seem to have no ambition or drive, especially the boys. Between my nephews and our good friends' kids I don't see a single college graduate. Oh wait, there's one. Took him 7 years to get his college degree. He's 30 and living on disability in his mom's vacation cabin in AZ.

These are kids that grew up in upper middle class environments. They've had access to very good opportunities. There seems to be no pride and desire to be independent and self supporting and way too much focus on their disabilities and how their parents have screwed them up.

I honestly don't get it.

Bonny, I think your concern is justified.  I've observed some of the same types of behavior in DW's and my family.  In our families, some of the lack of ambition seems to be related to how much the kids were catered to growing up.  I've got a really smart nephew.  Math major.  "Couldn't " find a summer job while in college.  (Might have had something to do with not starting looking before noon and refusing to use an approach other than look on the internet.)  Spent a year after graduation "looking" for work (more noon/net?).  After a year of his Mom being on his case, decided to go to grad school.  This kid was never expected to do anything around that house when he was growing up.  To this date, he's probably never mowed a lawn, washed a window, or washed a car.  And Mom and Dad funded all the college expenses.

On the other hand, a couple of other nephews were expected by their parents to mow the lawn and help their Dad with projects.  Both these kids had part time jobs while in high school.  And both have part time jobs in addition to being students. 

One family communicate to their kids that they expected them to become independent and self supporting.  The other family does not seem to have set a similar expectation.  In both cases, the kids seem to have lived up to the expectations that were set for them.

[Bonny]

It's kind of funny, I grew up with my father being so negative about college kids and how all they did was blow their folks' money. Dad was quite clear that he didn't think people appreciated anything unless they paid for it themselves. This is the man who turned down a two-year football scholarship to MIT because he didn't want to go to school.

Fortunately for me I got into a school track that had me "programmed" for entrance into the University of California system which was really cheap (relatively speaking). I was able to cash flow college since I lived at home.

I think the more "anti" college my dad was the more determined I was to go. Blame the red hair. And of course since I wanted to go my younger brother had to go.

Nothing like reverse psychology to motivate a teenager.

ETA: Dad finally admitted to me this year on his 79th birthday that the reason he didn't progress in his original career (electrical engineering) was that he wasn't willing to get a college education. He remained an engineering tech until he was asked to relocate back to the East Coast in the mid 70s. He quit and joined my mother in real estate sales. He never made the same net money again.