Decision Making on the Job, Career and Family, Childcare

Sunday October 24, 2021

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What Happens Next is a podcast where experts are given just SIX minutes to present their argument. This is followed by a Q&A period for deeper engagement.

This week’s topics include Decision Making on the Job, Career and Family, and Childcare.
Our first speaker today will be David Deming. He is the Isabelle and Scott Black Professor of Political Economy at Harvard. David’s research interests are really varied and include: skills and technology, higher education as well as the long-run impacts of early and K-12 schooling. Today, I have asked David to speak about one of his recent papers on the growing importance of decision-making on the job.

Our second speaker is Claudia Goldin who is the Henry Lee Professor of Economics at Harvard. She is also the author of a new book that was released just over a week ago that is entitled Career and Family: Women’s Century; Long Journey toward Equity. Claudia is one of the leading economists in the fields of economic history, education and technology, and the gender gap and employment.

I can also tell you first hand that Claudia is a fabulous teacher as she was my professor for microeconomics when I was an undergraduate at Penn.

Our final speaker today is Elizabeth Cascio who is the Dewalt H, 1921 and Marie H. Ankeny Professorship in Economic Policy at Dartmouth. One of Liz’s current research topics is evaluating the success of PreK schooling. This topic is of great importance now as the Federal Government is considering the expansion of PreK education nationwide. Liz will be discussing a history of childcare and where we are heading.


David Deming

Topic: Decision Making on the Job
Bio: Isabelle and Scott Black Professor of Political Economy at Harvard
Reading: The Growing Importance of Decision-Making on the Job is here


Every year, the National Association of Colleges and Employers publishes the job outlook survey. This survey asks 100s of companies about their hiring needs and, in particular, the skill that they desire most among new employees. Every year, the same two skills stand out as being both highly demanded and in short supply among candidates. Those skills are, first, ability to work in a team and second, problem solving. In the next six minutes, I’m going to explain why it is technology that has made these two skills so desirable.

A century ago, four out of every 10 workers in the US were farmers. Another three of the 10 worked in blue collar jobs in factories, mining or construction. The vast majority of jobs in this country a century ago were physically demanding, repetitive and sometimes dangerous. Jobs like these favor the young and the healthy and there is little gain to work experience beyond the first few years on the job. That’s why as late as 1960 the peak age of earnings in the US was about 37.

Today’s economy is completely different. Less than two percent of jobs are in agriculture. Only eight and a half percent or one in 12 are in manufacturing. More than 80% of jobs today are in the service sector. The peak age of earnings is not 37 now but 55. The average worker in 1960 experienced earnings growth of about 40% over their lifetime. Today, it is over 100%. This is because jobs today are knowledge-intensive and require workers to be adaptive and to learn from experience.

We have a service economy now because of automation technology. We used to have a bunch of guys digging a hole, now we have bulldozers. We used to have people on the assembly line at auto plants, now we have industrial robots. Service jobs are harder to automate because the goal is to help people rather than to make things and people are unpredictable. If you want to future-proof your career, try to be good at things that are easy for people but hard for machines. Chess, calculus, challenging to most of us but trivial for a computer program. Having a two minute unstructured conversation? Most people can do it, even if some are better than others, but it is impossible for even the most advanced software. So, having good people skills will keep your robot overloads at bay, at least for now.

The second highly demanded skill is problem solving. Good problem solvers can navigate from problem all the way to solution without needing the steps in between to be fully mapped out. This skill is especially important in the age of coding, artificial intelligence and process automation. Think about your own job. Could you write the script in advance? Is your employer paying you to execute on job tasks that are decided upon ahead of time? Or is your value defined by your ability to adapt? Not to do, but to decide what to do?

The fastest growing and highest paid jobs are in what we call professional services: consultants, lawyers, engineers, accountants and especially managers. If you look around and you feel like management is a more common job than it used to be, you’re right. Management and management related occupations are nearly one third of employment in the US today compared to less than 15% in 1960. What do managers do? They don’t make anything physical. Rather, they make decisions. Decisions about how to allocate scarce resources, including their own time and the time and attention of others.

A bit of reflection reveals that almost all knowledge work leans heavily on good decision making. For example, surgeons have to be skilled in various procedures but they also have to be good at deciding whether a patient is a good candidate for surgery in the first place. Consultants are hired to help companies make decisions. What does to mean to be a good decision maker? We make decisions by predicting the likely consequences of each potential action and choosing the one we think is best. Decisions are context specific and so the more data you observe about the world, the better you get at it. Predictions are harder in complex work environments and so experience matters more and it takes longer to accumulate.

In a recent paper, I show that work experience actually pays off more in jobs that require a lot of decision making. These are the highly skilled professional service jobs I mentioned earlier. Because these jobs are automation-proof, they’ve grown faster in the last 50 years and that has fundamentally changed the career earnings profile of the average American. Income peaks 20 years later today than it did in 1960 and career earnings growth is dramatically higher than it used to be. This is true even after accounting for other changes that have happened since 1960 such as women entering the workforce and the growth of higher education.

The reason is that we can build a machine or a computer program to do any one thing better than a person and as the technology frontier moves outward, we are increasingly compensated for our ability to adapt, to be good problem solvers, to be, if you will, general purpose technologies. And if I had six more minutes I’d love to talk about how we might design or redesign our education and training system to more intentionally build the important skills of teamwork and problem solving. Thank you.

Questions for Deming

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Claudia Goldin

Topic: Gender Equity
Bio: Henry Lee Professor of Economics at Harvard
Reading: Career and Family: Women’s Century;Long Journey toward Equity is here.


Larry Bernstein:
All right, we’re going to move next to Claudia’s discussion about career and family. But first I wanted just to tell a quick story about how I met Claudia. So right before my freshman year at Penn, I got the book of courses to sign up for. And I looked for ECON1A which is the Introduction to Microeconomics. And it was being taught in large lecture halls by Professor Mansfield who wrote the textbook. And there was one general honors class offered by Claudia in a small seminar, It was called a Benjamin Franklin scholar class. And I had not been selected for the Benjamin Franklin scholar program.

So I decided that I would write a letter to Claudia asking for permission to take the class. And I wrote the letter and I waited. There was no response. So no big deal. I figured I would just show up for the first day of class and see what happened. And Claudia got up in front of the class and she said, “Over the summer, I received the following letter,” and she proceeded to read my letter to the class. And what it basically said was that I had worked at a stamp and coin shop and I noticed that the prices of stamps followed supply and demand.

Even though some stamps from Anguilla traded at very low prices, even though they were quite scarce, but there was no demand for the stamps. But for certain American stamps where there had been millions of them made, they still went for much higher prices and showed the importance of supply and demand. And then Claudia said, “All right, should we let this kid in the class or not?” And by a vote of acclimation, I was accepted and I was very pleased to have taken Claudia’s class. And with that, I now turn to Claudia for her new book to talk about career and family. Claudia, go ahead.

Claudia Goldin:
In 1963, Betty Friedan wrote about college women who were frustrated as stay-at-home moms. Today, almost 60 years later, college graduate women are largely on career tracks. Women graduate from college at far higher rates than men. They earn advanced degrees at about the same rate. But their earnings and promotions relative to those of the men they graduated with and to whom they are often married continue to make them look like they’ve been sideswiped. These women too have a “problem with no name” to paraphrase Friedan. So what is it? I show in the book how five distinct groups of women who graduated college from 1900 to the early two thousands responded to the problems of balancing career and family as the 20th century progressed. And as a “he” change in the labor market and the household altered work, marriage and childbearing, many barriers to women’s careers were removed, giving us a sharper vision.
Why equity for dual career couples remains stubbornly out of reach and what that means for gender equality? The new problem with no name is greedy work. By greedy work, I mean jobs for which working more hours or particular hours or working harder during certain portions of one’s life have disproportionate returns. For example, if doubling the number of hours worked, maybe from 40 to 80, more than doubles the implicit hourly wage, we have greedy work. Couples with children and other care responsibilities will be enticed by the greater income of greedy jobs to jettison couple equity. When a heterosexual couple gives up couple equity, they increase gender inequality for themselves and in the economy as a whole. I’ll explain first why that is the case and next, what might be done about it? Children take time and at least one working parent must be the on-call at-home parent, but on-call at-home jobs, say being a lawyer at a small boutique law firm, pays far less than the on-call at the office jobs.

Say, being a Park Avenue law firm lawyer. On-call at-home jobs enable more flexibility at work. If both members of the couple took the flexible job, each would earn, let’s say $120,000 a year. Alternatively, one could take a greedy job and earn, let’s say $150,000 a year, while the other member of the couple remains at the flexible job and earns the 120k. Couples are thus enticed here by the added 30K a year to give up couple equity because women are generally the ones who take the on-call at-home job, gender equality is thrown under the bus, along with couple equity. With couple equity, they would earn about the same amount. But without couple equity, in this example, women get 80% of what men earn. Couple inequity and gender inequality are actually the two sides of the same issue. The problem of greedy work is the main reason why women with care responsibilities earn less than men.

Yes, there is real discrimination, sexual harassment, bias among managers and supervisors. And we should stomp all of that out as if they were cockroaches. But even if we brought in a giant exterminator, we would still have a significant gender inequality in earnings for the reasons I have given. So what can be done?

Three things. First, reduce the cost of flexibility through various means, such as better substitutability and jobs. Create teams of substitutes, not complements. Improve handoffs between professionals with information technology. Reduce the need for long distance travel. And in fact, the new world of hybrid work may be moving in this direction. And number two, lower the cost of caregiving. And we’re going to hear more about this soon from Elizabeth Cascio. And three, change gender norms and get men on board. And we may be moving in that direction. I hope we do.

In conclusion, it is important to acknowledge the enormous progress made in the last 120 years in women’s attainment of career and family. Yet there is still a big problem reflected in a host of gender gaps in the labor market and at home. Knowing what the problem is and giving it the right name will help us. It doesn’t solve the problem, but it focuses our attention on the right issues. Thanks.

Questions for Goldin

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Elizabeth Cascio

Topic: Policy Design to Improve Child Care
Bio: Dewalt H, 1921 and Marie H. Ankeny Professorship in Economic Policy at Dartmouth
Reading: Does Universal Preschool Hit the Target? Program Access and Preschool Impacts is here


Larry Bernstein:
All right, I think this is a good time to transition, and bring in Elizabeth Cascio. She will be discussing childcare. She is the DeWalt H. 1921 and Marie Ankeny Professorship in Economic Policy at Dartmouth. She’s recently written a paper entitled, “Does universal preschool hit the target program access and preschool impacts?” And she’ll be talking about childcare. Go ahead, Liz.

Elizabeth Cascio:
Well, it’s pretty simple; parents of young children need childcare to participate in the labor market. The pandemic made this really clear. School closures at the end of the 2019-20 school year, and continuing hybrid and virtual learning models last year left parents of elementary school aged children, and especially moms, scrambling to the educational needs of their children, while also trying to work. Some just gave up on the work part, leaving the labor force entirely. Now, you might be wondering, why start a conversation about policy design and childcare by bringing up public education? Well, even though public school teachers don’t like to think about themselves as being babysitters, the reality is that their jobs are both educational ones; about an investment in the future of the economy and those general skills that David was talking about, and caregiving ones, about making it possible for the me to function right now.

Until the pandemic, most of us didn’t fully appreciate the caregiving part, and it wasn’t a goal of public schools with their establishment, but it’s a fundamental societal benefit of public education in a modern economy, where mothers work. The role of an early childhood educator or caregiver in a child’s life is not that different. They provide both care and education, but we’ve taken a sharply distinct approach as a society to the care and education of children under the age of five. Whereas kindergarten today is free and accessible across the country, early care and education or ECE is not. There’s limited direct public provision and subsidies to offset the costs of private programs are limited as well. These costs can be high, both because prices are high and there can be long distances to providers. Before the pandemic, government spending on ECE with less than$ 40 billion annually, almost an order of magnitude below spending on public education by all levels of government combined on a per capita basis. The US ranks at the bottom of the OECD in terms of the share of four-year-olds enrolled in pre-primary education, and on spending per capita on ECE.

If anything, though, research by developmental psychologists, economists, and others has shown that investments in the edge education of young children are relatively high return, and if I had to, I would argue that if any kid needs adult supervision, that kid would be an infant toddler or preschool age. So, what gives? There are a few reasons we find ourselves here, and we need to understand how we got here to know where we can go.

First, caregiving in the US has historically been undervalued. It might be because caregivers have tended to be Black and Brown women, or it might be because of norms surrounding a mother’s place in society. Regardless childcare has tended to be viewed as a service that yields only private benefits, much like going on a nice vacation or out for a fancy dinner. Sure, there have been moments when the federal government has gotten involved in childcare, emergency situations like the Great Depression and World War II, but these were aberrations. I don’t think we can ignore the racialized politics of the era, but Richard Nixon’s veto of the comprehensive Child Development Act in 1971, summed up a longstanding stated view on federal involvement in ECE that certainly lingers in some quarters. Government involvement would bring, “The vast moral authority of the national government to the side of communal approaches to child rearing, over the family centered approach.”

Second, even once we recognize the education part of ECE, funding for public education in the US began at the local level, and remains highly localized, which hampers ECE expansion. There was a certain and elegance in the beginning. Local funding of public schools through the property tax allowed families to borrow from one another to fund their children’s education, spreading the cost across the lifetime, or remaining invested in the quality of local public schools. State governments became more involved in elementary and secondary school funding over time, largely to address inequalities across communities.

But public education is still the domain of state and local government, and ECE is an educational service that yield benefits that don’t respect school district, or even state boundaries. Economists think that public goods like this are under provided relative to what would be socially optimal. Still, state funding helped to transform the parameters of public education in ways that recognized ECE as education, for example, state subsidies were critical to the final push of the kindergarten movement, which you might be surprised to know happened from the 1960s to the 1980s. They’ve also been fundamental to the establishment of pre-kindergarten or pre-K programs for four-year-olds, and in some cases, three-year-olds, particularly since the ’80s.

I’ve shown in recent research that when pre-K programs are available to all children, like public schools are, not targeted to disadvantaged children, a route that some states have taken, they tend to look significantly more like public schools in terms of their acts on children’s learning. The benefits of universal pre-K are substantial, interrupting a widening of the class based test score gaps that otherwise wouldn’t slow down until kindergarten and beyond. Moreover, projecting forward to earnings, they’re large enough to justify the additional costs from serving all children, not just the disadvantaged. But progress is slow, given the reliance on states to do the heavy lifting. Not all states have pre-K programs, and among the ones that do, offering universal pre-K is relatively rare.

The pandemic shocked this equilibrium, a substantial number of children who should have gone to kindergarten last year, didn’t go. And the childcare sector remained substantially smaller than it was in 2019. But now we see the problem more clearly; the dual roles of public school teachers in educating and caring are now more widely acknowledged, understood, and dare I say valued. And now they shine a harsh light on the economic logic of a system that values the dual roles of early childhood educators, by so much less, there’s momentum to do something about it at the federal level that we haven’t seen in half a century, the question is what will that be? We’re all waiting with bated breath to see what Joe Manchin decides.

Questions for Cascio

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