America’s Future Labor Force as a Majority-Minority Nation

America’s economic prosperity is at stake. For those of us committed to economic development, this is serious. Our future is in jeopardy. We have it within our power, however, to mitigate the risk. Between 2040 and 2060 projections from the US Census Bureau data are that the US becomes a majority-minority country. The state of Arizona does so by 2025; California, New Mexico and Texas are already majority-minority. It is now clearer than ever that our future prosperity will depend upon the minority population’s preparation for the workforce. This more diverse workforce is the future of American business labor.

The issue of workforce preparation and education was thoroughly addressed a few years ago by a Commission appointed by then Secretary of Education, Margaret Spellings. In meeting her with other university presidents, I was impressed with her understanding of the linkages among higher education, K-12 and America’s labor force. The Commission’s final report found that

America’s national capacity for excellence, innovation and leadership in higher education will be central to our ability to sustain economic growth and social cohesiveness. Our colleges and universities will be a key source of the human and intellectual capital needed to increase workforce productivity and growth.

In that report and in previous, preliminary draft reports, the Commission linked our future economic prosperity to the capacity of K-12 education to prepare students who were ready for college at graduation. Readiness for college in math, language and science is essentially the same for readiness for work. A major effort to raise high school standards ensued with the focus on college and work readiness.

As we approach a majority-minority US population by mid-century, the failure of our educational system becomes ever more alarming. A college education is increasingly essential for job preparation, and completion of high school is a prerequisite. Yet, too many minority students in our K-12 schools are still not succeeding. Across the US only 58% of Hispanics and 57% of Blacks graduated from high school while 85% of whites graduated on time in 2013. An alarmingly low number of Native Americans – only 49% – graduated on time.

There are policy initiatives that we can adopt in order to change the dismal future that appears to lie ahead. I will mention only a few:

  • Adoption of higher state and local standards that are linked directly to college and work readiness. The Common Core, despite the controversy, is focused on raising standards and increasing college and work readiness;
  • Access to private and charter schools for minority and low-income students. States like Arizona have led the way with charter schools and the introduction of rigorous reauthorization processes by the Arizona State Board for Charter Schools;
  • Higher teacher pay for schools that are remote and rural, e.g., schools on Indian reservations and low performing schools in city centers; and
  • Adoption of Move on When Ready, a program that the Center for the Future of Arizona has embraced from the National Center for Education and the Economy.

Educational policy choices are tough to implement. There is good reason. We experienced K-12 education, and we have strong feelings about it. But a failure to adopt innovations, a failure to introduce policy changes, and a failure to invest public money in selective policy changes is a mistake. We need to alter what appears to be a future of limited economic prosperity. It will become too late by mid-century. We still have a chance.

Tesla’s Home Storage System – Disruptive for Utilities

The real impact of the recently announced Tesla battery home storage system will be to utilities. And this will be a disruptive impact. The Tesla battery, along with a sophisticated power management system, has the potential to substantially decrease the demand of a home solar system on power from the grid and on the grid, itself.

Several utilities, including those in Wisconsin, New Mexico and Arizona have introduced fees that raise the costs for a solar homeowner’s use of the grid. The argument from utilities is that solar homeowners place demands on the grid without paying for the full expenses of the utility for grid maintenance.

Most home solar systems do not isolate the home from the grid. During peak power times and in early evenings, solar homeowners purchase power from the grid. During sunny, non-peak hours, they sell excess generated power to the grid through net metering agreements. Net metering, which is policy in most US states, allows a solar homeowner to provide home-generated power to the grid during sunny, low peak power periods. The solar homeowner then uses power from the grid during more expensive high peak power periods such as hot sunny afternoons or early evening. But they offset the homeowner’s cost of the more expensive peak power during a billing cycle with their own power, which was sold to the grid during the non-peak period of the day.

Newly imposed fees by some utilities such as Arizona’s Salt River Project (SRP) are designed to share more fairly the utilities’ expense for the grid and its maintenance among those with and without home solar systems. For example, SRP has recently introduced a grid fairness fee that is based on a solar homeowner’s use of peak demand power. With the Tesla battery or an alternative, along with a sophisticated power management system, the SRP customer with home solar can substantially reduce its demand for peak power by depending upon stored power from earlier in the day. This will further reduce the solar homeowner’s dependence on the grid. And it will leave more of the expense for the grid to the utility and to customers without solar power.

Tesla’s new home battery, among others such as some recent ones from Germany, will be disruptive. Depending upon a homeowner’s demands for power, it can isolate a home from the grid or nearly isolate it, especially with likely improvements to the battery and related technology. It can certainly substantially reduce the solar homeowner’s dependence on the grid. In places like Arizona, where some solar suppliers have discontinued installation of home solar to SRP customers, the Tesla battery and its competitors will reopen those markets to home solar systems.

We are seeing substantial improvements to the efficiency of photovoltaics, lithium ion batteries and battery power management systems. Those improvements have the potential to alter how we generate power, who owns power generation systems, and how we maintain a power grid that we will continue to need.

What Happens After College Matters

What happens after college matters – to graduates and their families. As a result of a college education, graduates should be prepared to begin their careers or enter more advanced education for specialized fields. Some companies are providing just what graduates need in order to find employment, and one of those is AfterCollege, a San Francisco-based company, started by a Stanford graduate, Roberto Angulo. I am honored to serve as an advisor to the company.

AfterCollege is committed to matching graduates and interns to potential employment opportunities and meeting companies’ needs to find knowledgeable and skilled employees for their job openings. Because AfterCollege is committed to matching the right graduate to the right job, it is very focused on the analytics associated with matching student to job opportunities. That means that AfterCollege addresses one of the critical outcomes of an undergraduate education – the right employment opportunity.

Besides its increasingly sophisticated analytics, AfterCollege works closely with a student’s faculty member. We know from students’ self-reports that a faculty member is the second most influential person in their career-related decisions, after their parents, of course. What may surprise many is that the same self-reported data place the university’s career center much lower in its relative influence on them. It is the self-report data that have confirmed AfterCollege’s commitment to work closely with faculty members. Metrics collected by AfterCollege show that faculty members read its emailed messages about jobs. That makes these influential people even more effective in supporting a student’s career decision-making.

AfterCollege is working hard to target jobs that it sends to a student who signed up for that service, and comments from users indicate that AfterCollege’s service is being well-received by those students. The company has made a practice of improving its analytics such that the right job is targeted to the right student. And the analytics confirm the successful targeting of jobs to students with students’ own positive responses. One student recently said, “I like the analytic-driven approach that AfterCollege seems to use.” Another user of AfterCollege pointed to its access to employment opportunities by saying, “So far, this is the site that allows me to apply to jobs I haven’t found at all on other sites.”

We depend heavily on colleges to provide the learning experience that prepares students for career success. Thankfully, there are companies like AfterCollege that have made a point of understanding how students make career decisions and what employers need from students. Luckily AfterCollege’s analytics and its faculty-driven focus are making it easier on both.

Improve Patent Policy – Promote Energy Innovation

America will continue to depend upon innovation in the energy sector. With prices of oil and gas driven down by new technology, increased supply and availability of renewables, the public’s attention to our energy supply has diminished. But America will continue to depend for its security and prosperity on widely available energy, energy innovation, and the products that come from traditional sources of fuel. That is why changes to patent policy matter for America’s future.

Previously, Penley on Education and Energy has focused on the critical role of advances in energy research (See, e.g., Energy Storage Advances in Research). Now renewed attention should be given to potential patent policy changes that may support those advances. On February 15 2015 Representative Bob Goodlatte (R-Va.) reintroduced the Innovation Act in the House Judiciary Committee. Today, a follow-up hearing will be held on this important patent legislation. While the primary focus of the legislation continues to be on patent trial proceedings, this is an opportunity to make other important changes to American patent law and the patent process.

Among needed changes are means to increase the speed by which patents are processed and approved. Slowness in patent approval processes inhibits advances in the application of research, discourages innovation and limits American competitiveness. Providing additional revenue to the US Patent and Trademark Office (USPTO) is one means to increase the number of patent examiners and encourage the development of needed technology.

Absent increased funding, which would address the problem, there are other potential changes in policy that can be adopted says the Congressional Budget Office (CBO) in a late 2014 report, Federal Policies and Innovation. They include giving the USPTO more flexibility in setting its fees. Fees are considered discretionary spending and are therefore subject to the 2011 spending caps. Congressional action could provide flexibility to the USPTO for setting fees and a Congressional appropriation could permit the USPTO to use the revenue it collects from fees for improving and speeding the patent approval process.

Why are changes necessary?

The answer is simple – to improve the application of innovative research. One example comes from research related to energy storage, important for increased use of energy generated by the sun and wind. Among the research in this area is the work of US scientists and engineers on lithium ion batteries. For example, West Virginia University Professors Hui Zhang, Xingbo Liu and their colleagues published research in 2013 on a means for increasing conductivity and decreasing the energy required for a chemical reaction in lithium ion batteries. A related patent is now before the USPTO where patents often languish due to inadequate resources of the USPTO.

But innovation in battery storage and renewables is not the only source of difficulty for American innovation. Recent patent applications include innovations in drilling, analyzing topographical data, separating chemical components of hydrocarbons, etc. These and related innovations affect availability and uses of traditional fossil fuels.

The Innovation Act is worthy of the public’s attention, and today’s hearing is just one step. Introducing needed changes to the USPTO’s patent processing will improve access to America’s innovation.   The Innovation Act before the House Judiciary Committee offers the opportunity. America will continue to depend for its security and prosperity on energy innovation. That is one very important reason for improving our patent policy.

The Consumer and US Higher Education

Demonstrating that US Higher Education provides real benefits to society is essential. Society’s considerable support of higher education in federal and state funding merits it. Consumers – parents and students – deserve it in order to make wise choices among colleges and universities. America deserves it for its global competitiveness.

Two reports in the last month provide relevant criticism and direction. The first is from The Economist and the second comes from the Senate Committee on Health, Education, Labor & Pensions. The Economist’s criticism readily acknowledges that the results of a college education are clear.  Those with more education, especially a college degree, receive higher incomes. This relationship of income to college degree does not, however, prove that higher education is responsible. For those of us with long-term experience in higher education, we know the truth. Excellent learning opportunities abound in our best schools. Good advising helps to lead to career-enlarging choices by students. But despite best efforts, a student can coast by with reasonable intelligence and choices of less demanding majors and easier classes. Too many do.

Society is the loser.   When students graduate with little improvement in their knowledge and skills, US capacity to innovate and become more productive is harmed. We hear repeatedly from recruiters that graduates are too often ill-prepared. Re-training by the hiring business is a major, unnecessary expense; it should not be the norm.

While The Economist’s article, Excellence versus Equity, challenges the notion that US higher education is responsible for post-graduation income improvement, the recent work of the Senate Committee on Education offers potential direction. It points to the opportunity to alter the data provided from schools and it points to the need to alter how those data are used as information for parents and prospective students. It does so in its report, Federal Postsecondary Data Transparency and Consumer Information Concepts and Proposals.

Having had ultimate reporting responsibility at two higher educational institutions as president, I was consistently frustrated by the level of institutional resources devoted to federal reporting and discouraged by the inadequacy of the resulting consumer data. That is why as President of Colorado State University (CSU), I instituted the College Portrait to provide consumers with more information about CSU’s outcomes. It was why I sponsored a trial at CSU of the Collegiate Learning Assessment as a potential means to measure the value added for undergraduates by their education. It was also why I sponsored considerable improvements to the student career services as President of the Thunderbird School of Global Management and why I serve on the Advisory Board of AfterCollege, a career path service for college students.

Just graduating is not enough. It is not enough to warrant the investment and expense of college degrees. It is not enough to satisfy students and parents. It is not enough to meet the needs of society, and it is not enough to retain America’s global competitiveness. Change is essential, and that means collecting the right data in order to provide usable information to consumers. The reauthorization of the Higher Education Act is a potentially positive step.

Avoid Sweet Briar for Your College

The news of Sweet Briar’s closing saddens many, including those of us who grew up in the South. This is a region of many historic, liberal arts schools. But sadness does not avoid another Sweet Briar. It does not address the threats that face many schools. There are actions – tough actions – that can be taken to address the threats and avoid becoming the next Sweet Briar or worse.

My recent experience has introduced me to those actions that avoid becoming Sweet Briar – and closing. My Board and I just completed the merger into Arizona State University of the Thunderbird School of Global Management. I was its President. Like Sweet Briar, Thunderbird was a relatively small, private college – but one dedicated to global management education. We are lucky to still have Thunderbird – as a part of ASU. Its students can complete their degrees. New students can enroll in the Thunderbird’s great education, and executives can receive the School’s global management training.

The outcome for Thunderbird was a very good one.  It could have been much worse. Like Sweet Briar, Thunderbird faced increased competition for qualified applicants, changes in what students wanted and employers needed. Like many schools in its situation, Thunderbird was in a vulnerable state. It needed stability, renewal and working capital for its aspirations. Like many schools, its size, traditions and structure limited options.  Luckily its board and I saw a future for the school through partnerships and other alternatives.

There are lessons that can be learned and actions that can be taken:

  1. Be pragmatic about the financial conditions of your college or university. Look at changes over time to your balance sheet and income statement.
  2. If it’s not too late already, begin the “process” of redefining the brand and modifying operations consistent with brand in order to position the school more competitively.
  3. Whether it’s too late or not, implement a communication plan that provides a rationale for the change – in brand or in the search for alternatives.
  4. If it is too late, realistically look for alternatives: joint ventures, mergers, and closure.
  5. Work closely with accreditors to help them understand the school’s situation. Actively solicit their advice and support for alternatives that will be acceptable under regional and specialized accreditation.
  6. Consider consultants like Penley Consulting – and Implement your plan.

The media have made clear that Sweet Briar and Thunderbird are not alone. Both schools took affirmative steps – but with different outcomes. Leadership from presidents and boards will determine what kind of outcome another, similarly vulnerable school receives.

Dear President Obama: End the Ban!

Larry Summers, leader of President Obama’s National Economic Council from 2009 to 2010 and former Harvard University President, made a forceful case last week at the Brookings Institution to end the 39-year-old crude oil exports ban.  The ban, which was put in place in 1975 in response to the Arab oil embargo, reflects policy stuck in the 1970s. We have an opportunity to promote U.S. economic development through a booming energy renaissance that demands a very different policy some 40 years later.  Permitting U.S. oil exports will lower gasoline prices at the pump, provide Americans with new jobs, lower unemployment, and strengthen the nation’s flexibility in international policy.  Mr. Summers believes President Obama should act now.  His case is straightforward: “We should not have prohibitions without a reason.  We need all the economic benefits we can get.”

Mr. Summers spoke at the release of a new report by the Energy Security Initiative (ESI) at Brookings, entitled “Changing Markets: Economic Opportunities from Lifting the U.S. Ban on Crude Oil Exports.”  The study supports his argument for exports.  U.S. refineries cannot handle the dramatic increase in domestic crude oil production that has resulted from the domestic shale boom.  Mr. Summers also makes clear that his support for ending the export ban is not an argument against climate change or the need to address it.  The US is already making surprising progress in limiting carbon, he observes.  Retaining a ban on exports is not the solution to additional changes that may be considered in well construction and wastewater disposal, associated with hydraulic fracturing.  Ending the ban on oil exports will drive economic growth with new jobs and increased disposable personal income that comes from savings at the pump.  Improved efficiencies in the refining process are also likely.

According to the macroeconomic study conducted by the ESI and the National Economic Research Associates (NERA), eliminating a ban on crude oil exports could inject between $600 billion and $1.8 trillion into the domestic economy and reduce gasoline prices by 9 cents per gallon by 2015.  The study coincides with a study by IHS released earlier this year that also forecasts lower gasoline prices and increased employment and economic revenue.  Because oil production is now at its highest point since 1987 as a result of the steep rise in domestic horizontal drilling and hydraulic fracturing, suppliers are looking for ways to bring their product to market.

Without increased market access via international exports, the study warns that U.S. production will decline. Crude stockpiles climbed to a record high on the U.S. Gulf Coast earlier this year, a trend that will continue so long as the industry believes that the export ban might be lifted.  With broader market access, however, oil production in the Gulf Coast alone could increase by over 1.5 million barrels per day.  Brookings gets it right: “We think the key lesson of our economic history in the energy space is that the U.S. economy works better by embracing market forces than trying to resist them.”

Mr. Summers’ succinct comments are the latest example in a growing trend of influential American leaders who wish to revisit the ban.  Obama Administration officials—including Energy Secretary Ernest Moniz—have asked to reexamine the ban’s utility.  Several high-profile lawmakers, for example Sens. Mary Landrieu (D-La.), Lisa Murkowski (R-Alaska), and Rep. Joe Barton (R-Texas), have followed suit.  According to an Associated Press poll conducted this year, ninety percent of economists surveyed believed allowing crude oil exports would improve the economy.

Additionally, the comments by Summers and the release of the Brooking’s report come on the heels of the Commerce Department’s decision earlier this summer to allow the export of lightly processed condensate, a first step that further bolsters Summers’s argument. Brookings believes President Obama has the authority to remove the ban without consulting Congress, meaning he could capitalize on the increasing momentum without getting weighed down in a political battle in Congress.

The President has the clear authority to act. The American people stand to gain substantially from ending the ban. The U. S. stands to gain additional international foreign policy leverage in a world where oil and natural gas exports provide power to some and constrain others in the continued European and Russian dance over the Ukraine.  Lawmakers and policy wonks are loudly supporting a rational crude oil export policy.  It is now time for President Obama to capitalize on this momentum and end the ban on crude oil exports.