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"Skills Gap" in U.S. Examined; U.S. Economic Inequality Examined; Six Year High School Focuses on Job Training
Aired February 15, 2014 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN ANCHOR: Welcome to the new American dream, millions of Americans stuck in the ranks of the long-term unemployed. There are good paying jobs available but those who need them most don't have the skills to get required. And emergency assistance from Washington is running out.
I'm Christine Romans. This is "YOUR MONEY."
I sat down with Christiane Amanpour and Candy Crowley to search for answers from Washington to the rest of the world. Up first, a solution to the big skills mismatch in this country. It remains elusive even in a recovery, and that could be a big problem politically.
CANDY CROWLEY, CNN ANCHOR: Many of these people, you know statistics far better than I do, tend to be 50 and 60-year-old males who have had a certain skill and got into a certain pay level, face it, that they're the first ones to go, when a company is trying to contract, because if you can get a 25-year-old to do what a 55-year-old is doing, you're going to do that, because he's not at the pay scale.
BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: Tonight I've asked Vice President Biden to lead an across the board reform of America's training programs to make sure they have one mission -- train Americans with the skills employers need and match them to good jobs that need to be filled right now.
ROMANS: I've talked to governors who have said before kind of privately, look, our retaining programs are not the best. In some cases they are programs to keep state workers employed, not necessarily to retrain people. And the skills are changing so much. You used to also have a very, very vibrant labor movement in the country where labor would force companies to pay for the retraining, and now you don't have that agreement any more. Companies want somebody readymade. And around the rest of the world, people who will work for a fraction of what we'll doll here for the same work.
CHRISTIANE AMANPOUR, CNN INTERNATIONAL CORRESPONDENT: Some of these place, you talk about China and some of these place, but even in those places will are bubbling, populist movements pushing back against incredibly low wages and incredibly bad conditions in the factories and the places they work. And so many people are looking at that as actually not going to be the same cheap labor market as it has been for so long.
CROWLEY: What's different here, it seems to me, what the long-term unemployed need and those coming in to the jobs market is not retraining in their lane. It's retraining for something -- it's a different job. It's not like, oh, now you can do this.
ROMANS: And we need more jobs.
ROMANS: We need more jobs. Talk about the livable wage, right? The jobs we do have and that we're growing prolifically are not jobs that you can feed a family of three or four on. Wal-Mart pays above average minimum wage but is getting slammed by unions and some of its workers who say it's just not enough.
BILL SIMON, PRESIDENT AND CEO, WAL-MART U.S.: At our company you have the opportunity to enter at whatever level your capability would suggest, and you have the opportunity to advance. But that opportunity doesn't exist everywhere in the country.
ROMANS: Should we raise the minimum wage? Is that the way to go forward, and --
AMANPOUR: Shouldn't we ask you?
ROMANS: Let me retract that. Is that a viable political option here?
CROWLEY: Yes, yes. It's a totally viable -- when you look at long- term unemployment extension of benefits there and you look at minimum wage, both of those are powerhouse issues. In the exit polls in the last election there were five qualities that people were looking for in a president. They said, the pollster said, which is the most important thing to you? And then they break it up. Mitt Romney in four of the categories -- good leader, decisive, all this stuff. Guess what category he lost in? Cares about people.
ROMANS: I remember that.
MITT ROMNEY, (R) FORMER PRESIDENTIAL CANDIDATE: I'm in this race because I care about Americans. I'm not concerned about the very poor. We have a safety net there. If it needs prepare, I'll fix it. I'm not concerned about the very rich. They're doing just fine. I'm concerned about the very heart of America.
CROWLEY: It is an Achilles' heel and a weakness. They say it's an image problem. Fine, whatever it is, when you put out minimum wage and long-term unemployment benefits, this was specifically put on the schedule, one was a calendar thing, so that Republicans would have to articulate why they're against it.
ROMANS: I guess this idea of one America, two economies. You have this country, the land of the American dream, yet it's the haves and have-nots? JANET YELLEN, FEDERAL RESERVE CHAIRMAN: I am very concerned. I share your concern about rising inequality. I think it's one of the most important issues and one of the most disturbing trends facing the nation at the present time.
ROMANS: Is that the view --
AMANPOUR: A growing gap. Yes, it is. It is. But still, as I say, those who go from the outside to America have a better chance of making it and living the American dream. People do see that Americans are suffering from this, not just income inequality but the growing gap of the inequality, but it's also happening in places like London right now.
ROMANS: Everyone from the Pope to the president has weighed in on growing income inequality. Oxfam, the global anti-hunger and poverty group, says the 85 richest people have the same amount of wealth as the bottom 3.5 billion. Here in the U.S., a CNN/ORC poll show most Americans want the government to reduce the gap between rich and poor, but that number hasn't budged in decades despite the majority. And the more you make, the less interested you are in government jumping in to close the wealth gap. The less money you have, the more likely you are to want Washington to step in.
At the very top of the heap, some outspoken 1 percenters are firing back at the 99 percent. Forget the Nazi reference of this wealthy venture capitalist made and then apologized for. He now warns his most recent comments will make people even more upset. More money? Then you should have more votes. That's just the beginning. Hear for yourself, next.
ROMANS: More money, more votes. Should the wealthy have more power at the ballot box? Mega-rich venture capitalist Tom Perkins thinks so. But don't worry 99 percenters, you'll be able to vote -- if you qualify.
(BEGIN VIDEO CLIP)
TOM PERKINS, VENTURE CAPITALIST: The Tom Perkins system is, you don't get to vote unless you pay a dollar of taxes. But what I really think is, it should be like a corporation. If you pay $1 million in taxes, you should get 1 million votes. How's that?
(END VIDEO CLIP)
ROMANS: Now, he said people are expecting outrageous from him and he gave it to them. John Avlon is a CNN political analyst and executive editor at "The Daily Beast." The nonpartisan Tax Policy Center says 43 percent of Americans didn't pay federal income tax last year. Do the one percent have enough political power to make this idea -- I think it was a rhetorical idea, quite frankly. But there's a drum beat of the one percenters saying, don't complain, the rest of you, because we're the ones making it happen?
JOHN AVLON, CNN POLITICAL ANALYST: No, they do not have the power to make it happen. The constitution stands in the way of that. There used to be land qualifications to vote. That got rid of a long time ago.
But you are seeing a rift. Perkins have been out front on this, earlier with the letter in the "Wall Street Journal" sort or rasing the specter of Kristallnacht with regard to the anger at the one percent, and then Sam Zell weighed in.
ROMANS: Sam Zell, who said the 99 percent should emulate and envy the one percent and that the one percent works harder than the rest of America.
AVLON: The thing about America that has always worked, we have traditionally not given into class war divisions. That's a European thing. Our political focus and fissures have been more along the lines of race. The fact that we have unprecedented inequality is all of a sudden giving rise to much more anger and anxiety around this issue than we've seen in a long, long time in America. When folks who are billionaires start mocking or playing the victim card, they exacerbate the thing they're allegedly afraid of.
ROMANS: Retailer Nicole Miller said that they 99 percent is whining, that someone making $35,000 a year would be considered wealthy in the rest of the world. We asked a Nobel prize winning economist, the guy who coined the phrase "the one percent" what he thought about this.
(BEGIN VIDEO CLIP)
JOSEPH STIGLITZ, ECONOMICS PROFESSOR, COLUMBIA UNIVERSITY: There are two ways to become wealthy. One way is to innovate, to really do something new, to invent a transistor, the laser, discover DNA, things that really transform our society, our economy. The other way is to try to seize a larger share of the economic pie, what I call rent- seeking, wealth -- taking wealth from others. That's a very large fraction of the wealth of that top one percent, it's a result of that. CEOs who are taking a larger and larger share of the corporate pie without any evidence that they are increasing the productivity relative to, say, the compatriots in other countries where CEO pay is much more limited.
(END VIDEO CLIP)
ROMANS: You could argue the influence of that top one percent is already so vastly greater than the average person's influence. They've got lobbyists on K Street, access to politicians at the very top of the country.
AVLON: Yes. And that's because it's true. The middle class doesn't have an organized lobby. Whatever specters people want to rise about 43 percent being almost a majority of takers, quote/unquote, in the country and ending democracy, that is a fear-filled rift we've heard in American politics.
The current issue of inequality we have is different. It is urgent. It is something we should pay attention to and it's good we're having a debate. The squeeze of the middle class, I, like a lot of folks, think the country's strength really is historically, not just America, is based and how strong the middle class is. We should be worried about the folks who are objectively middle class and how that seems to be on the losing side of the bet.
But when folks are playing the victim card, saying people are whining, they really are creating the thing they're complaining about and they're not helping to solve the problem.
ROMANS: Another problem, the state budgets cutting back for years, the state government, and now seeing a boost in revenue. Governors are even using the word, I can't believe it, dare we say, "surplus." Can you believe it? Overall revenue, highest since the recession, some states are going to have to decide what to do with their extra money. Don't spend it all in one place. Should it go to infrastructure? Use it because, to fill in the cutbacks from elsewhere? What are the political, I guess, decisions now with surpluses from these states?
AVLON: People are so unaccustomed to surpluses on the state and local level it is mind-bending and it is a tangible sign the economy is improving. That's the first thing.
ROMANS: They have to have balanced budgets and have to have surpluses by law, unlike your federal government.
AVLON: Correct. That's another conversation for another day. Look, politicians, of course, love it. They can talk about comeback going into a reelection mode. The thing to keep in mind the deficit surplus doesn't mean these states don't have a lot of outstanding debt. And yes, I think better use if you have a surplus, is probably invest in infrastructure. The federal government doesn't get off its butt for infrastructure, but I think states can do some things. We have huge outstanding pension costs because of an aging population, and the states still have serious problems with debt. The idea all is rosy and clear skies from here on out isn't a reality.
ROMANS: No rainbows and unicorns, this is the picture of the job situation. And 91 million people are not looking for a job, 37 percent. I mean, that's unbelievable how much of the actual population is not working. What's going on here?
AVLON: I think partly it has to do with an aging population, but it also has to do with the long-term effects of the great recession. You do have that one percent bouncing back taking 95 percent of the gains since then. Some folks have been sidelined. This is really troubling. If you care about America as country, forget all the bumper stickers. You care about stability, about the viability of the American dream, you care about people feeling invested in the overall success, that's being eroded.
ROMANS: If you're a politician looking at that number, you should figure how to get the right training for kids on the front end, the right retraining for baby boomers who have been sidelined, the right jobs mix in the middle, and wages that people can feed a family on, and you just don't see that laser focus in Washington about jobs. And 91 million people not even looking for a job.
AVLON: Yes. And every time we've had things, previously bipartisan support to boost the economy, in the current polarized environment they are all of a sudden off the take with divided government.
ROMANS: John Avlon, more to talk about next week.
ROMANS: Coming up, want to be successful in this job market? There's one thing you need to have. What it is, right after the break.
ROMANS: Is college worth it? If you want a job and a solid income, the answer is, yes. Look at the gap in median earnings between millennials with a college degree and those with a high school diploma. It has never been greater, that's according to Pew, $45,000 if you're a college grad, $28,000 if you have just a high school diploma.
There's a huge gap in unemployment rate for millenials as well, three times higher for a high school grad than a college grad. There's one thing you need to be successful in this job market, a college degree, and now you can invest in people with college educations. If you go Upstart.com, you can browse profiles of young people with debts and dreams, and you can give them cash and jobs in exchange for a piece of their future earnings. They can use the cash to pay off loans and start companies. It's certainly a novel idea for getting out of debt, because, no question about this, the country with the best work force and the best infrastructure will lead the 21st century, and ensuring the best workforce starts with an education.
That'S why I want to bring in Rana Foroohar. He's assistant managing editor at "TIME" magazine and the author of this week's brilliant cover story "The school that will get you a job." Rana, welcome to the program. You write about this new model of education. Six year, six- year high school. Does it work?
RANA FOROOHAR, ASSISTANT MANAGING EDITOR, "TIME" MAGAZINE: It's an amazing program. It's rolling out in New York and Chicago, upstate New York, Connecticut. The way it works, you take four-year high school program and tack on two years of community college. The schools partner with local community colleges but they also have a corporate partner. IBM is one of the main ones that came up with this program in conjunction with New York City educators, and they provide curriculum support, they basically guarantee you'll teach these kids the kind of things they will need to get a job. And at the very end they are guaranteed a job opportunity to be first in line to get a job at IBM or with another of the blue chip companies.
ROMANS: We've heard from companies. They're concerned about the quality of education coming out of K-12 and concerned about gap where kids can't get into the community colleges. They're concerned about the skills people have. If you have the schools and the community colleges and the companies working together, they could fill that gap.
FOROOHAR: Absolutely. What's interesting is it doesn't actually require more money in the cities where it's rolling out. There's a lot of money already in the public school systems. IBM is not putting in money. The other corporate partner is not putting in money. They're putting in knowledge, because oftentimes kids are coming out and they just don't have the skill set even if they do graduate with a community college degree to be hired in these companies.
ROMANS: You here how networking is important. There's networking right there.
FOROOHAR: They're given a mentor. Each child has an individual mentor that stays with them through that whole experience.
ROMANS: Then they can focus on the STEM and engineering, math, the technical skills they desperately need for some of these big blue chip companies.
FOROOHAR: Absolutely. If you look at kids coming out of school know either with a two or a four-year degree, the difference between a starting salary between an English major and somebody with a science, engineering, and math degree is huge.
ROMANS: I was talking to a CEO of a company recently that they were going to relocate into, build a factually in a town, and they looked at the high school graduation scores and look at sort of the educational basis of the community they're going to be in because they know they need workers who are going to be able to adapt and be smart.
FOROOHAR: Absolutely. You know, I spoke to Chicago Mayor Rahm Emanuel. He said I have to guarantee companies to get them to locate, what it will look like. I have to be able to show them the high school and college kids we have, do they have the right skills?
ROMANS: Rana Foroohar, thank you for being with us.
FOROOHAR: Thank you.
ROMANS: Coming up, Barbie on the cover of the "Sports Illustrated" edition. Ken certainly isn't objecting, but others are. Sexy or sexist? Unnecessary. Next.
ROMANS: For more stories on "YOUR MONEY," give me 60 seconds on the clock. It's "Money Time."
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Attention drivers, higher gas prices ahead. Gas Buddy says pump prices are likely to rise 15 cents to 40 cents a gallon between now and Easter Sunday.
Buckle up, Greco recalling 3.7 million child car seats. The problem is the seat's harness can be difficult to unlatch. The government would even like a bigger recall of millions more.
A big week for bathing suits. Air New Zealand's in-flight video features "Sports Illustrated" swimsuit. Meanwhile, Barbie is featured in the new swimsuit edition. The doll that started it all is unapologetic for how she looks. Critics are outraged and called the campaign sexist and bad for young women's body images.
ROMANS: A superstar on the baseball diamond is also calling it quits, but that likely won't keep him from making millions off the field. 2014 will be New York Yankees' shortstop Derek Jeter's last season, but he'll still help companies sell you stuff. Jeter's annual endorsement deal is estimated about $8 million to $9 million. Marketing experts tell us it will drop maybe slightly. And business in Cooperstown, New York, could get a boost. Reports say hotel rooms are already going fast for the Hall of Fame ceremony of the year 2020. That's the first year Jeter is eligible for the Hall of Fame.
Congrats to all the U.S. Olympians winning medals in Sochi. They'll also get a nice bonus after they step off the podium. The U.S. Olympic Committee awards its athletes $25,000 gold, $15,000 for silver, and $10,000 for bronze. The tax man wants a piece of that. The tax code includes prizes and awards as gross income.
For me standing up on the medal stand worth it, no question. What about you? What would you pay to wane gold medal in Olympic figure skating? We hit the streets of New York to find out.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: What's the price of gold?
UNIDENTIFIED MALE: Ah, I don't know, a couple hundred dollars? Yes. A couple hundred dollars.
UNIDENTIFIED FEMALE: I don't think there's a price for that. Everybody practices, they give their time, motivation, dedication. And then you get your gold. That's what it's all about.
UNIDENTIFIED MALE: I don't know. I wouldn't pay anything. Practice, be the best I could. That's what I'm doing here, practicing.
UNIDENTIFIED FEMALE: I don't know. Half a million dollars or something? I really don't know.
UNIDENTIFIED MALE: What would I pay? You're not supposed to pay anything. It's the Olympics. Priceless.
UNIDENTIFIED FEMALE: I don't know. I nerve are thought about it. Maybe, like, $1 million? If I had an extra $1 million I would probably do it.
UNIDENTIFIED MALE: I wouldn't pay anything. No one would pay to see me. So I'm happy just to be able to stay on ice skates and go around in a circle.
(END VIDEO CLIP)
ROMANS: All right, thanks for joining us this week for "YOUR MONEY." Join John Berman and me every weekday morning on "EARLY START." Until then have a great weekend.