The Public Good Newsfeed – December 27, 2016: School Testing, Mass Incarceration, End of the American Dream, and more…

A selection of recent news stories with an ILSR insight into “The Public Good.”

Stories in this Newsfeed:

High Stakes Testing Debunked | Do Unions Aid Student Achievement? | Inequality and Upward Mobility | Do Prisons Reduce Crime? | Uber Unmasked

High Stakes Testing: Destructive and Ineffective

Student scores on standardized tests have become a key factor, possibly the key factor in evaluating teachers, principals and schools themselves.  Teachers can be fired and schools closed on the basis of test scores.  Which has led critics, understandably, to label this process “high stakes testing”.

“Standardized tests were originally intended as diagnostic tools to identify areas where students need remediation, not as punitive weapons,” commented Amy Grimes of Community Voices for Public Education in the Houston Chronicle. “Now school closures, hiring and firing decisions and graduation are directly linked to test scores. As a result, more and more time is spent preparing for and administering tests – time that otherwise would be spent teaching curriculum. Some Houston Independent School District teachers estimate that they must spend at least one-third of their class time on tests.”

Nationally almost $2 billion a year is spent on standardized testing.

Not only does the emphasis on test scores reduce the time teachers can actually teach and divert resources that could otherwise be used to bolster educational outcomes, it turns out to be a very inaccurate and unhelpful measurement tool.  Valerie Strauss, who covers education at the Washington Post sums up the stance of experts in the measurement field,  “The evidence against VAM (a method of measuring the value of a teacher on the basis of student test scores) is at this point overwhelming.”  A recent statement by the American Statistical Association (ASA) concludes, “that teachers account for about 1% to 14% of the variability in test scores, and that the majority of opportunities for quality improvement are found in the system-level conditions.”

“System-level conditions” includes non-school factors over which teachers and school administrators have no control, like students’ families and communities.  We know non-school factors influence test results but we’ve rarely estimated their level of impact.  Recently three researchers did just that.  In early December 2016 they issued their findings. They discovered they could predict the percentage of middle school students scoring a proficient or above levels on New Jersey’s mandated tests in language arts and mathematics a remarkable 70-78 percent of the time using only three variables:  1) percentage of families in a community with annual income over $200,000; percentage in a community living in poverty; and c) percentage of people in a community with bachelor’s degrees.

The researchers’ conclusion? “Using the student results from standardized tests to rate, rank, judge or evaluate middle level administrators is not ‘transparent’ and ‘fair’…

Teacher Unions and Student Achievement

One of the most dramatic changes in our public school system over the last generation has been the rise of teacher unions. Until the early 1960s virtually no teachers were unionized; today over 3.5 million are union members. Many, if not most, Americans view teacher unions as inimical to educational outcomes, but relatively little research has assessed that conclusion.

A few years ago Robert M. Carini, Professor of Sociology at the University of Louisville examined the then existing research.  He began by summarizing the arguments of both sides.  Those who believe unions are harmful contend they raise the costs of education; remove incentives for teachers to improve instruction by shielding ineffective them from dismissal; hamper principals’ ability to manage their schools; encourage distrustful relationships; and block promising educational reforms.  Carini notes that some of these arguments have been validated by research.

Those who view teachers unions as beneficial concede they bring higher costs but argue these additional costs effect valuable educational gains in a variety of ways. Higher salaries and benefits attract and retain superior teachers.  They enhance teacher morale and job satisfaction.  Union pressure may result in smaller class size and designated instructional planning time, both of which raise educational outcomes.  Unions may also “shock” management into becoming more effective.  Carini notes that some of these arguments too have been validated by documented.

Of the 17 studies Carini reviewed, 12 reported “generally beneficial effects of unionism.”  Carini adds, “In particular studies that report beneficial effects tend to employ more extensive statistical controls, thereby increasing our confidence that the findings are real.” His conclusion? “(T)he overall pattern in the research is increasingly clear:  teacher unionism favorably influences achievement for most students in public schools”.

Income Inequality and the End of the American Dream

Studies about income inequality have captured less than 60 percent of U.S. income by ignoring government spending, non-cash benefits and nontaxable income.  Thomas Piketty, Emmanuel Saez and Gabriel Zucman, three of the pre-eminent researchers in the field, have addressed this problem with new research made public in early December 2016.  This research captures 100 percent of U.S. national income and lays the foundation for “distributional national accounts” that can accurately assess inequality and the impact of public policies on inequality across nations.

The researchers found that average incomes, adjusted for inflation, grew by 61 percent from 1980 to 2014. But nearly $7 out of every additional $10 went to those in the top tenth of the income scale.  The spectacular growth in the incomes at the top so outpaced the small increase at the bottom from public programs intended to ameliorate poverty and inequality that the gap between the wealthiest and everyone else has continued to widen.

From l946 to l980 GNP grew by 95 percent and the fruits of that growth were equally distributed.  Indeed the income of the bottom 90 percent grew faster than that of the top 10 percent.  For the bottom 50 percent of the population, the share increased in the 1960s because of rises in the minimum wage, which reached its historic maximum in 1969 as well as the introduction of food stamps, welfare, and Medicaid.

From l980 to 2014 GNP grew more slowly, by 60 percent and the largesse was distributed extremely unevenly. From 1946 to 1980 the pretax income of the bottom 90 percent of the population grew at same rate as did the average growth of income overall, at 2 percent per year.  Between 1980 and 2014 average income grew by 1.4 percent a year while income for the bottom 90 percent of the population grew by .8 percent a year.

Incomes for the bottom 50 percent stagnated.  Growth for the middle 40 percent of the population was weak, comprised almost entirely of tax incentives for employer sponsored health care and Medicare.  Average income more than doubled for the top l0 percent and tripled for the top l percent.  For the top .001 percent incomes soared by an astounding 636 percent.

The ratio of pre-tax income of the top 1 percent compared to the bottom 50 percent held steady between 1962 and 1980 at about 27 to 1, but the gap then dramatically widened, a result of tax reductions for the rich, a stagnant federal minimum wage and vigorous anti-union efforts. By 2014 the ratio had soared to 81 to 1.

Until the 1990s the wealthy relied largely on income derived from their labor. Since then they have gotten rich from their investments.

Between 1980 and 2014 the share of national income going to the bottom half of the population plummeted from 20 percent to 12 percent.  Meanwhile the share of national income going to the top 1 percent soared from about 12 percent to 20 percent.

Government redistributive efforts have had only a small effect, despite the growth in government transfers, other than social security, disability and unemployment insurance, from 2 percent to 11 percent of the national income.  Almost the entire increase was a result of the introduction of expanded public health benefits (e.g. Medicaid and Medicare.)

These transfers reduced by about a third the gap between the growth in GNP and the growth in income of the bottom half of the population. The bottom 50 percent of the adult population does not receive a net benefit from cash transfers.  They pay about as much in taxes as they receive back in financial benefits.

The researchers also found that the difference in the tax rates paid by rich and poor have narrowed considerably.  In 1950 the tax rate on the top 1 percent of earners was about 3 times that of the bottom 50 percent.  Today the ratio is 1.4 to 1 to 1, a result of a significant reduction in progressive taxation, especially the reduction of taxes on capital, and an increase in payroll taxes.  Given the election of Donald Trump we can expect the difference to narrow even further in the coming years.

America since its founding has prided itself on being the land of opportunity. Upward mobility was and is a part of the fabric of American identity.  Since the founding of the United States each generation has become richer than their parents.

The stark increase in inequality has dimmed the American dream.

Recent research finds that about 90 percent of those born in the 1940s and 1950s grew up to earn more than their parents while only half of those born in the 1980s and 1990s grew up to earn more than their parents.

Some blame this slackening of upward mobility on slower economic growth.  They argue that if we raised the national economic growth rate upward mobility would improve.  The truth is that inequality, not growth, is the primary factor behind this dramatic reduction of upward mobility.  The researchers found that the increase in inequality accounts for more than 70 percent of the decrease in upward mobility.  “Certainly more growth helps,” they observe, “but what is really important is that that growth happen at all income levels and not be concentrated into a very small part of the distribution.”

Mass Incarceration, Crime, and Prison Privatization

In May of 2011, by a 5-4 vote, the United States Supreme Court ruled that conditions in California’s overcrowded prisons were so bad they violated the Eighth Amendment’s ban on cruel and unusual punishment.  The Court ordered the state to reduce its prison population by more than 30,000 inmates. The state responded by moving tens of thousands of prisoners convicted of non-serious and non-violent crimes into county jails.

The passage of Prop 47 in November 2014 by a vote of 59.6 percent to 41.4 percent reclassified drug possession and most small thefts as misdemeanors, released at least 13,500 inmates and converted about 200,000 prior convictions for low-level drug and theft from felonies convictions to misdemeanors, making those who had already served their time drastically more employable.

In their dissent from the 2011 Supreme Court decision, Justices Samuel Alito and Chief Justice John G. Roberts Jr. cautioned,  “I fear that today’s decision, like prior prisoner-release orders, will lead to a grim roster of victims. I hope that I am wrong. In a few years, we will see.”

Justices Alito and Roberts should be happy to know their fears were unfounded. In a late 2015 article looking back on the result of the large release of prisoners TIME magazine reported on a study from the Public Policy Institute of California that found a decline in property and violent crime rates to historic lows after 2011. The only area where releasing prisoners was found to increase crime was auto thefts, which was estimated to be 17 percent higher than it would have been otherwise.

A previous study from Stanford Law School had examined the status of more than 1,600 prisoners released in California under an earlier reform of the state’s “Three Strikes Law”, a reform that was also mandated by a citizen initiative.  Only 1.3 percent of prisoners released early under that reform ended up back in prison.

Reform advocates tout the numbers to support reform efforts, but they also say that public officials need programs to help prisoners transition to the real world. As Christopher Watler, project director at the Harlem Community Justice Center, of California officials, told TIME, “I think it’s wonderful that they’re releasing people, but they also need services in their communities where they have help.”

State officials allowed counties to manage criminals, which led county criminal justice systems to emphasize mental health, drug treatment and probation. All of these factors helped reduce recidivism.

But budget cuts have hurt efforts to help those released as a result of Prop 47. In mid December a report based on a 7-month investigation by reporters from four publications —The Desert Sun, The Ventura County Star, The Record Searchlight and The Salinas Californian—found that although Prop 47 earmarked millions expected to be saved in prison costs for inmate rehabilitation, little had been generated and spent, making the state’s shortage of treatment programs even more glaring. The Desert Sun reports, “Thousands of addicts and mentally ill people have traded a life behind bars for a churning cycle of homelessness, substance abuse and petty crime.”

California’s surging prison population was mirrored on a national scale. Between 1970 and 2014, America’s prison population increased five fold. With 5 percent of the world’s population, the U.S is home to 25 percent of its prisoners, disproportionately people of color.

There are 2.3 million people living in prison cells today. Another 7 million are on correctional control, being monitored daily by probation and parole officers and subject to stop, search, and seizure without any probable cause or reasonable suspicion. All in all, more than 65 million people in the United States who now have criminal records are subject to legalized discrimination, sometimes including loss of the right to vote, for the rest of their lives.

Some, like law professor Michelle Alexander, author of The New Jim Crow persuasively argue that our mass incarceration strategy has had a significant racist and social control component. She notes that the United States actually has a crime rate lower than the international norm, yet our incarceration rate is six to 10 times higher than that of other countries.

Others disagree, arguing that crime rates were rising rapidly in the 1970s and incarceration reduces crime because not only by taking past offenders off the streets, but by deterring future ones.

Crime has indeed steadily declined over last two decades.  Today the crime rate is about half of what it was at its height in 1991.  Violent crime has fallen by 51 percent since 1991, property crime by 43 percent.  Violent crime is back to levels not seen since 1970; property crimes are at 1967 levels.

Did massively increased imprisonment cause a reduction in crimes?  A Brennan Center for Justice report says no. Researchers found it has had little effect on the drop in violent crime in the last 24 years and accounted for only 6 percent of the reduction in property crime in the 1990s and less than l percent of the decline in property crime since then.

How many Americans are unnecessarily imprisoned?  Another report from the Brennan Center addresses that question.  Their conclusions? 39 percent.  A quarter of all prisoners, almost all non-violent, lower level offenders, would be better served by alternatives to incarceration such as treatment, community service, probation or fines and another 14 percent have already served long sentences for more serious crimes and can be safely set free.  Lauren-Brooke Eisen, the lead author of the report comments, “The research is incredibly compelling that after a certain age, it’s very unlikely that a person would commit a second offense.

There is another reason to avoid relying on imprisonment.  Abundant evidence suggests that prison itself increases crime.  When people involved in low-level nonviolent crimes are sent to prison they find themselves living in an environment with more unstable and violent criminals, making them more prone to commit crimes upon release.  Incarceration also damages families and workplace and community ties, making it more difficult for people to avoid crime after release.

We’ve not only locked up millions of Americans. In the last two decades we’ve also privatized the prisons in which they reside, giving government-like control over our bodies and our lives to largely unaccountable corporations driven by a legal obligation to maximize profits.

The dismal results of privatizing prisons have been widely documented. In the last couple of years the tide appeared to have turned against privatizing prisons.

And then came the election of Donald Trump.

James Surowiecki of the New Yorker sums up the context and impact of this election on the future of privatized prisons.

“Going into Election Day, few industries seemed in worse shape than America’s private prisons. Prison populations, which had been rising for decades, were falling. In 2014, Corrections Corporation of America, the biggest private-prison company in the U.S., lost its contract to run Idaho’s largest prison, after lawsuits relating to understaffing and violence that had earned the place the nickname Gladiator School. There were press exposés of shocking conditions in the industry and signs of a policy shift toward it. In April, Hillary Clinton said, “We should end private prisons.” In August, the Justice Department said that private federal prisons were less safe and less secure than government-run ones. The same month, the department announced that it would phase out the use of private prisons at the federal level. Although most of the private-prison industry operates on the state level (immigrant-detention centers are its other big business), the news sent C.C.A.’s stock down by thirty-five per cent.

Donald Trump’s victory changed all that: within days, C.C.A.’s stock had jumped forty-seven per cent.”

Uber Unmasked

In a series of four outstanding essays in Naked Capitalism, Hubert Horan brings his 40 years experience in the management and regulation of transportation companies to bear on the Uber phenomenon.

Founded in 2010, Uber has become the most highly valued private company in the world at $69 billion.  It has raised $13 billion from investors.

Conventional wisdom holds that Uber is one more digitally-based “disrupter” coming out of Silicon Valley that is upending a traditional business model by offering better service and lower costs.

Horan persuasively argues the conventional wisdom is wrong.  To him Uber is a fundamentally unprofitable enterprise with huge negative profit margins and larger operating losses than any previous startup in history.  Uber’s business lacks the economies of scale that allowed digital companies like Amazon to transform high initial losses into prodigious profits.  Uber’s ability to attract customers and drivers from incumbents derives entirely from the $2 billion in annual subsidies it pays from its investors’ capital to keep fares low and driver income attractive.

Horan calculates that Uber passengers are paying only 41 percent of the actual cost of their trips while conventional competitors must charge fares that cover 100 percent of their costs. Little evidence suggests taxi customers in a competitive market would pay more than twice as much for the service advantages Uber investors have been subsidizing.

Traditional taxi owners take l5 cents of each passenger dollar to cover dispatching, corporate overhead and profit.  Uber currently takes 30 cents. (Originally it took 20 cents in order to attract drivers but in 2015, to reduce its financial hemorrhaging, Uber raised its take to 30 cents, cutting by a third drivers’ income.)  However, Horan estimates Uber’s overhead costs are much higher than traditional companies. Uber’s costs include global marketing, software development, branding and lobbying and global development, while also providing an adequate return to its investors.

Horan insists Uber cannot and never will be able to compete on a level playing field and that Uber’s founders and investors knew that from the start.   “From its earliest days Uber’s investors and managers have always recognized that investor returns would required global industry dominance and the elimination (or effective nullification) of longstanding law and regulations designed to protect competition and to protect consumers from the risks of anti-competitive market power.”

Uber strives to become not only a monopoly but to a largely unregulated monopoly. Where it can, it hires an army of high-powered lobbyists to allow it to avoid existing taxi rules.  In Las Vegas, for example, Uber spent more on lobbyists than the entire casino industry.  In California it had a larger lobbying team than any bank.

If lobbying fails, Uber usually simply bulls ahead and breaks the law, counting on its customers, aided and abetted by a vigorous Uber-driven publicity campaign, to protest if the government cracks down.  Horan writes, Uber wanted “to establish that it did not respect the right of democratically elected governments to control local taxi service and could disregard any rules it found inconvenient”.

Given its current rapid rate of growth, Uber just might achieve its dream of monopoly.  Which will allow it to reduce driver pay and autonomy while raising fares.  As Horan observes, “Uber will require $3-4 billion a year more than it is currently earning to provide investors returns and has extremely limited scale economies,” Horan maintains,  “and will need to extract a significant fraction of that amount from consumers, drivers and suppliers via the exercise of anti-competitive market power.”

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David Morris

David Morris is co-founder of the Institute for Local Self-Reliance and currently ILSR's distinguished fellow. His five non-fiction books range from an analysis of Chilean development to the future of electric power to the transformation of cities and neighborhoods.  For 14 years he was a regular columnist for the Saint Paul Pioneer Press. His essays on public policy have appeared in the New York TimesWall Street Journal, Washington PostSalonAlternetCommon Dreams, and the Huffington Post.