Tuesday, September 20, 2011

The Lake Wobegone Effect Plagues Parent Surveys

THEN (not so then)

A 2008 poll from Education Next and the Program on Education Policy and Governance (PEPG) at Harvard University found that Americans are increasingly disappointed with public schools, and that by a 3 to 2 ratio believe that Democrats have a better record on education than Republicans (Q18) and are more likely to improve schools (Q19). The other, a Phi Delta Kappa (PDK)/Gallup poll, found that most Americans believe a President Barack Obama (46%) would be more likely than a President John McCain (29%) to improve public schools.

As with surveys in other fields, respondents rate themselves higher than others.
As other surveys have shown, the public’s evaluations become somewhat more favorable when the subject turns to the public schools in their own communities (see Figure 1)... But teachers offer the schools systematically higher grades than the rest of the public. Thirty-four percent give the schools an A or a B, while only 14 percent give them one of the two lowest grades (Q.1).

The demographic at the losing end of the achievement gap ranked the nation's schools even lower. This group also depends most on public schools.

On the whole, survey respondents offered slightly lower evaluations of the nation’s schools in 2008 than they did in 2007, and some groups posted sharp declines. Twenty-seven percent of African Americans gave the public schools an A or a B in 2007, but in 2008, that figure fell to 20 percent. Meanwhile, the share of African Americans giving schools a D or an F rose from 20 percent to 31 percent. The share of Hispanics awarding schools a similarly poor grade doubled during the period, from 16 to 32 percent.

Although public school teachers (34% A or B) graded public schools significantly higher than the general public (20% A or B), nevertheless teacher opinion implies that a full 66% of teachers believe public schools are performing below expectations. For the education system of the richest, most powerful country in the world, a C or below is simply unacceptable.


40% of teachers gave schools nationally an A or B grade, but 61% gave their local schools an A or B grade. It seems obvious that teachers are essential to school reform, but if all politics is local, and by extension, all education reform is local, education reform must overcome teacher satisfaction and consequent inertia first.

Perhaps surprisingly given union activism on the issue, somewhat more public school teachers (47%) favor the formation of charter schools (Q11) than the general public (42%). On the other hand twice as many public school teachers (33%) oppose charter school compared to the general public (16%).

The survey concluded, among other things, "...while Americans retain an abiding commitment to public education, the grades that they assign the nation’s schools are increasingly mediocre."



AND NOW

The 2011 Gallup/PDK poll found 69% of Americans give high grades to their local teachers.

Perhaps the most significant finding was that more than 70 percent of Americans said that they have trust and confidence in the men and women who are teaching in public schools. The percentage of Americans who would grade their local schools as A’s or B’s continues to be at an all-time high. The percentage was even higher among people under the age of 40...

69 percent of Americans would grade teachers in their communities with an A or B – higher than their principals or school boards. This confidence also exists despite the fact that most Americans said that they hear more bad stories than good stories about teachers in the news media.

As usual, people graded their community schools higher than the nation's schools (page 18 and 19). 51% gave their their own children's schools an A or B, but 81% rated the nation as a whole C or below.

In Lake Wobegone, all children are above average. Most Americans seem to think their children go to Lake Wobegone schools.

Friday, September 2, 2011

The Teachers' Social Security Safety Net

Over at Justin Baeder's blog, there is a lively discussion of Social Security. I suspect I provoked some of it. Please read the original blog entry and its comments for the context of what I am about to write.

Justin says, “...but as a 30-year-old, I'd much rather just pay SS tax and never get anything back (to provide a societal safety net for others) than have additional money taken from me only to be given back later at a very poor rate of return.”

Kudos to you, Justin, if you are really fine with paying in and never getting anything back in order to provide a safety net for others. There are plenty of people who resent Social Security precisely because it is a safety net. They would rather think of it as an investment or an entitlement instead of the insurance program it was designed to be. Before the Baby Boomers came along (don't blame them, blame their parents:), the 1% premium was cheap insurance. In the 1980s, it was raised to 6.2% to save for the Baby Boomers. It would be nice if the premium could drop back once the Baby Boomers are gone, but I do not see this happening for at least three reasons.

1. The Boomer Echo-Baby Boomers had kids, and the Echo Generation is having kids, so the population is permanently higher than without the Baby Boomers.
2. Spoiled Government-The government has gotten used to having the extra funds to borrow for General Fund expenses.
3. Longevity-People are living longer, thus needing the safety net for longer periods of time.

As far as the 12X return is concerned, please remember that one dollar is not the same as another. If I bought, for example, Netflix stock a year ago for around $150 and sold at about $200 recently, those dollars are roughly the same dollars, so the 33% gain is an accurate perception. However, if I bought GE in the early 1970's for $1.00 and sold for $55, close to GE's historic high 30 years later, it appears to be a super impressive 5400% gain. But consider what $1.00 could buy in the 1970's versus what it could buy in 2000. Here is a sample: A $0.05 ice cream cone from Thrifty cost $2.79 now, a 56x or 5480% increase. Here's another: It used to cost $0.25 to go swimming for four hours in the community pool. Now it costs $5.00, a 20x or 3100% increase. I remember these figures because I used to ride my bike to the pool every Saturday and get an ice cream cone on the way home out of my dollar a week allowance.

Consider an index fund that tracks the DOW. From the 1970's to 2000, the index fund would have posted a gain of only 14x or about $1310%. If you retire now, you have had no additional gain due to the “lost decade.” Beloved Thirty-Somethings, this could happen to you. If the index fund is your retirement, regardless of the appearance of being a multi-bagger, it did not keep up and will only lose ground to future inflation during retirement when the typical retiree converts it to a fixed-income stream.

The 12x return on Social Security only has the illusion of being huge. The fact is the 12x increase is potentially sustainable because past dollars, present dollars and future dollars are not the same. Even so, the nominal 12x return on Social Security payments will not even pay the rent.

So Justin is partially right. Individual investors have the potential to get a return great than that of Social Security. The question is whether individual investors can actually achieve such a return, and more importantly, keep it. Statistics say that regardless of what the historical returns of the market may be, the typical individual investor get a 1% return. And to get that paltry return, they have to break the first rule of investing: do not put money at risk you cannot afford to flush down the toilet. Retirement savings surely qualify.

People have learned the hard way they cannot count on their 401(k) plans, not only because of market risk, but also because studies have found that most 401(k) plans are actually pretty low quality. In my mind, maybe the best thing to do is buy a house when the rent vs. buy comparison is in your favor. Even if you end up spending twice the price of the house because you took the full 30 years to pay, you would have paid a similar amount anyway as rent and have nothing to show for the rent after 30 years. At least with a house, after 30 years you have secured a roof over your head. You can keep it for only the cost of the approximately 1% property tax, reducing your total retirement expenses by at least 25%-30%. Then your Social Security benefits, if you need the safety net, can go toward other expenses like food.

Many, many people, even after a lifetime of hard work and doing everything right, are finding themselves looking over the edge of the abyss. Dear Thirty-Somethings, this could be you. And if you are a public school teacher, there are people out there going after your so-called exorbitant pension.