Chapter 3

1. Chapter 3 THE ECONOMY AND DEMOGRAPHICS

2. Focus Questions • What is the business cycle? • How does the business cycle affect spending on education? • According to the 2000 Census, how is the U.S. population changing? • What are the implications of these demographic changer for education policy?

3. THE ECONOMY AND DEMOGRAPHICS • WHY ANALYZE THE POLICY ENVIRONMENT • ECONOMIC ENVIRONMENT • DEMOGRAPHICS AND THE POLICY ENVIRONMENT • IMPLICATIONS FOR EDUCATION POLICY • HOW ABOUT LARGE NEW INVESTMENTS IN SCHOOLS? • THINK AND LEARN

4. WHY ANALYZE THE POLICY ENVIRONMENT Defining Policy Environment • Every public policy-including every education policy-is a response to a specific social setting that includes a wide range of phenomena studied by the social sciences: economic forces, demographic trends, ideological belief systems, deeply held values, the structure and traditions of the political system, and the culture of the broader society. • Although these phenomena changes over time, most of them also reveal historical continuity. The complex social dimensions of a specific place at a particular time constitute its policy environment.

5. Policy and Its Social Context • Public policies-including education policies-are not like the goddess Arsenal! They do not suddenly emerge from nowhere, taking everyone by surprise. • Public policies are responses to the complex dynamics of a specific social setting. Although shifts in policy are not fully predictable, people who are knowledgeable about a policy environment are usually not taken completely by surprise.

6. Their understanding of broad social trends prepares them for certain types of change. • Another reason for understanding the policy environment is that such knowledge can help school leaders avoid wasting time, energy, and resources as educational Don Quixotes tilting at policy windmills. • Some school leaders, unaware of a changed environment, continue to push for policy changes that have become unrealistic.

7. For example, a curriculum supervisor who has been working with the state department of education to get funds for a professional development program may think he does not have time to follow the news. • Unaware of economic indicators that a recession is looming, he may plough ahead with his project, not realizing that developing alternative strategies for this changing policy environment would be wise.

8. If the legislature cuts the department’s budget, eliminating the money he had hoped to obtain, he may be caught by surprise, even perceiving this legislative action as sudden. • Caught off-guard without a contingency plan, he may feel he has wasted many months of hard work. Sensitivity to the changing policy environment makes avoiding such disappointments easier. • Finally, understanding the relationship between the social environment and education policy helps school leaders conceptualize the broad direction of educational policy.

9. Human beings need to make sense out of their experience, especially in periods of rapid change. • School leaders who have developed an intellectual framework to use in thinking about policy issues are equipped to interpret the flow of policy change; the policy world no longer seems like Oz to them. • Such understanding builds their confidence in their own ability to act constructively as public leaders in a changing world. return

10. ECONOMIC ENVIRONMENT Importance of the Economy • Two of the most important aspects of the policy environment are the structure of economic system and the current economic climate. • In fact, some thinkers believe that ultimately, the economy is the only aspect of the social environment that matters and that all other social phenomena are determined by it.

11. Economic Environment • Short-Term Economic Changes (1) Economic Indicators (2) Monitoring Business Cycles • Long-Term Economic Trends (1) Globalization (2) Inflation (3) Growing Gap Between Rich and Poor

12. Economic Indicators • Economists use various statistics, known as indicators, to track the general trends of the economy. In general, an economic expansion is indicated by such signs as strong growth in the real GNP, a decline in the unemployment rate, and important increases in the sales of durable goods, consumer installment credit, new housing starts, and business investments. • A recession is indicated by the opposite signals. The CPI increases during both expansions and recessions; however, it increases more slowly during recessions.

13. The most important is probably the gross national product (GNP), a measure of a country's total economic output. When adjusted for inflation, this indicator is called the real CNP; real GNP figures for two or more consecutive years can be compared. • The unemployment rate, which is the percentage of residents older than age 16 who want to work but lack jobs, is another important indicator.

14. A third is the Consumer Price Index (CPI), a general measure of the prices of goods and services prepared regularly by the U.S. Bureau of Labor Statistics. It suggests what the inflation rate is doing. • The Misery Index is calculated by adding the unemployment rate to the inanition race; it provides a rough way of predicting the outcome of presidential elections.

15. Almost always, if the Misery Index has declined within the twelve months before an election, the candidate of the incumbent party will win; if it has increased, the other party will win. • Other indicators of the economy’s direction include: (1) sales of durable goods such as furniture, cars, and major appliances; (2) consumer installment credit; (3) business investment in plant and equipment; and (4) new housing starts. return

16. Monitoring Business Cycles • Education leaders must be aware of where the economy is in the business cycle; they can use many methods to maintain such awareness. • Most daily newspapers include a business section that covers both national and regional economic news. • Major metropolitan newspapers periodically publish a summary of indicators for their area.

17. Cable and commercial television channels as well as some radio stations broadcast shows about business. • Online services such as America Online also offer up-to-date business and economic news, as do many Internet sites. Today following economic trends is easier than ever.

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19. Globalization • A another major long-term trend of the U.S. economy is globalization, meaning that increasingly our economy is not independent but rather part of a larger, worldwide economic system. • Many causes for this trend have been identified; however, the most important ones are probably technological.

20. Because of advances in computer science and telecommunications, information, money, and processed data can move thousands of miles in seconds. • As a result, "for the first time in human history, anything can be made anywhere and sold everywhere". This means that businesses-which are more and more likely to be parts of large multinational corporations-can move their factories add offices to places where labor is cheap, taxes are low, and regulation is minimal.

21. This also cleans that national governments have lost much of their power to influence their own economies through national economic polities. • By providing them with stiff international competition, globalization has forced nearly businesses to restructure, merge, or even go bankrupt. return

22. Inflation • Since the end of World II, the United States has experienced what economists call "endemic inflation"-persistent, ongoing price increases that cannot be completely controlled (Heilbroner, 1985). • In fact, since 1945, the CPI has increased in all years but two. It was relatively low until the 1970s when it exceeded 10% in some years; under Reagan's supply-side economics it dropped again.

23. During the 1990s, the inflation rate averaged about 3% although by the very end of the decade it was running between 1 and 2% (Blank, 2000; Hamrin, 1988; Makin, 1996,1997). • Although high inflation weakens an economy and disturbs citizens, a certain amount of inflation is helpful to debtors. They can pay off their loans in dollars that are cheaper than the dollars they borrowed. • However, even a relatively low inflation rate makes financial planning difficult, return

24. Growing Gap Between Rich and Poor • One of the most troubling trends of the U.S. economy is the increasing difference in income between the top 20% of the population and the bottom 80%. It began in 1968 and has accelerated with the passage of time, caused by complex set of factors. • First of all, the top 20% of the population is doing better than ever; they are well-educated, highly skilled workers who can command good salaries in the emerging information economy.

25. On the other hand, the lower 80% is less skilled and is therefore doing less well; in fact, the less skilled a worker is, the more difficulty he or she has earning a decent wage. • Table 3.3 shows how the distribution of wealth among the five quintiles (or fifths) of the U.S. population and the wealthiest 5% changed between 1950 and 1997.

26. The table clearly shows that both the richest 5% and the richest 20% of the population have become richer while everyone else has experienced a decline in their share of the national wealth. • Younger workers have been especially hard hit by this change in the distribution of wealth; in the 1990s almost one third of American men aged twenty-five to thirty-four did not earn enough to keep a family of four above the poverty line.

27. An especially distressing aspect of this problem is its impact on children. Between 1974 and 1994 the child poverty rate in the United States increased by 49%. • Although it dropped slightly during the long expansion of the 1990s, it still hovers around 20%-by far the highest rate among industrialized nations.

28. return Top 5 percent Lowest fifth Second fifth Third fifth Forth fifth Highest fifth year

29. DEMOGRAPHICS AND THE POLICY ENVIRONMENT The Importance of Demographics • Those who wish to understand education policy must pay as much attention to demographics as they pay to the economy. Demography is the scientific study of the characteristics of human populations and how they change over time. • The closely related term demographics to the characteristics of a specific population, such as U.S. residents or U.S. schoolchildren (The American Heritage Dictionary of the English Language, 1992).

30. Demographers record and analyze information about the size of a specific population, its growth patterns, age distribution, and vital statistics. Like the economy the demographic context can create severe constraints education policy. • After World War II, for example, the U.S. birthrate soared. Suddenly, school systems accustomed to demographic stability because of the Great Depression and World War II faced the challenge of educating unusually large numbers of children.

31. They had little choice: most of the available resources had to be channeled into constructing school buildings, hiring additional staff and equipping new classrooms. • A declining school enrollment presents a different set of challenges, and an aging population creates special pressures for schools. • School leaders must be aware of broad demographic trends not only in the nation, but also in their own geographical area.

33. Long-term Demographic Trends • Immigration and Migration • Suburbanization • Increasing Diversity • Changing Family life

34. Immigration and Migration • We live in a period of enormous population movement. The United States and several other nations receive hundreds of thousands of immigrants each year, many of them from Third World countries. • During the 1990s, the estimated number of legal and illegal immigrants into the United States was 820,000 annually. return

35. Suburbanization • Another internal population shift that has been occurring for decades is suburbanization. The rural population has been in decline for a long time; but, as the twenty-first century begins, the urban population is also dwindling. • City dwellers are not, however, fleeing to the country but rather settling in the suburban belts that girdle large cities. Nevertheless, suburbs are no longer the sheltered havens from the pressures of modern life they once were.

36. Most large cities are surrounded by at least three rings of suburbs: (1) older suburbs that sprang up between 1920 and 1945; (2) the suburbs of the post-World War II era; and (3) newer suburbs, often many miles from the inner city. • The older suburbs have taken on many of the characteristics of the inner city. Not surprisingly, then, for twenty-five years child poverty has increased most rapidly in suburban areas, growing by 76%. By the mid-1990s, 14% of suburban children were living below the poverty line. return

37. Increasing Diversity • Because of both immigration and differential birth rates, the U.S. population is becoming more diverse ethnically, linguistically, and religiously. • The fastest-growing ethnic groups are Hispanics and Asians/Pacific Islanders. The 2000 census found that 35.2% of U.S. schoolchildren belong to a minority group; for the first time, Hispanic children outnumbered African American ones. • In addition, the number of Americans who consider themselves bi- or multiracial is growing.

38. People who are Asian, Black, Caucasian, and Native American-are becoming increasingly common. Because immigration levels vary considerably among states, some areas have experienced the challenges of greater cultural diversity for years. • For example, in 1990 40% of the children enrolled in the public schools of New York City belonged to racial minority groups. • In the same year 31.4% of public school pupils in California were Hispanic, 11% were Asian, and 8.9% were African American.

39. Until recently, in fact, five states (California, Florida, Illinois, New York, and Texas) received most new immigrants, so the impact of this new diversify was geographically restricted. Today, however, this wave of immigration is fanning out into other areas which are less experienced in dealing with it. • For example, in North Carolina the number of students with limited English proficiency grow by 440% between 1990 and 1997; the corresponding figures for Alabama and Kentucky are 429% and 208% respectively. return

40. Changing Family Life • Changes in the U.S. family provided much fuel for political fires in the 1980s and 1990s. Although the demographic statistics do not fully support politicians' rhetoric about family values, they are troubling. • Between 1980 and 1990, births to unwed mothers increased by 76%; most of this increase was caused by an increase in births to unmarried white women, and many of these mothers were in their 20s and 30s rather than in their teens.

41. Although the teen pregnancy rate dropped significantly during the 1990s, the 2000 census reported that less than a quarter of U.S. households consist of a married couple with school-age children, a slight decline since 1990. • Moreover, the percentage of households made up of unmarried mothers with children udder 18 has grown slightly. In 1994, 24% of children in the United States lived in fatherless homes, four times as many as in 1950.

42. Because such children are more likely to be poor, to drop out of school, to be placed in foster care, to commit crimes or felonies, and to become teenaged parents than children with a father in the home, this trend has raised widespread concern, • A related fact recently documented by the Urban Institute is that approximately 4,000,000 children between the ages of 6 and 12 are unsupervised by adults for part of the day.

43. Even those children who are growing up in two-parent households do not experience the idyllic lifestyle frequently depicted in the television situation comedies of the 1960s and 1970s. • Because their parents and older siblings often hold down one or two jobs outside the home and because commuting time has increased, children receive less attention at home than previously. • Mother usually is not standing at the door when they arrive home from school, milk and cookies in hand, ready to assist with homework. return

44. IMPLICATIONS FOR EDUCATION POLICYImplications of the Business Cycle • Because tax revenues expand and contract with the business cycle, that cycle has important implications for the level of funding that is likely to be available for public education.

45. Guthrie and Koppich (1987) analyzed the political economy underlying each of four national education reforms: • (1) the passage of the National Defense Education Act under President Eisenhower in 1958; • (2) the passage of the Elementary and Secondary Education Act during President Johnson's war on Poverty in 1965; • (3) the passage of Public Law 94-142, the Education for All Handicapped Children Act, in 1975; and • (4) the education excellence movement of the 1980s.

46. They compared these four reform periods in relation to nine variables of the political and economic environment, finding that only two of the various were consistent across all four cases. • The first was that all four reform periods were sparked by a catalyst such as the launching of Sputnik or the release of a commission report.

47. The second was that “an upbeat economy undergird[ed] enactment or initiation of all four reform efforts"(p.37) They concluded: "It may well be that economic buoyancy is a precondition of widespread change" (p. 38). • The demographic trends suggest that the task of public schools is going to become increasingly difficult. First of all, about one out of every five schoolchildren is growing up in poverty with all its associated problems: poor nutrition, inadequate health care, transience, and stress.

48. Moreover, many children-and not just poor ones-have special social and educational needs, these needs might include bilingual or English-as-a-second-language programs; activities to introduce their parents to the expectations of U.S. schools; academic curricula that include more coverage of Asia, Africa, and Latin America; before- and after-school programs; tutors to help with homework; remediation; and mentoring.

49. Finally, discipline problems and violence in school have increased and are likely to continue to do so. The probable needs of today's and tomorrow's schoolchildren are such that public education will need far more money in the near future than it receives today. • However, the economic and demographic trends together suggest that raising more money will not be easy and that raising as much as was raised in the recent past may even be impossible.

50. For complex reasons including slower economic growth, stagnating wages, the aging of the population, the threat of unemployment, and heavy consumer debt, Americans have become averse to tax increases-and even to maintaining the current level of taxation. • So-called tax revolts were common in the late 1970s; as a result many states passed tax and expenditure limitation laws that are still on the books.