Last August, President Biden signed into law the CHIPS Act, which subsidizes the semiconductor industry. But the law is failing to expand semiconductor manufacturing much, because there is no workforce to manufacture the semiconductors, thanks to misguided federal policies that devalue useful industrial skills. The CHIPS Act “provides roughly $280 billion in new funding to boost domestic research and manufacturing of semiconductors in the United States.”
“Taiwan Semiconductor Manufacturing Company will delay production at its new Arizona-based chip plant to 2025 due to a shortage of skilled labor, the company’s chairman said on its second quarter earnings call Thursday.” So reports CNBC. “Chairman Mark Liu told analysts on an earnings call Thursday that the company does not have enough skilled workers to install advanced equipment at the facility on its initial timeline. The company previously anticipated it would begin making 5-nanometer chips in 2024.”
No wonder the CHIPS Act has been called a “recipe for corruption and waste.”
For years, the federal government has effectively encouraged people with few academic skills to go to college, rather than working in manufacturing or skilled trades, by heavily subsidizing college, rather than training for blue-collar jobs. The result is that there is a surplus of people who go to college despite not being college material, and then study useless, easy majors in college, and then never pay off their student loans. The Biden administration’s financial aid policies subsidize useless majors through income-based repayment plans, which write off a person’s student loans after 10 or 20 years of payments based on a percentage of income, no matter how low that income is. Its “Pay as You Earn” program allows eligible student-loan borrowers to cap monthly payments at 5 percent of their income over $33,000 a year), and have their remaining federal student loans forgiven after 20 years — or just 10 years, if they go to work for the government. So the less a student earns (because their major was in a useless subject), the less they pay on their student loans before the loans are forgiven.
The government has encouraged people who once would have become skilled and valuable factory workers to instead go to college and work in white-collar jobs, contributing to a severe shortage of the skilled workers needed by manufacturers. The Washington Post reported in 2012 on this problem:
the country … needs more manufacturing work. But … many manufacturers say that, in fact, the jobs are already here. What’s missing are the skilled workers needed to fill them. A metal-parts factory here has been searching since the fall for a machinist, an assembly team leader and a die-setter. Another plant is offering referral bonuses for a welder. And a company that makes molds for automakers has been trying for seven months to fill four spots on the second shift. “Our guys have been working 60 to 70 hours a week, and they’re dead. They’re gone,” said Corey Carolla, vice president of operations at Mach Mold, a 40-man shop in Benton Harbor, Mich. “We need more people. The trouble is finding them.”
In recent years, government officials have depicted white-collar jobs for college graduates as the way to go. President Obama advocated sending every high-school graduate to college or some form of higher education, while denigrating training for blue-collar industrial jobs. He has sought to increase spending on colleges, while slashing spending on more useful vocational education that could lead to work in manufacturing. As The Washington Post notes, as senior skilled factory workers are retiring, no one took their place, since “many of the younger workers who might have taken their place have avoided the manufacturing sector because of the . . . stigma of factory work.” .
Meanwhile, college students learn less and less with each passing year. “Thirty-six percent” of college students learned little in four years of college, and students now spend “50% less time studying compared with students a few decades ago, the research shows.”
While the federal government encourages young people to go to college by heavily subsidizing colleges and writing off many graduates’ student loans after 10 or 20 years (through income-based repayment plans that allow loan balances to be forgiven after 10 or 20 years of modest payments), it does nothing to encourage young people to get trained for decently-paid skilled trades and blue-collar jobs that have critical shortages of workers.
Campus Reform reports:
The ominous warnings of a void in trade professionals are finally coming to fruition.
Application rates to technical jobs that require vocational training dropped by 49% in 2022 compared to 2020, according to data from Handshake obtained by NPR. The US Chamber of Commerce in their 2023 economic projections predicts a “massive shortage of skilled workers.”
Traditional trades, however, can provide good-paying, stable paths for income. Employment data from recruitment board Indeed indicates that the national average hourly rate for carpenters is $23, with more experienced carpenters earning upwards of $34 per hour. Automotive technicians can earn between $25 and $70 per hour and plumbers can earn more than $90,000 per year.
Despite these high salaries, data from Handshake shows job postings for trades received only 5 applications per post compared to the 19 applications per post for white-collar positions, as NPR notes.
While the effects of this blue-collar crisis are becoming more apparent in today’s job market, experts have been sounding the alarm for years.
Mike Rowe, former host of the Discovery Channel’s “Dirty Jobs,” has long been a supporter of elevating vocational education. In February 2017, Rowe testified before the United States House of Representatives to advocate for an increase in funding for technical and vocational training.
Addressing the vocational skills gap in today’s job applicants, Body Shop Business reports that Rowe told Congress, “When we took shop class out of high school, we sent an unmistakable message to an entire generation of students…that a whole category of jobs was simply not desirable. Is it any wonder those are the very jobs that go begging today?”
A “generation… has been both dissuaded from and denied access to vital vocational and technical training.”
While doing little to encourage young people to go to trade school to learn a useful skill, the Biden administration is encouraging everyone to go to college by changing income-based repayment plans to allow college graduates to pay a small percentage of income toward repaying their loans for 10 or 20 years, and then have the remaining loan balance forgiven. These changes could cost taxpayers $500 billion or more.
As the Washington Post has explained, income-based repayment plans encourage colleges to raise tuition like crazy, because “under income-based repayment, your payments vary with your income, not the size of the loan” you took out to pay for tuition. So you don’t mind borrowing more money, because as your debt increases, your payments remain the same (and the unpaid loan balance is written off after 10 or 20 years). As a result, if you are a student, your college will raise tuition more, and you will borrow more money to pay that tuition, knowing that taxpayers will some day pay off your IDR program loans.
At the People’s Policy Project, Matt Bruenig explains how those IDR plans encourage students to like taking on lots of debt (which will be written off in the future under the Biden plan) and colleges to like tuition increases fueled by debt:
Just as schools have new incentives to push debt loads higher in an IDR-dominant world, so do students. Above, I say that, for students planning to enroll in IDR, $15,000 of student debt is no different than $100,000 of student debt. But this is not quite right. A student planning to enroll in IDR actually benefits from taking out the maximum amount of debt possible.
Student loans are initially paid to schools to cover the tuition and fees. But what’s left after tuition and fees is disbursed as cash to the students, ostensibly to cover living expenses. In a conventional student loan, you have reason to live frugally and take out as little debt as possible. But if you are planning to go on IDR, then your incentives flip and you are leaving money on the table if you don’t take out the maximum loan possible.
Even if you don’t want to spend it living lavishly while in college, you could squirrel away the surplus into a savings account for later use, including for use in making your IDR payments after you graduate. Indeed, this is just a student-administered version of the LRAP scheme discussed above where student debt is used to pay off student debt….
A student that plans to enroll in IDR has no reason at all to care about the prices colleges are charging. To them, $15,000 of student debt is no different from $100,000 of student debt….
To see how this can play out in practice, consider the Loan Repayment Assistance Programs (LRAPs) that many law schools already have. Law schools provide a good view into this question because law graduates have been enrolling in IDR programs at high numbers for a long time and law schools have some ability to determine who is likely to use IDR upon graduation based on the kind of law they plan to go into.
Under the Public Service Loan Forgiveness (PSLF) program, law graduates that go on to work in the public sector, which is a lot of them as the public sector employs many lawyers, only have to pay 10 percent of their discretionary income for 10 years in order to have their debt forgiven.
Law schools figured out many years ago that, for a student who is planning to enroll in PSLF upon graduation, prices and debt loads don’t matter. Ten percent of your discretionary income is ten percent of your discretionary income regardless of what the law school charges you and how much debt you nominally have to take on.
Law schools also realized that they could make the deal even sweeter by setting up LRAPs that give graduates money to cover the the modest repayments required by the PSLF.
The LRAP schemes work as follows:
- The school increases their tuition.
- The student takes out federal loans to cover the tuition increase.
- The school squirrels away the debt-financed tuition increase into an LRAP fund.
- The school disburses money from the LRAP fund to cover PSLF repayments.
Through this roundabout process, the law schools effectively use student debt to pay off student debt and make their schools free, at least for these particular students.
Under the IDR scheme proposed by Biden, the regular IDR program will become a little more generous than the current PSLF program that the law schools have so effectively gamed. It’s impossible to say for sure how schools will respond to that, but schools have already shown themselves quite adept at optimizing within the financial aid constraints and not just the law schools.
At some point, it seems like expensive private universities will realize that providing tens of thousands of dollars of need-based discounts to certain borrowers who are likely to wind up on IDR does not make sense and that they should instead charge the maximum amount a student can cover through federal loans. As the law schools show, the surplus generated by that scheme could even be shared a bit with the students via an LRAP.
The White House last August announced the Education Department’s intent to revise income-driven repayment plans in a way that would allow students who foolishly attend expensive colleges to largely avoid repaying their loans, by cutting their payments by well over half. As a result, many borrowers will pay only a trivial amount each month, and can stop paying anything at all after 10 or 20 years, no matter how much of their student loan balance remains. The remaining student loan balance will be written off, at taxpayer expense.
Historically, increases in federal student lending spawned tuition increases, that resulted from students’ increased ability to borrow money to pay big tuition bills. The Daily Caller notes that historically, “each additional dollar in government financial aid translated to a tuition hike of about 65 cents,” according to the Federal Reserve Bank of New York.
