California has become the first state in the U.S. to adopt a cap-and-trade system to reduce carbon emissions, while China appears to be taking the carbon tax route. What’s more, California has just reached an agreement with Quebec to exchange carbon permits. Watch for more to get done to reduce climate-changing greenhouse gases at the state, provincial and local levels than at the federal level in certain countries, says Erwann Michel-Kerjan, managing director of Wharton’s Risk Management and Decision Processes Center.

Related videos:

What Will China’s Likely Carbon Tax Mean?

Can a New Carbon Tax Clean Beijing’s Air?

China looks set to introduce a new carbon tax and other levies aimed at cleaning up severe environmental problems. Whether the tax will be high enough to make a big difference is unclear. But Chinese officials know they must address the challenge soon, says Erwann Michel-Kerjan, managing director of Wharton’s Risk Management and Decision Processes Center.

For more on China and carbon taxes, see:

What Will China’s Likely Carbon Tax Mean?

California and China Offer Two Visions of a Greener World

China will soon introduce a carbon tax as well as other levies aimed at protecting the environment, says the finance ministry’s head of taxes, Jia Chen. What will it mean for businesses inside – and outside – of China? Erwann Michel-Kerjan, managing director of Wharton’s Risk Management and Decision Processes Center, offers some analysis.

At $7.25 an hour, the U.S. federal minimum wage is below that of many developed countries, including Canada, Ireland, the U.K. and France. According to an opinion piece in yesterday’s New York Times by Princeton economist Paul Krugman, inflation has surpassed minimum wage hikes for nearly four decades, so that in real terms, low-wage workers are earning less today than they did in the 1960s. Meanwhile, Krugman notes, “worker productivity has doubled. Isn’t it time for a raise?”

Krugman wrote his op-ed in response to President Obama’s call in his State of the Union address last week to raise the minimum wage to $9 an hour, with additional increases down the line to keep pace with inflation. According to Krugman, it’s a good policy move — one which would have “overwhelmingly positive effects” by helping those Americans who are paid the least.

At issue is the question of whether such an increase would have the unintended consequence of reducing the number of jobs for low-wage workers, because it would cost more to keep them employed. According to Wharton management professor Peter Cappelli, while raising the minimum wage is meant to help low-wage workers, “it’s not so good for people who have to pay it. Most experts recognize that minimum wages aren’t the best way to help low-wage workers. Raising [the wage] probably does lead to some modest reduction in jobs, or leads more employers just to ignore the laws altogether.”

Wharton business economics and public policy professor Kent Smetters agrees that the impact of a minimum wage hike would be limited. “Poverty is mainly the result of family structure and low education, typically with the former producing the latter. The best way to help low-income workers is ultimately to tackle these two problems. The government is only part of the solution,” he says.

In addition, “the timing for a minimum wage hike is not great,” Smetters continues. “The college-educated unemployment rate is only about 3.9%. Instead, most of the current unemployment and labor force dropout is concentrated in potential workers without a college education. Minorities are especially in bad shape. A wage hike right now could, therefore, lead to slower growth in jobs for uneducated and minority workers. I would wait for a more robust economy before increasing the costs of hiring these types of workers.”

What might be a better way of helping low-income workers, if not a raise in the minimum wage? According to Cappelli, “The better alternative is the earned-income tax credit, which gives low-wage workers big tax breaks and doesn’t raise the cost of hiring to employers. But that doesn’t do anything if your income is so low that you don’t pay any federal income tax. So, the administration is pushing to raise the minimum wage because it is about the only tool it has. Political gridlock probably makes it impossible to think about something really novel as an alternative.”

Bangalore has played a critical role in establishing India’s prowess globally in information technology and biotechnology. The phrase “Bangalored,” which signifies getting laid off due to outsourcing, has even become part of the lexicon. Now, a group of prominent citizens of the tech savvy, forward thinking city, have kicked off a new initiative, one that they hope will serve as a model for the rest of the country.

Called the Bangalore Political Action Committee (B.PAC), this initiative is led by Kiran Mazumdar-Shaw, founder, chairman and managing director of Biocon, India’s largest biotechnology company; T. V. Mohandas Pai, chairman of Manipal Global Education Service and a former board member, CFO and head of human resources at IT firm Infosys, and K. Jairaj, who recently retired as additional chief secretary to the state government of Karnataka.

B.PAC has a clear focus — to connect the urban educated elite with the political process. “The educated class has distanced itself from the political process. But if we have to bridge the governance deficit, we need to engage with the political class. We are an apolitical body, but our focus is engagement in the political area,” says Pai, who is the vice-president of B.PAC. Mazumdar-Shaw, managing trustee and president of B.PAC, adds: “Bangalore took the lead in e-governance, but has failed to deliver in terms of accountability, transparency, good governance and efficiency. B.PAC wants to be a ‘rating agency’ on governance that will help to build administrative excellence within the government. Starting from Bangalore, we want to hold a candle to the rest of the country.”

The key goals identified by B.PAC are promoting good governance practices, integrity and transparency in all arms of the government; supporting good political candidates, and improving the quality of infrastructure in the city. The organization has a core committee of around 20 prominent citizens from different walks of life, including sports and the performing arts. It plans to form a network of citizens and work in partnership with other groups engaged in reforms. According to Mazumdar-Shaw, B.PAC will start with focusing on voter registration, voter education and supporting strong candidates for public office.

While the founding members have committed to personally funding the operating expenses of the organization — Pai estimates this to be around Rs. 25 lakh to Rs. 50 lakh (about $50,000 to $100,000) annually — for the next five years, they plan to create separate funds for supporting political candidates who meet their criteria. These campaign funds will be open to everyone for contributions. “We will also create a corps of volunteers to campaign for the candidates we endorse. We believe this will be a force multiplier,” notes Pai.

M.V. Rajeev Gowda, professor of economics and social sciences at the Indian Institute of Management in Bangalore, says that initiatives like B.PAC will give “more structure and bring more resources to systematically draw the hitherto excluded urban, educated middle and upper classes toward political participation.” Democracy requires a lot of investment of resources in terms of time, energy and money, Gowda adds, “Most people who have benefitted from India’s democracy and flourishing economy have not given back either in the form of engagement with politics or contribution by way of money to the political system. This is in stark contrast to the U.S.”

According to Gowda, what sets B.PAC apart is its willingness to embrace the political process and support good candidates, though remaining apolitical. “This is indicative,” he suggests, “of a maturing urban educated class which is willing to engage with politics without feeling tainted, and one that is also willing to back it with resources.”

Can B.PAC serve as a model other cities? Yes, according to Gowda. “In most other states and other industries, people have made money by corrupting the system. But people who have made money in Bangalore — in IT and biotechnology — are unique in that they have made ‘clean’ money. So it doesn’t look like they are trying to hijack the system for their own end.”

N. R. Narayana Murthy, founder and chairman-emeritus of Infosys, notes that one of the important roles that B.PAC will need to play is that of “a friendly and gentle persuader of existing political parties.” At the launch of B.PAC’s charter and agenda, Murthy points out that while new initiatives are very important, there is also an urgent need to transform the current institutions. “Unless we can bring a transformation in the well-entrenched political party system, the effectiveness of B.PAC may not be as much as what [we] would aspire to,” said Murthy.

Children between the ages of six and 14 belonging to the economically weaker sections of society in India are entitled to free education under the Right to Education (RTE) Act. But going by the Annual Status of Education Report (ASER) for 2012, which was released earlier this month, it may take a lot more to ensure that the quality of education imparted to those children is of acceptable standards.

ASER is the largest annual household survey of children in rural India focusing on the status of schooling and basic learning. Facilitated by Pratham, a Mumbai-based NGO, ASER 2012 covered over 330,000 households and about 600,000 children in the age group of three to 16.

According to the report, around 13% of children in grades one to five could not read at all and around 11% were not able recognize numbers from one to nine. Only 46.8% of all children in grade five were able to read a grade two level text. This number, in fact, has been declining over the past two years from 53.7% in 2010 and 48.2% in 2011. In mathematics, too, there has been a significant drop. In 2010, 70.9% of the children enrolled in grade five were able to solve simple two-digit subtraction problems with borrowing. This proportion declined to 61% in 2011 and 53.5% in 2012.

The report also points out that the decline in reading levels is higher among children in government schools as compared to those in private schools. At present, over 90% of schools in India are either run directly by the government or are government funded. But according to ASER 2012, in the six to 14 age group, enrollment in private schools across the country has increased from 18.7% in 2006 to 28.3% in 2012. The report adds: “If this trend continues, by 2018 India may have 50% of children attending private schools even in rural areas.” In contrast, in the U.S. more than 80% of children attend public schools and in U.K., this number is over 90%.

Talking to the media, Pratham Education Foundation CEO-president Madhav Chavan said that RTE has come to mean “the right to schooling and not to learning and education.” A statement by ASER 2012 notes: “The guarantee of education is meaningless without satisfactory learning. There are serious implications for India’s equity and growth if basic learning outcomes do not improve soon.”

Meanwhile, the quality of teacher training in India is also a matter of huge concern. According to the Central Board of Secondary Education, last year, 795,000 candidates took the Central Teacher Eligibility Test (CTET). More than 99% of these candidates failed to pass the test. CTET certification is mandatory to become a teacher for grades one to eight in central government schools.

Commenting on the shortage of trained teachers, a recent report by Mumbai-based rating agency India Ratings and Research titled, “2013 Outlook: Indian Education Sector,” covering both primary school and higher education notes that “most organizations will find it challenging to comply with the prescribed student-teacher ratio (STR) in the coming years.” The report also adds that although the government’s spending on education in financial year 2012 increased to 3.35% of GDP from 2.62% in 2005, “the infrastructure for both school and higher education needs to be upgraded to provide better quality education and absorb new enrollments.”

Pointing out that quality of education provided by schools is directly related to the quality of its management, T. V. Mohandas Pai, chairman of Manipal Global Education Services and formerly head of human resources at Infosys says: “The quality of leadership in government schools is inadequate and they are very poorly managed. Over the past 20 years, due to political [pressure] poorly educated teachers have been recruited, often with no relevant qualifications. Post recruitment training too is inadequate.”

According to Pai, the fundamental flaw in India’s schooling system is the controls and restrictions implemented by the central and state governments. “It is very difficult to open a new school in the English medium across India, [and the existing ones] are subject to regular harassment and unable to expand freely.” Pai suggests that the only solution to stem further decline in India’s education system is to open it up. “Stop funding government schools and fund the child so that parents have a choice of schools.”