Race Between Education and Technology

This well written book is based on a careful analysis of the effects of educational policy on economic growth and economic inequality in the USA over the last century. The authors have undertaken the very demanding task of reconstructing a large amount of data related to eduational performance and economic performance. In some respects this is a fairly dense book with a lot of data presented, usually in the form of tables and simple charts, though the authors use some multivariate regression methods and some modeling as well. The authors necessarily use some simplifying assumptions and methods, for example, using the benefits of higher education - the college wage premium - as an index of inequality. Given the limitations of the data and the complexity of the topic, these approaches seem reasonable and the end result is a convincing analysis. Goldin and Katz make a series of important points. One is that a well educated work force is an important driver of economic improvement. In this context, the show that the USA, from the mid-19th century to around 1970, was a world leader in mass education. They show 3 major waves of mass educational advancement; near universal primary education in the 19th century, a huge increase secondary education ("the high school movement") in the first half of the 20th century, and the enormous expansion of higher education in the post-WWII era. The authors argue very well that this distinctively American series of educational expansions were a major contributor to robust American economic growth. Simultaneously, the success of serial mass education and production of increasing numbers of well educated workers resulted in a relative reduction in inequality with social benefits beyond merely economic benefits. In the last generation, mass education has stagnated and the relative decrease in production of highly educated workers is a major driver of the increasing inequality of American life. One of the authors' major points is captured by the title of the book. Given the constantly changing and improving technologies of modern economies, increasing numbers of well educated workers are needed merely to maintain a constant position, let alone to produce increasing welfare. Remarkably, Goldin and Katz argue very well that vigorous increases in education produce not only aggregate economic benefits but also reduced inequality. Investments in mass education produce winners across the board, an amazing effect. Goldin and Katz see the USA as having gone off the tracks in last generation - roughly the period of conservative predominance of American politics. They point out as well several other nations, notably a number of European countries, have now closed the gap or surpassed the USA in mass education. This is true for indicators of the amount of mass education and quality of mass education. This will reduce American competitiveness in a global economy. The declining rate of educational attainment is

I found this book fascinating and would recommend it although I found it frustratingly flawed, and therefore, without the authors' further comments, will eventually have to reduce my 4 star rating. The book's core thesis is that the rate of technological change in the 20th century has been constant, while the supply of skilled workers has been uneven, leading to expanding and contracting wage differentials between skilled and unskilled workers over the course of the century. The variation in supply and correlation to changes in relative wages seems large enough to be convincing. But while I find the case persuasive, I couldn't help but feel it was, in part, reserve engineered to reach its conclusion. It seemed to me that three critical issues remained either unwittingly or intentionally overlooked. In part, large part perhaps, I would guess, the "skill" of a worker transcends their education. So a high school drop out today, when most everyone graduates from high school, represents a much less skilled worker than a drop out at the turn of the century, when very few graduated. To suggest the ratio of wages between high school graduates and drop outs today can be compared to the past without some adjustment, or even mention of an adjustment, that take this into consideration, seems lacking. The same is true of college graduates, where the meaning of the term has been averaged down. The analysis seems to suggest that a college or high school graduate is equivalent no matter what (changing) percentile of the population it encompasses or, more complicated mathematically, that the relative curve across percentiles is such that any point is logarithmically proportional to any other. While perhaps this is a second order issue on the margin, over the large shifts that have occurred in the education of various percentiles of workers over the course of the 20th century, leaving it unmentioned is disappointing. While the mathematical logic of relative wages vs. relative supply (of skilled vs. unskilled workers) seems reasonable on the surface, it's not clear why expansion in the supply or demand of one would affect the ratio between them proportionally. It would seem, for example that the US has absorbed a large numbers of unskilled immigrants, it has offshored an unprecedented volume of "unskilled" goods, and it has accelerated productivity improvements and yet the unskilled wage has remained flat. That suggests that the marginal product of unskilled labor is largely flat over large shifts in volume. To argue that the expansion or contraction of supply drives (relative) wages up or down requires a downward sloping marginal product of labor, unskilled labor in this example. I don't see why that would necessarily be the case to the degree necessary to explain the data. Quite the contrary, it seems unlikely based on the prevailing flat wages. In that case, an expansion of unskilled workers would have no effect on the wages of unskilled or skilled workers