The Race Between Education and Technology: Lawrence Katz

[MUSIC PLAYING] America rose to prominence
economically in the world not just because it
had a vast continent, but because it basically
educated its children and its workforce better
than any other nation. Our earliest legislation,
the Northwest Ordinance, said part of the land
and new settlements had to be dedicated
to a common school. In the 19th century, we
became the first place to give almost universal
access to common schooling up to eighth grade. I’d say almost universal
because in the South we had the plague of
slavery and Jim Crow. Over the last 100
years or so, there’s been a tremendous increase
in educational attainment. We can track the education
using our census data. And what you see is
someone born in 1875 on average got about
seven years of schooling. But if you then look at
the early 20th century, each generation of
people basically had two more years of
schooling than their parents. The next major advance
was the American invention of the modern high school. There wasn’t some
big federal program to build the high school. It was small towns in Iowa
and in Nevada and Oregon and Massachusetts using
their own local tax revenue to give kids an opportunity to
try the new world of business, to be a clerical worker, to
read blueprints and become a manufacturing worker
to leave the farm. From 1910, less than 10
percent of American kids got a high school degree. By 1940, the majority
of American kids were finishing high school. Today’s youth are more
educated than their parents, but something has
changed and slowed down. And while today’s
young people are more likely to go
to college, they’re not that much more likely. So what we now know is in
the early 20th century, there was a reason
why so many areas were interested in
investing in schooling. What you got if you could
get a high school degree was as big as like what you
get if you get a college degree in improving your earnings. So building a high school
was a very valuable thing for a local community. The person who could get
a clerical job no longer was only an elite person who got
a job from their father’s firm. The kid growing up in rural
Iowa or the kid in Brooklyn who had access to high school
could now compete for that job. And it narrowed inequality by
reducing that educational wage premium for jobs like
clerical or manager. And the mid-20th century we sort
of had the best of all worlds, rapid expansion of education,
rapid expansion of technology. There’s a quite
reasonable hypothesis that what we call skill-biased
technological change — that new computers advantage
highly educated people, not just those with
programming skills, but those able to
handle big data and use it to market things,
to design innovations — that’s been an important
force behind inequality. So what we really
wanted to understand: Is the recent period
different economically because technological
change is different, or is it because the role of
education in helping people to cope with technology is
different in this period than in the past? When you look at the
growth of inequality, particularly of wages in the
U.S. in the last three decades, there are two major components. One is the tremendous
growth of the college premium, post-secondary schooling. So the new technology
has been affecting what were the middle-skilled
jobs of the mid-20th century. So a clerical
position could easily be replaced by new computers. Data entry isn’t as important
when you can scan things in. Someone able to market or
interpret that information, a college graduate or greater,
often does much better. A typical college graduate
earns almost twice as much as a typical high
school graduate. A typical high school
graduate career might earn $40,000,
and the college graduate more like $80,000. And a way to think about
the path of inequality and the college wage
premium is to think about a race between
education on the supply side and technology on
the demand side. In periods when education races
ahead faster than technology, one sees declining inequality
in education differentials. When technology moves ahead
faster than education, one sees widening. So you want them both
to move ahead fast, but you don’t want
particularly technology to be too far ahead of
education, because that’s going to lead to rising inequality. So the first place
we need to look at to reduce inequality
and create more broadly shared prosperity is trying to
win the race between education and technology, and
to do that we’ve got to have more rapid
expansion and greater access to higher quality schooling. In the early 20th century, we
provided everyone a guarantee they could go to high school. We have not yet done
that with college. By expanding education,
we know that individuals who get more educated will
have large returns in income. We would be wealthier. And they provide more
competition for the elites, and that would tend to
reduce inequality as well. [MUSIC PLAYING]

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