The Race between Education and Technology

• Publisher:   Belknap Press of Harvard University Press
• Number Of Pages:   496
• Publication Date:   2008-06-30
• ISBN-10 / ASIN:   0674028678
• ISBN-13 / EAN:   9780674028678

This book provides a careful historical analysis of the co-evolution of educational attainment and the wage structure in the United States through the twentieth century. The authors propose that the twentieth century was not only the American Century but also the Human Capital Century. That is, the American educational system is what made America the richest nation in the world. Its educational system had always been less elite than that of most European nations. By 1900 the U.S. had begun to educate its masses at the secondary level, not just in the primary schools that had remarkable success in the nineteenth century.

The book argues that technological change, education, and inequality have been involved in a kind of race. During the first eight decades of the twentieth century, the increase of educated workers was higher than the demand for them. This had the effect of boosting income for most people and lowering inequality. However, the reverse has been true since about 1980. This educational slow-down was accompanied by rising inequality. The authors discuss the complex reasons for this, and what might be done to ameliorate it.

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 a long term drag on economic attainment and causing economic inequality. Their prescription is to take steps to improve mass education. While detailed policy prescriptions are not the focus of this book, their recommendations are sensible. They advocate increased investment in early childhood education, particularly for poorer people, increased investment in K-12 education to improve graduation rates and college preparation, and making college education more accessible. All of this will cost considerable money, but appears to be justified well by this analysis.

Three stars? This book is undervalued by the current amazon reviews. In my opinion, a majority of books about education are downright bad. Of those that are good, many are not uniquely good - you can find the same information in other popular books on education. This book is good and unique. This book is excellent on the links between education, productivity, and income inequality over the last century. It makes the case that increasing human capital through education is a very important goal - the claim is not original but the way they argue it is. The policy recommendations are less well backed up. Google for an excellent commentary written by Arnold Kling & John Merrifield, entitled "Goldin and Katz and Educational Policy Failures in Historical Perspective."

I am puzzled by this book and its evaluation by the friends and colleagues of the two Harvard economist authors. I approached it with high expectations but upon examination sadly concluded that although it has much useful data, its central thesis is flawed. Sitting on my side of the table with that judgment is just me,
a non-economist (but with a lifelong career in finance). Sitting across the table confronting me are Lawrence Summers, William Bowen, Nicholas Kristof, Alan Krueger and many others, all of whom have warmly praised the book in blurbs. Indeed, Professor Krueger went so far as to say "This book represents the best of what economics has to offer..." I admire and respect each of these individuals very much. How then to square their uniformly high opinions of the book with my own? Either I am way off base (I think not) or they are all wrong (hard to believe)....or, it's just the recipe for how some books are sold these days. First you take a very prestigious university name, then take one or two professors from a major department, take one of their favorite theses dealing with a current popular policy issue, don't do too much if any independent verification of how solid the thesis is, then have the authors approach present and past luminaries from the same institution for blurbs, plus approach colleagues in sister departments in other prestigious institutions for similar blurbs, then get the press of the prestigious university to publish the book, put a high price tag on it with the prestigious university's name prominently all over it, and then get good friends and colleagues elsewhere in the profession to write positive reviews to go with the blurbs in unspoken return for -- mutatis mutandis -- doing the same thing for them later. In terms of an intellectual onslaught this puts the individual intelligent lay reader and reviewer in somewhat the same position as the "Unknown Rebel" standing in front of the column of advancing Chinese tanks in that iconic photograph taken in Tiananmen Square on June 5, 1989. On anything dealing with the subject of economics who intentionally wants to stand in front of an advancing Lawrence Summers? Or before Alan Krueger when he declares "This book represents the best of what economics has to offer"? Well, filled with trepidation this sole reader will stand his intellectual ground and respond to Professor Krueger by saying
"It would be sad to think so". In this book the Emperor truly wears no clothes. And beyond that, without his clothes we can easily see that the Emperor also has scoliosis.
Kenneth E. MacWilliams
Portland, Maine

This book's thesis is based upon overly simplified and therefore misleading educational and economic concepts and definitions. For instance, the authors' definition of "educational attainment", a critical measure supporting the authors' central argument, is simply the rate of growth in the number of years of schooling experienced by successive "cohorts" (people with the same birth years) throughout the past century. Declining "educational attainment" (which might be expected when a measure has an upper limit) is then correlated with wages. To establish their argument, the authors present this correlation as if it were causal. Another consideration is that the authors' supply and demand analysis (a declining rate of "educational attainment" has reduced the supply of valuable human capital and has thereby driven up the cost of that supply, resulting in vast wage disparity) is insupportable for reasons stated convincingly by other reviewers, and because wages are not currently determined by free market forces. The authors rely on the above as they argue (repeatedly) that a failing American public education system (as they have defined it, most deceptively in my opinion) is to blame for the growing disparity of wealth between the rich and everyone else in this country. I am certainly no fan of the wage and wealth disparity we see in the U.S. today, the myopic greed of the hyper-rich, the dehumanizing struggles of the poor, and the disappearance of the middle class. Unfortunately, the authors' argument is unconvincing and feels manipulative and ideological. For me, the authors lose all credibility by not acknowledging the limitations of their own research methodology and analysis. There is plenty of good educational research out there--interesting, informative, and important--I would suggest you keep shopping.

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 and their subsequent ratio, whereas, in this example, the expansion of skilled workers could have such an effect. To assume they are wholly substitutable seems to be a stretch. Similarly, the book overlooks both productivity issues and hours worked in analyzing the supply of labor. We know the most productive workers are now working longer hours than the rest of the working population. And it's hard to believe that the information age hasn't, to a very large extent, affected the productivity of the most productive workers. This would suggest that their supply has expanded far more than their headcount. If that's true, then if supply has expanded and wages have expanded, exogenous technological breakthroughs are likely driving up wages and not merely reduced relative headcount as the book argues. Piecing these together, it seems easy to imagine significant changes in the relative productivity and resulting supply of skilled vs. unskilled labor, along with differing marginal product of labor, highly circumstantial substitutability, and varying rates of exogenous technological changes all significantly affecting these ratios in ways not considered by this analysis. Perhaps the authors' argument is better stated this way: if one assumes that the rate of technological change is constant, and that relative productivity changes between skilled and unskilled are similar (although the book argues that in the past that was not the case), and that substitutability is generally high, then relative headcount should drive relative wages; because it appears to be highly correlated, these assumptions are likely to be true. That's a pretty big leap of faith. And, if the authors are correct that it is merely a matter of relative supply, it's not at all clear to me why diminished relative supply of skilled workers has led to an increase in the percentage of overall income paid to skilled workers, as has been the case. Apparently there was previously far more of them than was optimal! I find that hard to believe and apparently so too the authors. And the recent 10 to 15 year growth in output per US worker relative to Europe and Japan, despite unfavorable demographic shifts in the US workforce (toward less educated Hispanic immigrants), seems greatly at odds with the book's analysis. Lastly, the book is very weak on recommendations and in many cases what recommendations it does offer, a steeper income tax for example, hardly stem from the 300 pages of analysis that comes before. In another example, it suggests that testing is bad because it may increase drop out rates. But, I sit on the board of a charter school that today has outstanding test scores where previous testing and low scores put enormous pressure on the school to make positive changes, changes that were made because of the demand for higher scores. Again, there is little in the analysis to warrant their suggestion that more forgiving testing would be a net positive. I find the simplistic solutions largely unsupported by their analysis to be disappointing.

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