It’s become clear that the US has splintered by class; cultural, social and economic gaps are growing. Couples are increasingly formed between people of similar socioeconomic status (‘assortative mating’), economic and social inequality is increasing, and the political divide is stark, drawn along cultural, educational and class lines. I view the US as a clear and well-documented example of a phenomenon I think is happening across the Western world, including Australia . It seems that these trends are likely to worsen, and education will play a major part in ameliorating them.
The link between education, technological advance and income inequality is becoming clearer by the day. A major book in this literature, hailed by economist Tyler Cowen as “The most important book on modern U.S. inequality to date”, is The Race Between Education and Technology by Claudia Goldin and Lawrence Katz of Harvard University. Goldin and Katz argue that we are not increasing educational attainment fast enough to keep pace with the demand for skilled workers, leading to greater inequality. Those with elite skills can demand a premium in the labour market as they lack competition in getting top jobs, while a glut of unskilled workers has emerged, thereby reducing their returns relative to highly skilled workers. But, as they note, this wasn’t always the case.
In the first three quarters of the twentieth century, the supply of skilled workers was relatively strong, which reduced income inequality. Education was outpacing technology and the associated demand for skilled workers. The opposite has occurred in the last three decades, leading to greater returns for skilled workers and increasing inequality.
The implication is that we need to increase educational attainment to keep up with the increasingly sophisticated economy and the associated demand for highly skilled labour. However, I have a concern with this idea, derived from Charles Murray. Murray argues that many students are simply not equipped and motivated to do higher study to the level and rigour necessary for higher education (he thinks only 10-20% of high school students actually have the aptitude). Therefore, it follows that as the demand for high skilled workers grows, inequality will continue to increase; perhaps the economy is getting so sophisticated that the population simply isn’t capable enough in large enough numbers to participate at the top level. There is only so much we can squeeze from education.
One of the implications is that we should increase high-skilled immigration into countries with high demand for skilled workers (such as the US and Australia) as a means of supplying the economy with the workers it needs and thereby putting a lid on inequality. Australia seems to do this already, which is perhaps why inequality has only risen mildly in the last few decades (and wealth inequality has actually gone down since the 2008 financial crisis).
But perhaps more pertinently for education policy, we need to start considering a more appropriate education system, one where students are more engaged, learning useful stuff and gaining more experience to enable them to build relevant skills and useful networks. The current education system seems to have hit it’s limits with respect to supplying ample numbers of skilled workers. It’s time for an overhaul.