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Lesson 1.3

Economic Context:
Schools for Knowledge Work

Do you know what is America’s most valuable resource?

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Not so long ago, the bulk of the wealth of the world was made up of tangible stuff. Iron. Oil. Gold. As recently as the movie The Graduate, the future was plastic. Today, the wealth of the world is harder to pin down, isn't it? Does catching Pokemons count as wealth?

Our wealth is our people

Nobel prize-winning economist Gary Becker took a special interest in the growing capacity of people to create value, even from nothing. He estimated that the value of America’s human capital exceeds the value of its tangible capital assets at least threefold. That is, the world's wealth isn't found in stuff, but in the knowledge, talent, and skills of people.

Today, most of America's wealth is intangible - the product of human knowledge and capacity. (Graph used with permission from Ocean Tomo) Today, most of America's wealth is intangible - the product of human knowledge and capacity. (Graph used with permission from Ocean Tomo)

This relatively recent shift can be quantified in the marketplace using the S&P 500 index, a measure of the market value of 500 large companies. In the mid-1970’s, more than 80% of the market value of the S&P 500 could be attributed to tangible assets. By 2005, the ratio had flipped – 80% of the value was intangible.

Creating intangible value is often called “knowledge work.” As this “knowledge work” shift occurred, the labor market responded strongly. The shift is happening everywhere.

Wealth is becoming more concentrated

Today, most of the lifting in construction and shipping is done by forklifts and cranes, which need but one skilled operator. Even newspaper delivery, once the very cliché of a first job, is being replaced by web delivery. Tasks that can be automated are progressively being automated, which places continual pressure on the job market for those with narrow skills. In the past, the jobs vulnerable to outsourcing were mostly associated with manufacturing — the economy of "stuff." But the internet has made knowledge work portable, too. Facing this competition, the jobs that can pay a middle-class wage increasingly require a high level of skill and some education beyond high school.

This competition has probably contributed to the long trend toward concentration of wealth. Economist Thomas Piketty, who has brought particular focus to this trend, assembled long-term data about income inequality in America. Since the 1980's, he shows, economic gains have concentrated in the "top 1%" of households. The share of the "bottom 50%" has steadily eroded.

The World is Flat: knowledge work is portable, too

Increasingly, when young people graduate from high school they need the same knowledge and skills to be career ready as they do to go to college. All over this flattening world, increasing numbers of people are getting the educational preparation they need to compete in a global market for jobs that pay well.

Only about a third of California residents over age 25 have earned a Bachelor’s degree or more.

The Public Policy Institute of California has estimated that by 2025, based on current trends for high school and college graduation, California will have way too many workers without a college degree and too few who have one. This change in the job market is driving an ever-growing wedge in the American dream. Only about a third of California residents over age 25 have earned a Bachelor’s degree or more. As the US has become a knowledge economy, the earning potential of educated workers has exploded, while that of less educated workers has stagnated.

The importance of "cut points"

A recurring theme of Ed100 is "be careful with statistics, especially when a cut-point is involved." A Bachelor's degree is one example of such a cut-point. Many students begin college but do not complete a four-year degree, for all kinds of reasons. Could it be they are getting the preparation they need to qualify for the jobs available in the market? In 2015, the Public Policy Institute of California examined the demand for students who complete "some college." The authors argue that the state of California is underproducing candidates for knowledge work at all levels, including for positions that can be filled without a completed degree. They forecast a shortage of 2.5 million educated workers by 2025.

The next lesson examines the terrible cost of failing to educate students.

Review

What fraction of California adults over 25 have earned a 4-year college degree?

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Questions & Comments

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user avatar
Meilani Hendrawidjaja May 8, 2017 at 12:42 pm
Does California have enough college capacity to educate our ever growing population?
user avatar
Meilani Hendrawidjaja May 8, 2017 at 12:40 pm
Only about a third of California residents over age 25 have earned a Bachelor’s degree or more. Is this due to cost? access to colleges? or just lack of interest from the kids?
user avatar
iemailjillian February 29, 2016 at 6:18 pm
My children will truly benefit from these lessons. Thank you
user avatar
hannahmacl March 15, 2015 at 12:42 pm
While the focus of this conversation is about attaining a college degree in the supposition that its knowledge-base is needed, it seems as though, in too many instances, it's often just a gate-keeper for many jobs that used to go to high school graduates. Also, as an increasing number of women graduate from college, the systemic social barriers (lack of available affordable or free child care, family leave, and social attitudes), are not being taken into consideration.
user avatar
digtrz March 5, 2015 at 1:24 pm
I agree that kids today need to learn about balance. A quality education is important to allow students to have choices for what they want to do in the future. College education will allow more opportunities for jobs in which they can be financially successful and live comfortably (we all have different levels of comfort), however there are other methods to obtain that same goal. Our school system needs to be able to provide the students the education they need to get where they want to go.
The school system needs to keep in focus that not all students want to, or have the financial capability to go to higher education levels. Guidelines that are more challenging for students that are not college bound, such as the A-G requirements for college entry, in order to graduate from high school could be detrimental and cause the student to give up.
user avatar
Jeff Camp - Founder March 5, 2015 at 2:01 pm
Thanks, Digtrz. I suspect you'll also be interested in lesson 6.2, which has more information about the availability of a-g courses in high schools.
user avatar
jenzteam February 27, 2015 at 6:35 am
I believe schools need to focus on teaching kids "balance" in life - work vs. family. Just because you make a lot of money doesn't mean you are guaranteed to be successful. We should shift our focus to being healthy and happy, not just what jobs pay the most. Kids should be encouraged to expand their skill sets so they have options, and then find a job that they enjoy doing every day.
College is about the experience and knowledge growth - it is not a guarantee that you will somehow become rich or successful. I have a ridiculous amount of education and debt and can't get a job that pays enough to make bills because of the economy and where I choose to live. Yet, we have so much more time together as a family.
There is nothing wrong with being middle class and creating your own unique ways of providing for your family, even if it means thinking and working outside of the corporate box.
user avatar
Emily RossBrown February 25, 2015 at 11:14 am
I wonder sometimes if we are not doing our children a dis-service by making them believe that a job that pays well is the be all and end all way to be fulfilled - education is vitally important, making a living wage is vitally important, but there are many, many more jobs out there that don't require vast amounts of time spent before a screen - as you say Sherry - grit and perseverance. There is no shame with getting your hands dirty by making something, coast line, forest, public gardens, city streets beautiful and places where people want to spend time.
To Dennis - yes, let's stop making excuses and raise the standards up instead of lowering them.
user avatar
Sherry Schnell January 22, 2015 at 9:16 am
Under the theory that you get what you measure, I think public schools should be preparing (and measuring) the number of students who have the academic and social skills (like grit and perseverance) to graduate from college, not just get into college.
user avatar
hetds June 14, 2015 at 10:08 pm
Agreed, but it seems many of our students are unwilling to go into debt via student loans, then graduate and join the ranks of the unemployed or underemployed.

One statistic reports that the average debt for a college graduate is $25,000.

And student debt can not be cancelled via bankruptcy.
user avatar
Jeff Camp - Founder June 21, 2015 at 12:38 am
Hi, Hetds -- The topic of college debt is explored in Lesson 9.6.
user avatar
dcima March 3, 2011 at 2:09 pm
Thank you for creating this forum...

Silicon Valley remains the global center of innovation because of the knowledge ecosystem that has evolved here. We are incredibly fortunate to have such a high level of “intangible value” in our region.

But Silicon Valley, like the rest of California and the nation, is not immune from budget crises and the lack of available talent. We know that the very technologies that have been invented here are “flattening” the world and, thus, we will continue to be in fierce competition with the rest of the globe for innovators and cutting edge companies.

To protect the knowledge work that is so vital to our economy and everyone’s prosperity, another intangible value will need to be brought forth: courage.

In education, in particular, we must muster the courage to:

* Collect and use data; to look honestly in the mirror about what is working; and to stick with things over the long term that do;
* Embrace what science tells us, particularly when it comes to investing in children ages 0-5;
* Give a little up front for a longer term gain and understand that quality is not found in the bargain aisle;
* Shed programs and people that do not demonstrate results or contribute to the core mission of educating students at all levels; and,
* Keep standards high and stop making excuses for a system that allows future innovators to drop out and vanish.

If we still want to put the “knowledge” into the world’s (and word) technology, it is vital that California and Silicon Valley have the courage to protect and foster its core.

Dennis Cima
Senior Vice President, Silicon Valley Leadership Group
www.svlg.org
©2003-2017 Jeff Camp
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