Which school do you want to support?
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?
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.
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.
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 growing concentration of wealth is pronounced in America, but less evident or absent in other economies. (See page 8 in the World Inequality Report for a comparison to Western Europe.)
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 next lesson examines the terrible cost of failing to educate students.
Search all lesson and blog content here.
Not a member? Join now.
or via email
Already Joined Ed100? Sign In.
or via email