This Tyler Cowen blog entry references a provocative study (gated) suggesting that there is a falling return on cognitive skill – which is a pretty scary proposition.
I tend to subscribe to a couple of Tyler’s comments:
1) Rather than accepting “falling returns to skill,” I would sooner say that education doesn’t measure true skill as well as it used to.
2) Many people get the degree, yet without learning the skills they need for the modern workplace (at least partially explaining a growing polarization in returns)
3) Too many discussions of the returns to education focus on the mean or median and neglect the variance and what is likely a recent increase in that variance.
A related thought is that our society needs an increased focus on the effective utilization (on whatever scale) of our human capital. Perhaps the current trend to entrepreneurship and lean startups (of all denomination) can help, but the jury is definitely still out. In the interim we are setting unrealistic expectations for much of our society.
Here’s a summary from the gated link page:
“””””What explains the current low rate of employment in the US? While there has been substantial debate over this question in recent years, we believe that considerable added insight can be derived by focusing on changes in the labor market at the turn of the century. In particular, we argue that in about the year 2000, the demand for skill (or, more specifically, for cognitive tasks often associated with high educational skill) underwent a reversal.
Many researchers have documented a strong, ongoing increase in the demand for skills in the decades leading up to 2000. In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow. We go on to show that, in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers.
This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together.
In order to understand these patterns, we offer a simple extension to the standard skill biased technical change model that views cognitive tasks as a stock rather than a flow. We show how such a model can explain the trends in the data that we present, and offers a novel interpretation of the current employment situation in the US.””””