A Distraction From Schools’ Real Needs

by Richard Rothstein

It’s become an article of faith that the 21st century economy makes our schools obsolete. Global competition, it is said, requires all students to graduate from high school prepared for academic college or technical training. Falling middle-class living standards and the outsourcing of good jobs prove that radical reform of public schools is urgent.

These beliefs have been popularized by Thomas Friedman’s book, The World Is Flat, and cited by reports (like last year’s “Tough Choices” by the National Center on Education and the Economy), by big foundations (Gates, for example) and by education groups (such as ACT or the Alliance for Excellent Education).

But the gloomy analysis is wrong. Of course we should improve schools and help more disadvantaged students graduate from good high schools. But enhancing opportunity requires more than school improvement because the biggest threats come from social and economic policy failures, not schools.

Dominant Policies
Since the mid-1990s, American workforce productivity has accelerated at a remarkable clip, rising faster than in any other industrialized nation. This productivity renaissance relied upon the very work force whose skills are denounced by school critics.

Adequate workforce skills can spur productivity growth that, in turn, increases national wealth, but skills cannot determine how that wealth is distributed. This is determined by policies over which schools have no influence. Tax, regulatory, trade, monetary, technology, anti-discrimination and labor market policies influence the pay of skilled and less-skilled workers alike. Continued upgrading of skills is essential for continued growth and for closing racial income gaps, but economic success also requires ensuring new wealth from productivity gains is passed on to employees.

Living standards are threatened, not because workers lack competitive skills but because the richest among us have commandeered the fruits of productivity growth, denying fair shares to middle-class workers educated in American schools who have boosted national wealth. From 2001 to 2005, wages of high school- and college-educated workers stagnated while productivity grew by an extraordinary 11.5 percent.

We’re all aware of growing returns to education — the ratio of college to high school graduates’ wages — and too quickly conclude this indicates a shortage of college graduates and surplus of those with only high school. But the ratio can grow not only because the numerator (wages of college graduates) gets bigger but also because the denominator (wages of those with high school degrees) shrinks.

In fact, falling real wages of high school grads has played a big part in boosting returns to education. Important factors have been a decline in the inflation-adjusted value of the minimum wage and the withering bargaining power of unions, which historically has boosted pay of high school-educated workers.

We raised the minimum wage this summer. The curious statistical result will be a decline in returns to education. We should not conclude from this that we need fewer college graduates, any more than we should have concluded from rising returns that college graduates are scarce and schools are failures.

It is cynical to tell millions of Americans who work (and will continue to be needed) in low-level administrative jobs or in janitorial, food service, hospitality, transportation and retail industries that their wages have stagnated because their educations are inadequate for international competition. The quality of our civic, cultural, community and family lives demands school improvement, but the failure of a recent congressional effort to remove barriers to unionization has more to do with low wages than the quality of education.

An Impossible Offset
Over the last few decades, wages of college graduates overall have increased, but some — managers, executives, white-collar sales workers — have commandeered disproportionate shares of national productivity gains, with little left over for scientists, engineers, teachers, programmers and others with high levels of skill. No amount of school reform can undo tax, regulatory and labor market policies that redirect wealth generated by skilled workers to profits and executive bonuses.

Escalating health care costs also reduce living stand-ards. Better schools can’t undo the waste of worker productivity in administrative duplication, marketing and pharmaceutical profiteering.

Certainly many firms employing college- and high school-educated workers will find themselves in tougher competition with firms paying low wages overseas. Even if American workforce productivity accelerated further, our graduates’ skill levels could never offset the enormous pay gaps. Although it is an exaggeration to suggest all workers will be subject to such competition (technicians in India may read our X-rays, but domestic pediatricians will continue to see our babies), we do face serious economic challenges. Beating up on schools distracts us from developing the social and economic policies to help Americans thrive while they compete.

Richard Rothstein is a research associate with the Economic Policy Institute in Washington, D.C. E-mail: riroth@epi.org. Lawrence Mishel, president of the institute, contributed to this column.