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"The Race Between Education and Technology" toc by Claudia Goldin

[[image:Goldin.jpg width="130" height="154" link="@http://www.economics.harvard.edu/faculty/goldin"]]
& Lawrence F. Katz //**As a group, we initially expected “The Race Between Education and Technology” to be a book that discussed integrating technology into the classroom. Unfortunately, the book was not what we expected. If you enjoy economics courses and enjoy reading about the history of education in terms of supply and demand, this 353 page book is for you! However, if you do not enjoy economic-intense reading, we suggest you view our Prezi below to get an idea of the big issues the book presented. For a more in-depth look at these issues, feel free to view our summaries of each section of the book in the area beneath the Prezi.**//

A Quick Glance
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Economic Growth and Distribution
The Twentieth Century could be considered the “Human Capital Century” or even the “American Century.” Americans were recognizing the value in human capital, which is considered a “broad class of inputs such as education, on-the-job training, and health” (Goldin & Katz, 2008). The American Century represents an era where education was recognized as a powerful contributor to the work force, making the labor force more efficient, innovative, and able to embrace the changes brought by technology. Particularly during the first three-quarters of the century, “educational attainment advanced by 6.2 years or 0.82 years per decade” (Goldin & Katz, 2008). Although the 15-year period from 1975 to 1990 showed a slower increase in educational attainment, it was evident that America was placing value in education. In particular, high school education was contributing to some of the largest gains in educational attainment in U.S. history.

America’s choice for education was unique at the beginning of the Twentieth Century. “According to a careful analysis of data from 18 European nations in the 1950s, none enrolled more than 30 percent of older teen youth in full-time academic secondary schools and most were below the 20 percent mark” (Goldin & Katz, 2008). Meanwhile, even at the beginning of the Twentieth Century, education was publicly provided and funded free, aside from the highest schooling levels. Even rural areas had the option of sending their child to a free public secondary school, with the exception of some African Americans being excluded from various levels of schooling (particularly in the South). While the European countries were not exceeding 40 percent enrollment, America had more than 70 percent of its teen youth in secondary schools during 1950. America’s human capital through education was allowing for innovation and technological advancement as highly educated workers entered the workforce.

At the same time, educational attainment and a growing human capital resulted in inequality in the Twentieth Century. The economic growth had two “phases” in regards to inequality. As educational attainment grew during the first three-quarters of the century, inequality actually greatly diminished and lowered returns to education. The economic growth was shared amongst the various income distributions. However, from the 1970s and on, there has been an “exploding wage inequality” as the upper end of the income distribution is greatly away from the other educational levels. Returns to education, particularly college, have increased. Meanwhile, almost no growth has occurred for the lower income labor force. “The degree of inequality resulting from these trends is one that the United States has not seen since before the 1940s and has left the country with the most unequal income and wage distributions of any high-income nation” (Goldin & Katz, 2008). One of the leading factors from this sharp rise in wage differentials comes directly from the increased relative demand for highly educated and more-skilled workers arising from skill-biased technological changes.

While technology was a changing element in the Human Capital Century, it is argued that technology changes are not, it itself, the reason inequality increased during the second half of the Twentieth Century. “Great technological advances in recent decades have increased the relative demand for skill; but, surprising as it may seem, the early part of the Twentieth Century also experienced great advances that increased the relative demand for skill, possibly to an equal degree” (Goldin & Katz, 2008). In particular, for the early Twentieth Century there was a focus on increased demand for high school educated workers, whereas for the more recent period, there is a different demand for college-educated workers. The U.S. manufacturing sector in the early Twentieth Century required more advanced and capital-intensive technologies. This was associated with increased relative demand for occupations with higher educational requirements, whereas now computers have changed the skill-biased technological demand. Regardless, the complexity of inequality does not solely rest upon the demand side. The supply side, determined by American educational attainment, plays a large role on the current economic growth.

Education for the Masses in Three Transformations
“The key features of US educational institutions are public funding, public provisions, separation of church and state, a decentralized system of fiscally independent districts, open access with a forgiving system, and gender neutrality” (Goldin & Katz, 2008). These virtues promised equal opportunity and a common education for all US children. They suggest that a student could often advance to higher grades and institutions even if he or she failed to perform adequately in a lower grade. There were an equal amount of boys and girls in school; however African American children were educated in segregated schools throughout the South.

At the start of the US nation, school funding came from state funds, rate bills (tuition), and local taxes. Later, rate bills were eliminated and only the wealthy sent their children to academies, private schools, or boarding schools. In the mid-nineteenth century, large cities established free public high schools but most rural communities, particularly the South, could not support a public high school because they were agricultural regions and sparsely settled. But by 1900, real estate taxation was the most effective means of funding education and the federal government had minimal involvement in primary and secondary education. In 1920, the demand for more educated workers increased which lead to more high schools being built. These taught both academic and vocational subjects which made students more marketable in the job force. These courses were offered to make secondary education more appealing to students who were dropping out of school at age 14. Compulsory and continuation school laws were brought into effect to compel students to stay in school instead of joining the work force early. This prepared the nation for the expansion and growth of public high schools.

As mentioned, the purpose for secondary schooling in the early 1900s was a way to train young men and women for an occupations and life, not necessarily college. Smaller towns had higher school enrollment rates than bigger cities because of the immediate job opportunities presented by the urban industries. As the high school movement proceeded, graduation rates for girls exceeded the graduation rates for boys across the country. Until college became a mass form of education, when the graduation rates from secondary school increased, the amount of students continuing to college decreased. High school enrollment rates soared in the mid-1900s, but “the supply of quality teachers was extremely elastic and the large increase in demand for teachers did not lead to a decrease in the quality of teaching personnel at the secondary school level” (Goldin & Katz, 2008).

For most men and women born in the early Twentieth Century, college was not something that was tended as a necessary means of survival. However, after the end of World War II and the passing of the GI Bill by FDR, the attendance and graduation from college rates began to skyrocket. Once the Korean and subsequent Vietnam War came about, male attendance and graduation rates began to drop again and America saw a transition of more females attending and graduating college. "Rather than lagging behind men in college-going and graduation, women became the majority of college students in 1980. The trend has continued so that at the beginning of the twenty-first century women were 56 percent of all undergraduates" (Goldin & Katz, 2008). In early parts of the Twentieth Century, private universities and colleges ruled the higher education system, but as time went on, public universities were able to increase their vastness in size to become the majority for higher educated Americans. State financial support increased for the public sector, where most of these states were the Midwest and farther westward, which leads to the sheer disparity in continued dominance by private institutions in the East, while public institutions dominate most of the rest of the country.

As more Americans began attending college, a change began to happen to the structure of American colleges and universities; increasing the need for research and scientific discovery with the changes in American technology. The application of science to industry, growing scientific methods, and the increasing immergence of social issues, forced American higher education to specialize in departments to further the specific understanding of these new technologies. "But the modern university is far more than a collection of higher education services brought together under one roof. It is a production center in which the research of one part enhances the teaching and research of the other parts" (Goldin & Katz, 2008). It is with this in mind that 17 of the top 20 universities are in America and since 1955, nearly half of all Nobel prizes have been won by Americans and nearly 70 percent of college-going foreigners come to study in the U.S. Even though the start of the Twentieth Century was molded by a strong change to increase high school education, it was the push at the end of the Twentieth that college became the mass institution for higher education that has molded the current educational system.

The Race
Early in the Twentieth Century, around 1915, the wage premium for both college and a high school education had an extremely high economic rate of return. However, the wage structure began to collapse around 1920 until about 1950, where the more college educated Americans saw their earnings reduce at about the same rate as less educated Americans. Even with the decline in wages, the rate of return on education was still high enough that even though the wage structure fell apart, the return of education was still a good investment. "Yet America remained the 'best poor man's country' because it had a considerably higher average income than did other nations, as well as an open educational system and more equality of opportunity than existed in Europe" (Goldin & Katz, 2008). As each generation continued to become more educated than the previous one, America saw its wage structure climb substantially as the economy and labor production grew until 1973. This wage structure primarily soared for college graduates, and although high school graduates wages increase, it was not nearly at the level of college graduates, as their education was no longer being highly valued. After a brief lull in the 1980s, college graduate wage premiums rose back to levels of return that they enjoyed in 1915. Although the wage premium for high school graduates rose as well, it only recovered to half the level is was at in 1915, creating an enormous inequality gap between the wage premiums for college and high school graduates.

The reasoning behind this drastic change in inequality has been attributed to a few factors, primarily the supply and demand of workers, as well as immigration. The first half of the Twentieth Century saw a continual increase in the supply of both college and high school educated works. The demand for highly skilled technical workers with college educations were not at a great premium and with the push for the importance of a high school education, the market was flooded with a supply of these educations were not in high demand. However, after the changes in technology brought upon by World War II and the subsequent future advances, the market was once again high in demand for high skilled technical workers. The difference remains in the return to the highest levels of returns for college educated workers and the limited gain of high school educated workers. Early in the Twentieth Century, a high school diploma was seen as a high achievement, very closely related to that of a college diploma. "But today's high school graduates and dropouts are perceived by employers as being close substitutes" (Goldin & Katz, 2008). As high school diplomas used to carry the ideal of receiving high training in the field and excellence in understanding of material, that shift has now found itself to be that of a college diploma, leaving a high school education to be seen as more of a formality, whether it is completed or not. Some Americans contest that the increase of immigration in the past 30 years has affected this lower educated market, flooding it with a supply of high school and non-high school educated workers. In a critical time from 1980 to the present, college wage premiums have jumped almost 25 percent, of which some argue that the supply of lower educated workers is so great that is has pushed these wages back up, while only a 10 percent increase in high school educated wages. "Most of the increase was due, instead, to the slowdown in college-going among the native-born population. In fact, educational changes among the native-born population were nine times more important than was immigration in explaining the rise in the college wage premium" (Goldin & Katz, 2008). As less workers are striving to become college educated, they are creating a gap in the supply and demand continuum, which will only continue to be widened as the need for highly skilled workers in the growing field of technological advances continues to increase.

Even with this wage premium increase and historic prominence in education, the current state of American education is somewhat on a downslide. In 1970, high school graduation rates in the U.S. were at their peak, but after this there was a steady decline in the graduation rates of high school students in America. In fact, the U.S. high school graduation rate plummeted to its lowest standing in the past 50 years in 1995. "While high school graduation rates had seriously stagnated in America they took off in Europe and in other parts of the world" (Goldin & Katz, 2008). As America struggled, the rest of the world began to climb and succeed, evident by the fact that currently 18 of the 26 current Organization for Economic Cooperation and Development (OECD) countries have higher high school graduation rates than the U.S. The struggle has not stopped there; even though the U.S. has had gains in the number of students attending college, college completion rates have not kept pace and the growth of students attending college has slowed considerably. "As the //quantity// of education became more equal across nations, the //quality// of U.S. K-12 education became subject to greater scrutiny" (Goldin & Katz, 2008). Students in the U.S. were being seen as less prepared for a college education, as they continually scored lower on international assessments against other OECD countries.

There has been great debate on why this has happened to American education, as well as what can be done to fix it. Some argue that the increased dependence on a General Education Development equivalency degree (GED) has dealt a great blow to the value of a high school education. Although the GED was originally created to help soldiers returning from World War II obtain a diploma, many students saw it as an alternative and conversely to high school graduation rates, 1995 saw the highest percentage of graduates obtain their GED. However, many students who leave high school never take advantage of this opportunity, continuing to increase the supply of low skilled workers. Some argue that immigration primarily that of Hispanics, is also the culprit here in lowering American high school graduation. Although immigration has produced a greater number of non-high school graduated teenagers and adults, they still have seen a slight growth in their graduation rates from 1970 to 2000 by 2.2 percentage points. "Therefore, even if the composition of the population had remained constant, the high school graduation rate would have increased only modestly in recent decades" (Goldin & Katz, 2008). In fact, some worried that the real issue is that Americans did not see the benefits of graduating high school and then graduating from college. The years of schooling by Americans progressed only 0.8 years from 1980-2005, the smallest in any measure of 25 year increments since 1930. The real issue was that less Americans were attending school to prepare them for the technology of the future. One issue is that less and less students were being prepared for college in their K-12 experience. "The growth of resources in many states has not kept pace with the increased disadvantages of many students" (Goldin & Katz, 2008). America once thrived by having a decentralized education system, allowing states and the districts inside them to manage students' education, but it now has become one of the problems, as they are not preparing students both before they enter high school, as well as when they exit. The other issue is that more and more students do not have the financial access to higher education. More students who can even make it to college are spending more time trying to stay there by working more, leaving less time available for studying and focus on their education. America has always been a forgiving educational system, which now seems to be part of the problem in advancing students to a higher education. There continues to be an increase in demand for higher technological degrees in areas such as finance, nanotechnology, cellular biology, and many more. If education continues to slow and technology continues to increase, then America will continue to see the inequality in its work force divide, as well as the success of Americans in comparison to other OECD countries. Globalization has created a new problem for American education and unless preparation through the K-12 system is improved and there are better financial means of obtaining a college education, America will continue to fall from its once virtuous stance on education, producing continued inequalities in the educational and economic status of its citizens.

Statistics
> while the other 500 are public. > Today, public institutuion tuition makes up 10% of median family income. Private institution tuition makes up 45%. > In 2003, 52% of 18-22 year old college students were employed, working an average of 24 hours per week.
 * Educational attainment during the twentieth century expanded by 5.27 years for those born in the United State from 1895 to 1975.
 * Advances in education across the Twentieth Century account for almost 15 percent of the labor productivity change.
 * Across the 90-year period from 1915 through 2005, increases in educational attainment boosted worker efficiency by 0.48% per year.
 * Less than 10 percent of youths had high school diplomas in 1920, but by the mid-1920s 30 percent to 50 percent did, depending on the region. The increase in formal education expanded the supply of skilled manufacturing workers and altered their training.
 * From 1910 to 1940, the fraction of youths enrolled in public and private US secondary schools increased from 18 to 71 percent.
 * In the same time frame, the fraction of youths enrolled in private high schools decreased from 16 to 6.5 percent. Some of the decline was due to the impact of the Great Depression.
 * By 1934, the average number of academic courses taken each year per student was only about 3.
 * After the high school movement began, 48% of all US cities with populations greater than 25,000 had at least one junior high school and in 1927, 69 percent did.
 * 10% of all males and females born in 1900 attended college. Approximately 5% of all males and females born in 1900 graduated college.
 * 60% of all males and 65% of all females born in 1975 attended college. 30% of all males and 35% of all females born in 1975 graduated college.
 * There are currently about 1,400 four-year institutions in America that award a bachelor's degree. About 900 are privately controlled,
 * There are currently more than 1,500 two-year institutions in America that award an associate's degree.
 * In the early 1990s, the median number of students were as follows: 1,579 for private - 8,181 for public.
 * 24 of the 25 largest bachelor of arts degree granting institutions are publicly controlled.
 * In 1900, public institutions made up 22% of all four-year students. Today, they make up about 65%.
 * In 1950, public institution tuition made up 4% of median family income. Private institution tuition made up 20%.
 * The relative supply of college educated workers expanded 3.89 percent per year from 1960 to 1980. It expanded only 2.27 percent per year from 1980 to 2005.
 * The relative supply of high school graduates increased by 5.61 percent per year from 1960 to 1980. It expanded only 2.49 percent per year from 1980 to 2005.
 * In 1970, 78% of students graduated high school. In 1995, 68% of students graduated high school. In 2004, 74% of students graduated high school.
 * In 1961, GEDs accounted for 4% of all diplomas. In 1995, they accounted for 16%. It currently makes up around 10% of all diplomas.
 * In 1970, 38% of 18-22 year old college students were employed, working an average of 21 hours per week.