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America's biggest issue: the skills gap

Why did the United States become the leading economic power of the 20th century? The best short answer is that a ferocious belief that people have the power to transform their own lives gave Americans an unparalleled commitment to education, hard work and economic freedom.

Between 1870 and 1950, the average American's level of education rose by 0.8 years per decade. In 1890, the average adult had completed about 8 years of schooling. By 1900, the average American had 8.8 years. By 1910, it was 9.6 years; by 1960, nearly 14 years.

As Claudia Goldin and Lawrence Katz describe in their book, “The Race Between Education and Technology,” America's educational progress was amazingly steady over those decades, and the U.S. opened up a gigantic global lead. In 1950, no European country enrolled 30 percent of its older teens in full-time secondary school. In the U.S., 70 percent of older teens were in school.

America lost its edge

America's edge boosted productivity and growth. But the happy era ended around 1970 when America's educational progress slowed to a crawl. Between 1975 and 1990, educational attainments stagnated completely. Now many nations are surging ahead in school attainment.

This threatens the country's long-term prospects. It also widens the gap between rich and poor. Goldin and Katz describe a race between technology and education. The pace of technological change has been surprisingly steady. In periods when educational progress outpaces this change, inequality narrows. The market is flooded with skilled workers and so their wages rise modestly. In periods, like the current one, when educational progress lags behind technological change, inequality widens. The relatively few skilled workers command higher prices; the many unskilled ones have little bargaining power.

The meticulous research of Goldin and Katz is complemented by another report from James Heckman of the University of Chicago. Using his own research, he concludes that U.S. high school graduation rates peaked in the late '60s, at about 80 percent. Since then they have declined.

In “Schools, Skills and Synapses,” Heckman probes the sources of that decline. He directs attention at family environments, which have deteriorated over the past 40 years.

Heckman points out that big gaps in educational attainment are present at age 5. Some children are bathed in an atmosphere that promotes human capital development and, increasingly, more are not. By 5, it is possible to predict, with depressing accuracy, who will complete high school and college and who won't.

IQ matters, but Heckman points to equally important traits that start and then build from those early years: motivation levels, emotional stability, self-control and sociability.

Don't blame globalization

There is a big debate under way over the sources of middle-class economic anxiety. Some populists focus on the destructive forces of globalization, outsourcing and predatory capitalism. But to Goldin, Katz and Heckman, it's not these forces that widen inequality. It's the skills gap. Boosting educational attainment at the bottom is more promising than trying to reorganize the global economy.

Both sides of this debate exist within the Democratic Party. The GOP is largely irrelevant. If you look at Barack Obama's education proposals — especially his emphasis on early childhood — you see they flow naturally and persuasively from this research. (It probably helps that Obama and Heckman are nearly neighbors in Chicago). McCain's policies seem largely oblivious to these findings.

America rose because it got more out of its own people than other nations. That stopped in 1970. This problem, more than any other, will shape the destiny of the nation.

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