Are We Smart Enough to Take Advantage of our Economic Opportunities?

This post is the first one of a Growthology series on Human Capital and the Economy, by Christopher Laubenthal. The first two posts will explore these ideas and the third will provide commentary.

Is it possible that American human capital is out of sync with current economic opportunities?

By human capital I mean all of the commercially valuable skills of people within this country. The phrase “commercially valuable” is an important one as it filters out the skills not directly applicable to the economy. For example, from a commercial perspective, playing the piano only has value if there are orchestras to purchase that skill. If orchestras stopped purchasing that skill, the piano skill part of our human capital would be out of sync with the economy.

The level of sync between skill and economy seems to be a collective theme in a current spate of books on human capital:

Each of these six books, predictably, has a different focus, voice, and conclusion. However, each of these books seem to agree on three major points:

  1. Our economy is now innovation based. We began the transition from manufacturing to innovation and asset-light corporations in the late seventies. Globalization made this transition a fast one.[1]
  2. Technology, specifically mechanized A.I., will become more advanced, requiring a set of skills and abilities not widely found in our society.
  3. The additional requirement of advanced skills and abilities will hollow out most middle skill jobs, leaving mostly high skill and low skill jobs.

If you agree with these points, then it is not a stretch to say that our human capital is out of sync with the economy. Such a status could cause some undesirable situations. Mainly, what happens to those current and would-be middle-skill workers who are being hollowed out? In short, it all depends on education.[2] Lucky for us, these books outline a number of suggested changes on this exact topic.

Medium-term solutions focus on our post-secondary education system. Making in America and The New Geography of Jobs see colleges and community colleges as drivers in the economy. On a regional scale, Making in America’s solution is to work with industry to establish professional training hubs at community colleges. These hubs would be able to meet more closely the immediate needs of businesses through the use of new curriculum, apprenticeships, and new industry labs. The idea is that the middle-skill jobs won’t all vanish immediately and that hubs like these could provide an excellent transition.

On a national scale, The New Geography of Jobs sees university research and increased college attendance as the best and most stable investments a government or business group can make. The book argues that the rate of return on a college degree is twice that of a bond or security. Here, the idea is to continue to spur innovation through university research and increase the number of people who have higher-level skills through expanded college attendance.

The next part of this blog series will cover some of the long-term human capital solutions to this problem.

[1] Innovation-based means moving away from tasks that can be automated into tasks associated with the development of new ideas, “soft” skills, and computing. From page 40 of Making in America, “…the downward pressure on manufacturing employment would come from technologies requiring people with the skills to deal with sophisticated software and equipment as well as aptitude for dealing with people…” Average is Over also hits on this on page 20 with a 2011 quote from the US Air force Chief of Staff, “Our number 1 manning problem [sic] is manning our unmanned platforms.” If innovation is calling for higher level skills, then globalization accelerates it by making mid-skill jobs in manufacturing more affordable outside of the U.S.

[2] Please note that none of the solutions to this issue are immediate. This is the natural obstacle to education and training — it takes time. For example, hypothetically, if you were to completely rewrite the high school curriculum it would still take years to train, implement, assess, and measure the effects of the change in curriculum. Human capital is not for the faint of heart.

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