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Student Publications
Author: Hector Cruz-Echevarria
Title:
U.S. Economic Growth Based on Education
Area: Marketing
Country :
Profile:
Program: Doctorate in Business
Administration
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U.S. Economic Growth
ABSTRACT
The objective of this research is to
discover advanced studies related
with
the U.S. economic growth based on
education and knowledge with the
purpose
to determine a correlation between
education and economic growth. The
author
explains how the educational system
of the United Sates has been for
decades
a reflex in the nation's economy,
and how this effect contributes
positively to
the nation's economic growth and its
influences on the evolution process.
The
research demonstrates that knowledge
is the most important determinant in
a
society, and helps to prevent
socio-economics problems, impacting
direct and
positively the economic growth.
Consequently, an increase in the
U.S.
educational systems, means that this
factor will generate more jobs and
experienced professionals in the
industry, changing from a
traditional
economy-based to an educational
economy-based.
U.S. Economic Growth
INTRODUCTION
This study investigates the U.S.
economic growth using as a base the
educational system in correlation.
The author uses statistical data to
determine
the behavior of the US economic
growth. The main objective of this
investigation is examining the
activities of registered investment
companies to
determine how these implications
affect the U.S. economic growth. The
author
uses the knowledge capital as a base
in the US economic growth. He uses
statistical data to determine
correlation with GDP growth. The
research
demonstrates that the US economy
totally depends of the society
educational
level. His statistical data further
indicates that when the economy
grows, more
people would pursue graduate level
degrees, and more Master's and Ph.D.
U.S. Economic Growth
ACKNOWLEDGMENTS
It has been a great pleasure working
with the faculty, staff, and
students at the
Atlantic International University,
during my tenure as a doctoral
student. This
work would never have been possible
if it were not for the freedom I was
given
to pursue my own research interests.
First, I would like to thank God,
because
he was the one who give me support
and show to believe in myself to
achieve
this project. Thanks in large part
to the kindness and considerable
mentoring
provided and supporting advisory by
Maria Salaman Bayron, marketing
professor at University of Phoenix.
I would especially like to thank my
advisor, Dr. Franklin Valcin, for
his
generous time and commitment.
Throughout my doctoral work he
encouraged
me to develop independent studying
and research skills.
Finally, this dissertation is
dedicated to my greatest blessing,
my daughter
Pamela, the most innocent and loving
person I've ever known. She and my
others sons, Hector Jr., Luismi, and
Fernanda, they impart me the
commitment I have with the society
and with the business Industry. They
served as an instrument to achieve
my goals and show me to keep my eyes
on
the right direction, focus in my
career and my beliefs.
iv
U.S. Economic Growth
METHODS
Subjects: To conduct the
investigation the author used three
academic
libraries, three public libraries,
three business magazines, and three
peer
review articles.
Materials: A total of 24 online
articles were used to conduct the
research
process. The investigation is based
on electronics articles such as:
journals,
peer review articles, business
magazines, and academic libraries.
The materials
used in the investigation were texts
books, magazines, electronics
resources,
and a notebook computer with a
high-speed Internet connection.
Procedure: The research was
conducted to determine how the
educational
system impacts the U.S. economic
growth. The author uses as a
references
online publications, and academic
libraries. .
v
U.S. Economic Growth
TABLE OF CONTENTS
PAGE
ABSTRACT..........
....................................................................
ii
INTRODUCTION
.......................................................................
iii
ACKNOWLEDGMENTS
.............................................................
iv
METHODS.........
......................................................................
v
TABLE OF CONTENTS: (this
page).........
..................................
vi
LIST OF
FIGURES....................................................................
vii
LIST OF
TABLES......................................................................
viii
CHAPTER ONE: .........
...........................................................
1
CHAPTER TWO: .........
............................................................
23
CHAPTER THREE: .........
.......................................................
37
CHAPTER FOUR: .........
.........................................................
52
CHAPTER FIVE: .........
...........................................................
63
CONCLUSION...........
...............................................................
72
BIBLIOGRAPHY.........
..............................................................
74
CURRICULUM VITAE.........
......................................................
80
vi
U.S. Economic Growth
LIST OF TABLES
TABLE PAGE
1. Table 2.0 Percentage of
bachelor's degrees by women
.............. ......13
2. Table 2.1 Growth in gross
domestic product
..................................
.30
vii
U.S. Economic Growth
LIST OF FIGURES
FIGURE PAGE
1. Figure 4.1. Average net price,
grants, loans, and total price
....... ......6
2. Figure 4.5. Children's reading
and mathematics scale scores
........ .10
3. Figure 5.0. Percentage of public
high school
students.................... .19
4. Figure 5.1 Index of real output
per hours of all persons
.................. 24
5. Figure 5.2 Real GDP per worker in
G-7 nations
.............................. 30
6. Figure 5.3 Earnings for all wage
and salary
....................................
39
7. Figure 5.4 Estimated returns to
education among workers
............. 41
8. Figure 5.5 Median annual income
for full-time workers
.................. 42
9. Figure 5.6 Unemployment of adult
labor force participants
............. 54
10. Figure 5.7 Average proficiencies
of the unemployed
...................... 55
11. Figure 5.8 Mean weekly earnings
of full-time workers
.................. 56
12. Figure 5.9 Mean weekly earnings
of full-time employed
................ 58
13. Figure 6.0 Weekly earnings of
full-time black workers
.................. 59
14. Figure 6.1 Percentage of labor
force in each proficiency level
........ 60
15. Figure 6.2 Secondary school
completion, by age: 1992
................. 66
16. Figure 6.3 Completion of higher
education, by age: 1992
.............. 67
17. Figure 6.4 Completion of
postsecondary education
....................... 68
18. Figure 6.5 Mean mathematics
achievement of students
................ 70
19. Figure 6.6 Mean science
achievement of
students......................... 71
20. Figure 6.7 Mean reading
achievement of 14-year-old students
...... 71
viii
CHAPTER 1
EDUCATION ANALYSIS
U.S. Education Analysis
The 1990s brought rising tuition and
fees but also expanded and
restructured
financial aid programs to help
students pay for college. At the
federal level, the
1992 Reauthorization of the Higher
Education Act broadened eligibility
for
need-based aid, raised loan limits,
and made unsubsidized loans
available to
students regardless of need. States
and institutions increased their
grant aid
and put more emphasis on merit as a
criterion for awards. As a result,
the
overall picture of what and how
students pay for college has changed
substantially since the early 1990s.
This special analysis uses data from
the 198990 and 19992000
administrations of the National
Postsecondary Student Aid Study to
describe
some of these changes. It focuses on
students who were enrolled full time
and
were considered financially
dependent on their parents for
financial aid
purposes. All dollar amounts were
adjusted for inflation.
Between 1990 and 2000, the average
price of attending college (tuition
and fees
plus an allowance for living
expenses) increased at public 2-year
institutions
(from $7,300 to $8,500), at public
4-year institutions (from $10,000 to
$12,400), and at private
not-for-profit 4-year institutions
(from $19,400 to
$24,400) (figure 4.1).
1
U.S. Economic Growth
These higher prices, combined with
reduced expected family
contributions for
low- and middle-income students and
their families resulting from
restructuring of the aid programs,
meant that the average student was
eligible
for more need-based financial aid in
2000 than in 1990.
Reflecting this greater need, more
students received aid in 2000 than
in 1990
(71% vs. 54%), and the average aided
student received more aid ($8,700
vs.
$6,200). Financial aid increased for
all income groups and at all types
of
institutions.
Grant aid partly offset the price
increases, with the percentage of
students
receiving grants rising from 45 to
57 percent and the average amount
received
by students with grants increasing
from $4,200 to $5,400. However, the
average net price after taking rants
into account (i.e., price minus
grants)
increased at each type of
institution. In other words, the
growth in grant aid
was not enough to offset the price
increases.
The average net price after taking
grants into account increased for
all income
groups, except those in the lowest
income quarter attending public
2-year or
private for-profit less-than-4-year
institutions. Reflecting greater
need and
expanded eligibility for the
Stafford loan program, the
percentage of students
who borrowed increased from 30 to 45
percent. In 2000, about half of low-
income students and 35 percent of
high-income students borrowed to
help pay
for their education. In 1990, about
46 percent of low-income students
and 13
percent of high-income students
borrowed. Among those who took out
loans,
the average amount borrowed
increased from $3,900 to $6,100.
2
U.S. Economic Growth
After taking into account both
grants and loans, the average net
price of
attending increased for full-time
dependent undergraduates at public
2-year
institutions, remained stable for
those at public 4-year institutions,
and
declined for those at private
for-profit less-than-4-year
institutions. The
apparent decline at private
not-for-profit 4-year institutions
was not
statistically significant.
The average net price after grants
and loans declined for low-income
students,
except at public 2-year
institutions, and increased for
high-income students at
public 2- and 4-year institutions.
Participation in Education
As the U.S. population increases, so
does its enrollment at all levels of
education. At the elementary and
secondary levels, growth is due
largely to the
increase in the size of the
school-age population. At the
postsecondary level,
both population growth and
increasing enrollment rates help
explain rising
enrollments. Adult education is also
increasing due to demographic shifts
in
the age of the U.S. population and
increasing rates of enrollment, as
influenced
by changing employer requirements
for skills. As enrollments have
risen, the
cohorts of learners--of all
ages--have become more diverse than
ever before.
As enrollment of school-age children
is compulsory, growth in elementary
and
secondary schooling is primarily the
result of the increasing size of the
population. At the postsecondary
level, both population growth and
increasing
enrollment rates help explain rising
enrollments. Between 1970 and 2002,
for
3
U.S. Economic Growth
example, the enrollment rate of 20-
and 21-year-olds increased from 32
to 48
percent.
Thirty-five percent of public
elementary schools had
pre-kindergarten programs
in 200001, serving over 800,000
children. Schools in the Southeast
were more
likely to have pre-kindergarten
programs and full-day programs than
schools
in other regions of the country.
Public schools with large
enrollments (700 or
more students) and schools in
central cities were more likely than
other
schools to offer pre-kindergarten
classes.
Enrollment among 4- to 6-year-olds
in kindergarten increased from 3.2
million
in 1977 to 4 million in 1992 before
decreasing to 3.7 million in 2001.
During
this period, the proportion of
students enrolled in full-day
programs increased,
and by 1995, it was larger than the
proportion enrolled in half-day
programs.
Rising immigration and a 25 percent
increase in the number of annual
births
that began in the 1970s and peaked
in the mid-1970s have boosted school
enrollment. Public elementary and
secondary enrollment reached an
estimated
48.0 million in 2003 and is
projected to increase to an all-time
high of 49.7
million in 2013. The West will
experience the largest increase in
enrollment of
all regions in the country.
In 2003, Black and Hispanic
4th-graders were more likely than
White 4th-
graders to be in high-poverty
schools (measured by the percentage
of students
eligible for a subsidized lunch) and
less likely to be in low-poverty
schools. The
same is also true by school
location: Black and Hispanic
students were more
4
U.S. Economic Growth
likely than White students to be
concentrated in the highest poverty
schools in
central city, urban fringe, and
rural areas in 2003.
In the next 10 years, undergraduate
enrollment is projected to increase.
Enrollment in 4-year institutions is
projected to increase at a faster
rate than
in 2-year institutions, and women's
enrollment is expected to increase
at a
faster rate than men's. The number
of part- and full-time students,
those
enrolled at 2- and 4-year
institutions, and male and female
undergraduates are
projected to reach a new high each
year from 2004 to 2013.
Forty percent of the population age
16 and above participated in some
work-
related adult education in 200203.
The most common types of programs
were
formal work-related courses percent)
and college or university degree
programs
for work-related reasons (9
percent). Educational attainment was
positively
associated with participating in
adult education for work-related
reasons.
Figure 4.1. Average net price,
grants, loans, and total price (in
1999 constant dollars) for
full-time, full-year dependent
undergraduates, by type of
institution: 198990 and 1999
2000
Public 2-year
Loans
Grants
Net price
100%
$600
$200
$500
$1,100
80%
60%
$6,500
40%
$7,000
20%
0%
1989-90
1999-2000
5
U.S. Economic Growth
Public 4-year
Loans
Grants
Net price
100%
$900
$1,200
$2,500
80%
$1,900
60%
40%
$8,000
$8,000
20%
0%
1989-90
1999-2000
Private not for profit 4-year
Loans
Grants
Net price
100%
$2,000
$4,800
80%
$4,000
$6,800
60%
40%
$13,400
$12,800
20%
0%
1989-90
1999-2000
6
U.S. Economic Growth
Private for profit less than
4-year
Loans
Grants
Net price
100%
90%
$3,100
$5,400
80%
$1,700
70%
60%
$1,800
50%
40%
$10,000
30%
$8,800
20%
10%
0%
1989-90
1999-2000
NOTE: Averages computed for all
students, including those who did
not receive financial aid. Detail
may not sum to totals
because of rounding.
SOURCE: Wei, C.C., Li,
X., and Berkner, L. (2004). A Decade
of Undergraduate Student Aid:
198990 to 19992000
(NCES 2004158), tables
A-1.2, A-2.2, A-3.2, A-4.2, A-1.6,
A-2.6, A-3.6, A-4.6, A-1.10, A-2.10,
A-3.10, A-4.10. Data
from U.S. Department of Education,
National Center for Education
Statistics, 198990 and 19992000
National
Postsecondary Student Aid Study
(NPSAS:90 and NPSAS:2000).
(Originally published as figure 10
on p. 24 of the complete
report from which this article is
excerpted.)
Learner Outcomes
How well does the American
educational system--and its
students--perform?
Data from national and international
assessments can help answer this
question, as can data on adults'
educational and work experiences,
health, and
earnings later in life. In some
areas, such as reading, mathematics,
and
writing, the performance of
elementary and secondary students
has improved
over the past decade, but not in all
grades assessed and not equally for
all
students. Long-term effects of
education, such as on the health and
earnings of
adults, help underscore the
importance of education and the
outcomes of
different levels of educational
attainment.
7
U.S. Economic Growth
According to data from the
Early Childhood Longitudinal Study,
children
without family risk factors, such as
poverty, start kindergarten with
higher
performance and experience a larger
gain in reading and mathematics
scale
scores through 3rd grade than
students with 1 or more family risk
factors.
From the beginning of kindergarten
in fall 1998 through the end of 3rd
grade
in spring 2002, children with no
family risk factors had an average
gain of 84
points in reading, compared with a
73-point gain among children with 2
or
more family risk factors; the
respective gains in mathematics were
65 and 57
points figure 4.5.
The average reading scale scores of
8th-graders assessed by the
National
Assessment of Educational Progress
(NAEP) increased between 1992
and 2003,
while no difference was detected for
4th-graders. The percentages of 4th-
and
8th-graders performing at or above
the Proficient level, defined
as "solid
academic performance for each grade
assessed," were higher in 2003 than
in
1992. Among 12th-graders, average
scores were lower in 2002 than in
1992
and 1998. The average writing scale
scores of 4th and 8th graders
assessed by
NAEP improved between 1998 and 2002
was increased. Twenty-eight percent
of 4th-graders, 31 percent of
8th-graders, and 24 percent of
12th-graders
performed at or above the
Proficient level in 2002.
The average mathematics scale scores
of 4th- and 8th-graders assessed by
NAEP increased steadily from 1990 to
2003. For both grades, the average
scale
scores in 2003 were higher than in
all previous assessments, and the
percentages of students performing
at or above the Proficient
level and at the
8
U.S. Economic Growth
Advanced level, defined as
"superior performance," were higher
in 2003 than in
1990. Thirty-two percent of
4th-graders and 29 percent of
8th-graders were at
or above the Proficient
level. In addition to indicators on
students' academic
achievement, there are also some
indicators on the long-term outcomes
of
education.
The better educated a person is, the
more likely that person is to report
being
in "excellent" or "very good"
health, regardless of income. Among
adults age 25
and above, 78 percent of those with
a bachelor's degree or higher
reported
being in excellent or very good
health in 2001, compared with 66
percent of
those with some education beyond
high school, 56 percent of high
school
completers, and 39 percent of those
with less than a high school
education.
In 2003, 13 percent of all persons
ages 1624 were neither enrolled in
school
nor working, a decrease from 16
percent in 1986. The gap between the
percentage of poor youth and others
neither enrolled nor working
decreased
over the period. The percentages of
White and Asian/Pacific Islander
youth
neither enrolled nor working in 2003
were lower than the percentages of
Hispanic, Black, and American Indian
youth. In addition, the percentage
of
Hispanic youth neither enrolled nor
working was lower than the
percentages of
Black and American Indian youth.
The earnings of young adults with at
least a bachelor's degree increased
over
the past 20 years relative to their
counterparts with a high school
diploma or
General Educational Development
(GED) certificate. Among men, the
difference
9
U.S. Economic Growth
in median earnings rose from 19
percent in 1980 to 65 percent in
2002, while
among women, the difference
increased from 34 percent to 71
percent.
Figure 4.5. Children's reading
and mathematics scale scores for
fall 1998 first-time
kindergartners from kindergarten
through 3rd grade, by family risk
factors: Fall 1998,
spring 1999, spring 2000, and
spring 20021
Reading
Series1
Series2
Series3
140
120
100
80
60
40
20
0
Fall Kindergarden
Spring
Spring 1st grade Spring 3rd grade
Kindergarden
Mathematics
Series1
Series2
Series3
140
120
100
80
60
40
20
0
Fall Kindergarden
Spring
Spring 1st grade
Spring 3rd grade
Kindergarden
1Family risk factors include
living below the poverty level,
primary home language was
non-English, mother's highest
education was less than a high
school diploma/GED, and living in a
single-parent household, as measured
in kindergarten.
NOTE: The findings are based on
children who entered kindergarten
for the first time in fall 1998 and
were assessed in fall
10
U.S. Economic Growth
1998, spring 1999, spring 2000, and
spring 2002. Estimates reflect the
sample of children assessed in
English in all
assessment years (approximately 19
percent of Asian children and
approximately 30 percent of Hispanic
children were not
assessed). The Early Childhood
Longitudinal Study, Kindergarten
Class of 199899 (ECLS-K) was not
administered in
spring 2001, when most of the
children were in 2nd grade. Although
most of the sample was in 3rd grade
in spring 2002,
10 percent were in 2nd grade and
about 1 percent were enrolled in
other grades.
SOURCE: Rathbun, A, and West, J.
(2004). From Kindergarten Through
Third Grade: Children's Beginning
School
Experiences
(NCES 2004007), tables A-4 and
A-5. Data from U.S. Department of
Education, National Center for
Education Statistics, Early
Childhood Longitudinal Study,
Kindergarten Class of 199899
(ECLS-K), Longitudinal
KindergartenFirst Grade Public-Use
data file and Third Grade
Restricted-Use data file, fall 1998,
spring 1999, spring 2000,
and spring 2002. (Originally
published as the Early Reading and
Mathematics Performance figure on p.
48 of the complete
report from which this article is
excerpted.)
Student Effort and Educational
Progress
Many factors are associated with
school success, persistence, and
progress
toward high school graduation or a
college degree. These include
student
motivation and effort, the
expectations of students,
encouragement from
others, and learning opportunities,
as well as various student
characteristics,
such as sex and family income.
Monitoring these factors in relation
to the
progress of different groups of
students through the educational
system and
tracking students' attainment are
important for knowing how well we
are doing
as a nation in education. The
proportion of 10th-graders who
expected to
complete a bachelor's as their
highest degree nearly doubled
between 1980 and
2002, and the proportion who
intended to earn a graduate degree
more than
doubled. Rising aspirations were
also notable among students from
families
with low socioeconomic status: about
13 percent of such students intended
to
earn a bachelor's degree in 1980,
but this figure had tripled by 2002.
During the 1970s and 1980s, "event
dropout rates," which measure the
proportion of students who drop out
of high school each year, declined.
However, event dropout rates
remained unchanged during the 1990s
on
average and for students from low-,
middle-, and high-income families.
11
U.S. Economic Growth
First-time entry rates into programs
that lead to a bachelor's or higher
degree
increased from 1998 to 2001 in many
countries that were members of the
Organization for Economic
Cooperation and Development (OECD).
In 2001, the
U.S. rate was lower than the OECD
country average. Despite assistance
offered
through remediation, students
enrolled in remediation are less
likely to earn a
postsecondary degree or certificate.
The need for remedial reading
appears to
be the most serious barrier to
degree completion: 12th-graders in
1992 who
took remedial reading at the
postsecondary level were about half
as likely as
those who took no remedial courses
to have earned a degree or
certificate by
2000.
While bachelor's degree completion
rates have been steady over time,
the
likelihood of still being enrolled
with no degree at the end of 5 years
has
increased. When comparing students
who enrolled in a 4-year college or
university for the first time in
198990 with those who began in
199596, 53
percent of both cohorts had
completed a bachelor's degree within
5 years;
however, the later cohort was more
likely to have no degree but still
be enrolled
and also less likely to have left
college without a degree.
Women have earned more than half of
all bachelor's degrees every year
since
198182. They still trail men in
certain fields but have made
substantial gains
since 197071 at both the
undergraduate (table 2.0) and
graduate levels.
Table 2.0 Percentage of
bachelor's degrees earned by women
and change in the percentage
earned by women from 197071 to
200102, by field of study: 197071,
198485, and
200102
Field of study
1970-71 1984-85 2001-02 Change in
percentage points
12
U.S. Economic Growth
1970-71 1984-85 1970-71
1984-85 2001-02 2001-02
Total1
43.4
50.7
57.4
7.4
6.7
14.1
Health professions related
sciences
77.1
84.9
85.5
7.8
0.6
8.4
Education
74.5
75.9
77.4
1.3
1.5
2.9
English language &
literature/letters
65.6
65.9
68.6
0.3
2.7
3
Visual & performing arts
59.7
62.1
59.4
2.4
-2.7
-0.3
Psychology
44.4
68.2
77.5
23.7
9.3
33.1
Social sciences & history
36.8
44.1
51.7
7.3
7.6
14.9
Communications
35.3
59.1
63.5
23.8
4.4
28.2
Biological sciences/life sciences
29.1
47.8
60.8
18.7
13
31.7
Business
9.1
45.1
50
36
4.9
40.9
Mathematics
37.9
46.2
46.7
8.3
0.5
8.8
Physical sciences
13.8
28
42.2
14.2
14.2
28.4
Computer & information sciences 13.6
36.8
27.6
23.2
-9.2
14
Agriculture & natural resources 4.2
31.1
45.9
26.9
14.8
41.6
Engineering
0.8
13.1
20.7
12.3
7.6
19.9
1Includes others fields not shown
separately
Contexts of Elementary and Secondary
Education
The school environment is shaped by
many factors, including the courses
offered in the school and taken by
students, the instructional methods
used by
teachers, students' opportunities to
attend a "chosen" public school, the
role of
school staff in providing various
support services to students, the
extent to
which teachers are teaching in their
field, and the characteristics of
school
principals and their influence over
school governance. Monitoring these
and
1 NOTE: Based on data from all
degree-granting institutions.
SOURCE: U.S. Department of
Education, National Center for
Education Statistics. (2003). Digest
of Education statistics
2002
(NCES 2003060), tables 246,
276297, and (forthcoming) Digest of
Education Statistics 2003 (NCES
2004024),
tables 265, 268, and 271. Data from
U.S. Department of Education,
National Center for Education
Statistics, 196986
Higher Education General Information
Survey (HEGIS), "Degrees and Other
Formal Awards Conferred" and
19872002
Integrated Postsecondary Education
Data System, "Completions Survey"
(IPEDS-C:8702), fall 2002.
(Originally published
as the Bachelor's Degrees table on
p. 65 of the complete report from
which this article is excerpted.)
13
U.S. Economic Growth
other factors provides a better
understanding of the conditions in
schools that
influence education.
Since the early 1980s, the
percentage of high school graduates
completing
advanced coursework in science and
mathematics has increased. Between
1982
and 2000, the percentage that had
completed advanced courses in
science
increased from 35 to 63 percent, and
the percentage that had completed
advanced courses in mathematics
increased from 26 to 45 percent.
Among high school graduates in 2000,
Asian/Pacific Islander and private
school graduates completed advanced
levels of science and mathematics
coursework at higher rates than
their peers. Females were more
likely than
males to have completed some
advanced science coursework and to
have
completed level II advanced academic
mathematics courses (i.e.,
pre-calculus
or an introduction to analysis).
According to findings from the 1999
Third International Mathematics and
Science Study (TIMSS) Video
Study--which examined 8th-grade
science
lessons in Australia, the Czech
Republic, Japan, the Netherlands,
and the
United States--46 percent of U.S.
8th-grade science lessons had
students
conduct experiments or other
practical activities, while 31
percent had
students collect and report data
from those activities.
In 19992000, high school students
in high-minority schools and
high-poverty
schools (measured by the percentage
of students eligible for a
subsidized
lunch) were more often taught
English, science, and mathematics by
"out-of-
field" teachers (i.e., teachers who
have neither a major nor
certification in the
14
U.S. Economic Growth
subject they teach) than their peers
in low-minority and low-poverty
schools
(figure 5.0).
The percentage of students in grades
112 whose parents enrolled them in
a
"chosen" public school (i.e., a
public school other than their
assigned public
school) increased from 11 to 15
percent between 1993 and 2003. In
the same
period, the percentage of children
attending private schools also
increased (.9
percentage points for private,
church-related schools and .8
percentage points
for private, non-church-related
schools). In addition, in 2003,
parents of 24
percent of students reported that
they moved to a neighborhood so that
their
children could attend a particular
school.
Principals' perceptions of their own
influence over a number of school
governance functions vary by the
control of the school. In 19992000,
private
elementary and secondary school
principals were more likely than
their public
school counterparts to report a high
degree of influence over
establishing
curriculum, setting disciplinary
policies, and setting performance
standards for
students.
The goals that guidance programs in
public high schools emphasize vary
according to the size and location
of the school. For example, in 2002,
the
smallest schools were more likely
than larger schools to report that
their
primary emphasis was on helping
students prepare for postsecondary
schooling, while the largest schools
were more likely to emphasize
helping
students with their high school
academic achievement. Schools
located in a
15
U.S. Economic Growth
central city or an urban fringe area
were more likely than rural schools
to make
helping students with their academic
achievement the primary emphasis.
At the elementary and secondary
school levels, most schools have
staff that
provides various support services
directly to students (e.g.,
counselors, social
workers, speech therapists, and
instructional and non instructional
aides). In
19992000, the most common student
support staff in public elementary
and
secondary schools were school
counselors, speech therapists,
school nurses,
and special education aides, each of
which were found in 79 percent or
more of
schools.
Contexts of Postsecondary Education
The postsecondary education system
encompasses various types of
institutions, both public and
private. Although issues of student
access,
persistence, and attainment have
been predominant concerns in
postsecondary
education, the contexts in which
postsecondary education takes place
matter
as well. The diversity of the
undergraduate and graduate
populations, the
various educational missions and
learning environments of colleges
and
universities, the courses that
students take, the modes of learning
that are
employed, and the ways in which
colleges and universities attract
and use
faculty and other resources all are
important aspects of the contexts of
postsecondary education.
Students age 24 and above
represented 43 percent of all
undergraduates in
19992000, and 82 percent of these
students worked while enrolled. Many
16
U.S. Economic Growth
older undergraduates were employees
first, focusing primarily on their
jobs,
and students second. Those whose
primary focus was on their
employment
were less likely to complete their
postsecondary programs than were
older
students who worked primarily to
meet their educational expenses.
The list of the top 30 postsecondary
courses, which reports the subjects
that
students study the most in college
(and which is referred to as the
"empirical
core curriculum"), has remained
relatively stable over the past
three decades.
Among bachelor's degree recipients
who graduated from high school in
1972,
1982, and 1992, each cohort earned
about one-third of its credits from
the top
30 postsecondary courses for the
cohort. For the 1992 cohort, the top
30 list
for students attending highly
selective institutions included a
concentration of
engineering and humanities courses
and courses with an international
theme,
a pattern not present for students
in selective and non-selective
institutions.
Postsecondary institutions provided
remedial coursework for 28 percent
of
entering freshmen in fall 2000 (22
percent undertook remediation in
mathematics, 14 percent in writing,
and 11 percent in reading). Public
2-year
colleges provided such coursework
for 42 percent of their entering
students.
In 200001, 56 percent of all
postsecondary institutions offered
distance
education courses, up from 34
percent 3 years earlier. The number
of course
enrollments in distance education
also increased, nearly doubling
between
199798 and 200001; by 200001,
about half of these enrollments were
at
public 2-year institutions.
17
U.S. Economic Growth
Figure 5.0 Percentage of public
high school students taught selected
subjects by teachers
without certification or a major
in the field they teach, by minority
concentration and school
poverty: 19992000
Low minority
High minority
Low poverty
High poverty
16
16
15
14
14
12
12
10
10
10
9
8
8
7
7
6
6
5
5
5
5
4
4
2
0
Mathematics
English
Science
Social Studies
NOTE: "Major" refers to a teacher's
primary fields of study for a
bachelor's, master's, doctorate,
first-professional, or
education specialist degree. "Major
field" can be an academic or
education major. "High minority"
refers to schools in which
75 percent or more of their
enrollments are minority students;
"low minority" refers to schools
with a minority enrollment
of less than 10 percent. "High
poverty" refers to a school in which
75 percent or more of students are
eligible to participate
in the federal free or reduced-price
lunch program, a common proxy
measure of poverty; "low poverty"
refers to schools in
which less than 10 percent of
students are eligible to participate
in this program.
SOURCE: U.S. Department of
Education, National Center for
Education Statistics, Schools and
Staffing Survey (SASS),
19992000, "Public School Survey"
and "Public Charter School Survey."
(Originally published as the
Out-of-Field Teachers
figure on p. 73 of the complete
report from which this article is
excerpted.)
Societal Support for Learning
Society and its members--families,
individuals, employers, and
governmental
and private organizations--provide
support for education in various
ways. This
support includes learning activities
that take place outside schools and
colleges
as well as the financial support for
learning inside schools and
colleges.
Parents contribute to the education
of their children in the home
through
reading with young children, setting
aside a time and place for
schoolwork, and
18
U.S. Economic Growth
seeing that assignments are
completed. Communities impart
learning and
values through various modes, both
formal and informal. Financial
investments in education are made
both by individuals in the form of
income
spent on their own education (or the
education of their children) and by
the
public in the form of public
appropriations for education. These
investments in
education are made at all levels of
the education system. Other
collective
entities, such as employers and
other kinds of organizations, also
invest in
various forms of education for their
members.
In 2001, 50 percent of children in
kindergarten through 8th grade were
enrolled in a variety of
non-parental care arrangements after
school,
most commonly center- or
school-based programs, relative
care, and self-
care. Black children were more
likely than White and Hispanic
children
to participate in non-parental care.
Thirty-eight percent of children in
kindergarten through 8th grade
participated in one or more
organized activities after school in
2001.
Children in 3rd through 5th grade
and 6th through 8th grade were more
likely to participate than children
in kindergarten through 2nd grade.
Parents of 19 percent of these
children reported using activities
to cover
hours when adult supervision was
needed for their children.
Total expenditures per public
elementary and secondary school
student,
adjusted for inflation, increased by
25 percent between 199192 and
200001. The largest increases
occurred in midsize cities and rural
areas.
In 2000, expenditures per student
for the OECD member countries
averaged $5,162 at the combined
elementary/secondary level and
$9,509
at the post-secondary level. The
United States and Switzerland, two
of
the world's wealthiest nations,
ranked highest in expenditures per
student at the elementary/secondary
and postsecondary levels. Wealthy
19
U.S. Economic Growth
countries such as the United States
spent more on education, and a
larger share of their gross domestic
product (GDP) per capita on
education, than less wealthy
nations.
The percentage of full-time
undergraduates receiving
institutional aid
and the average amount awarded
increased at 4-year institutions
during
the 1990s. In 199293, some 17
percent of full-time undergraduates
at
public institutions and 47 percent
at private not-for-profit
institutions
received institutional aid; by
19992000, the respective
proportions had
increased to 23 and 58 percent.
During this period, the average
award
increased from $2,200 to $2,700 at
public institutions and from $5,900
to $7,000 at private not-for-profit
institutions.
Those who had received bachelor's
degrees in 19992000 were more
likely than their 199293
counterparts to have borrowed to pay
for their
undergraduate education (65 vs. 49
percent), and if they had done so,
to
have borrowed larger amounts, on
average ($19,300 vs. $12,100 in
constant 1999 dollars). However, the
median "debt burden" (monthly
payment as a percentage of monthly
salary) a year later did not change.
Worker productivity is affected by
many factors, including the
education and
skill level of the work force.
Education and skills are important
because they
expand a worker's capacity to
perform a task or to use productive
technologies.
More educated workers are also
usually better able to adapt to new
tasks or to
changes in their old tasks.
Furthermore, because education
enhances workers'
ability to communicate with and
understand their co-workers, it may
prepare
people to work in teams more
effectively.
Some observers fear that the
American educational system has
deteriorated in
comparison with the educational
systems in other countries, and that
this
20
U.S. Economic Growth
deterioration may soon cause the
productivity of U.S. workers to lag
behind
that of workers in other countries.
These observers have agreed that
lagging
productivity jeopardizes the
nation's competitiveness in
international markets
and would eventually translate into
a lower standard of living relative
to other
countries. But others argue that the
relative economic performance and
standards of living should not be
the sole focus of studies of
economic well
being in the United States. Although
economic trends outside the United
States
can be used as a benchmark for
gauging U.S. progress, continued and
substantial improvements in U.S.
productivity and standard of living
can be
maintained regardless of our
position compared with other
countries. This
point does not, however, discount
the importance of education. If
educational
deterioration causes productivity to
slow or even to decline, it would
have a
negative impact on our standard of
living.
This chapter begins our
investigation of education and
worker productivity by
examining recent trends in U.S.
worker productivity. We extend this
analysis of
productivity by comparing it with
the productivity in other
industrialized
countries and examining the extent
to which American economic
leadership is
threatened by these other countries.
CHAPTER 2
21
U.S. Economic Growth
WORKER PRODUCTIVITY
AND EDUCATION
Trends in U.S. Worker Productivity
Research on the productivity of U.S.
workers has focused on trends in the
growth of productivity in the
post-World War II period. Worker
productivity is
typically measured by dividing
output by the number of workers or
the number
of hours worked. Figure 5.1 shows
the postwar trend in worker
productivity as
measured by business sector output
per hour worked. Output per hour has
increased nearly continuously over
the postwar period. Decreases were
generally confined to single-year
fluctuations. Output per hour in
1994 was
about three times the output per
hour in 1947. The average annual
rate of
productivity growth from 1947
through 1994 was 2.1 percent.
Figure 5.1 Index of real outputper
hours of all persons, busines
ssector
1947-94
Series1
140
120
100
80
60
40
20
0
FY1947 FY1954 FY1952 FY1970 FY1973
FY1974 FY1978 FY1986 FY1994
NOTE: Figures for years after 1988
were originally based on 1982=100.
They were multiplied by a factor of
1.013 for use
in the 1977=100 index. Hours of all
persons include hours of employees,
priorietors, and unpaid family
workers. Output is
the constant-dollar market value of
final goods and services produced.
For the business sector, the index
relates to gross
22
U.S. Economic Growth
domestic produce (GDP) less general
government, output of nonprofit
institutions, output of paid
employees of private
households, andrental value of
owner-occupied dwellings. Business
output was about 78 percent of GDP
in 1992.
SOURCE: U.S. Department of Labor,
Bureau of Labor Statistics, Handbook
of
Labor Statistics, Washington, DC:
U.S. Government Printing Office,
1989; Monthly
Labor Review 18 (8) (August 1995):
175.
Concern about the trend in U.S.
productivity is based primarily on
the lower
rate of productivity growth since
1973 as compared with the period
from 1947
through 1973. It is clear that the
growth in output per hour worked
since 1973
has lagged behind the 194773 trend,
as shown in figure 5.1. From 1947
through 1973, output per hour worked
increased by an average of nearly 3
percent per year, compared with
slightly more than 1 percent per
year from
1973 through 1994. In recent years,
slow productivity growth has
especially
been a problem in non-manufacturing
sector of the economy, which
represents
an increasing share of total U.S.
employment.1 Because of the slowdown
in
labor productivity, growth in worker
compensation (earnings plus
benefits) has
slowed by a similar magnitude
(Bosworth and Perry 1994). Given the
strong
connection between productivity and
compensation, the productivity slow
down
has been described by Baily and
Gordon (1988) as America's greatest
economic problem. Despite a vast
amount of research on trends in
productivity, economists remain
perplexed about the nature of the
post-1973
productivity slowdown. Various
researchers attribute the slowdown
to sectoral
shifts in the labor force,
inadequate accumulation of physical
capital,
inadequate work force training, or
overemphasis on short-term goals in
1 Baily and Gordon (1988) show that
output per hour of work increased by
2.52 percent per year in
anufacturing from
1973 through 1987, compared with an
increase of only 0.25 percent per
year in nonmanufacturing. However,
measuring
productivity in nonmanufacturing can
be difficult because changes in the
quality of goods and services can be
difficult to
track in this sector. Problems in
measuring productivity are discussed
in detail later in this chapter.
23
U.S. Economic Growth
business management.2 However, none
of the studies has isolated the
specific
determinants of the post-1973
productivity slowdown. Bishop (1989)
argues
that declines in education
achievement, as measured by test
scores, play an
important role in the slowdown of
productivity growth since 1973. On
the basis
of estimated returns to test scores
and the historical trends in test
scores and
economic productivity, Bishop claims
that declines in test scores since
1967
reduced the contribution of
education to productivity by 0.05 to
0.12
percentage points per year from 1973
through 1987.3 Although this
estimated
impact appears to be small, Bishop
argues that it translates into
substantial
social costs. He sets the social
cost in terms of foregone national
product at
$86 billion in 1987, and he projects
that it will double from 1987
through
2004. Although low academic
achievement may inhibit the growth
in
productivity, it cannot account for
the majority of the slowdown in U.S.
productivity since 1973. First, the
decline in productivity growth
occurred all at
once--too quickly to be attributed
to slow-moving changes in work force
quality. Second, the magnitude of
the slowdown is much larger than the
impact
of dropping test scores cited by
Bishop. Bishop's estimate would
explain less
than 10 percent of the overall
productivity slowdown. Third, as is
shown later
in this chapter, productivity grew
more slowly after 1973 in all
industrialized
2 Baily, Burtless, and Litan (1993)
discuss each of these possibilities.
3 Bishop (1989) estimates the impact
of academic achievement on
individual productivity by
estimating the relationship
between earnings as a proxy for
productivity and test scores as a
proxy for achievement. The
achievement proxy is
constructed based on the responses
to the 13 questions from the
Lorge-Thorndike intelligence test,
part of the Panel Study
of Income Dynamics survey. Bishop
then measures trends in academic
achievement over time on the basis
of scores on
the Iowa Test of Educational
Development. These trends are
translated into changes in labor
quality and linked to
productivity in a growth-accounting
framework.
24
U.S. Economic Growth
countries, not just in the United
States. It would be difficult to
believe that the
quality of education declined
simultaneously in all industrialized
countries
beginning in 1973. Finally, Bishop's
argument applies exclusively to the
cohort
of students educated in the late
1960s and 1970s. As is shown in
chapter 4,
the levels of achievement of U.S.
students in the late 1980s were
restored to
the levels of the early 1970s.
Another possible explanation for the
productivity slowdown is that
measurement errors have caused
observers to overestimate the
magnitude of
the slowdown. Researchers have paid
particular attention to the accuracy
of
the price indices that are used in
the calculation of real output. In
the U.S.
economy, there is a general trend
that shifts away from standardized
commodities with easily definable
characteristics that change little
over time
toward goods and services for which
issues of quality are of primary
importance. Some argue that the
complexity in defining quality as it
pertains to
modern goods and services makes it
extremely difficult to disentangle
pure
increases in the price paid for the
same quality goods from price
increases that
reflect changes in quality. If the
trend in prices is mis-measured,
trends in
output and productivity will also be
mis-measured. While this argument is
appealing, a detailed study (Baily
and Gordon 1988) of the empirical
evidence
suggests that errors in measuring
output fail to explain the majority
of the
observed post-1973 productivity
slowdown.4 A final possible
explanation for the
4 Baily and Gordon (1988) estimate
that errors in measurement explain,
at most, 0.5 percentage points of
the 1.5 point
slowdown in productivity growth
between 1948 and 1973 and 1973 and
1987. The majority, 0.3 percentage
points, of this
errors-in-measurement estimate is
attributed to declines in the
quality of labor, such as the
decline in test scores
documented by Bishop (1989), rather
than to previously overlooked or
mismeasured increases in the quality
of goods and
25
U.S. Economic Growth
slowdown is that the lower rate of
growth in productivity after 1973
may simply
represent a return to the long-run
trend in productivity, and that the
high
growth rate from 1947 through 1973
was a historical aberration (Baumol,
Blackman, and Wolff 1989). The
annual growth rate in output per
hour for the
entire period shown in figure 5.1,
194794, is approximately equal to
the long-
run productivity growth rate of 2
percent that has prevailed in the
United
States since 1870.5 While these
findings do not guarantee that the
U.S.
economy will return to and sustain 2
percent productivity growth in the
future,
they still do not conclusively show
that productivity in the United
States has
already declined to a slower
long-run growth rate. Rather, recent
trends may be
attributable to a short-run
variation around an unchanged
long-run trend.6
Productivity Trends in
Industrialized Countries
Alarm about the recent slowdown in
productivity in the United States is
driven
by the fear that other countries
will surpass the United States in
productivity,
thereby achieving a higher standard
of living at the expense of U.S.
workers.
While the available evidence is
unclear as to whether the post-1973
U.S.
productivity slowdown represents a
long-term slowdown, it is clear that
services. However, Baily and Gordon
(1988) also present estimates from
other studies, which suggest that
the actual
contribution of the decline in labor
quality may be smaller than 0.3
percentage points.
5 Maddison (1982) presents
statistics showing that GDP per
man-hour grew by an annual average
compound rate of 2.3
percent from 1870 through 1979.
6 Darby (1984) supports the argument
that the statistics do not provide
evidence of a long-run decline in
productivity
growth in the United States.
Nordhaus (1982) points out that two
similar periods of stagnancy in U.S.
productivity occurred
in this century. He presents
statistics showing that U.S.
productivity did not grow from 1901
through 1917 and grew slowly
from 1924 through 1937.
26
U.S. Economic Growth
productivity in other countries is
catching up to that of the United
States.
Figure 5.2 shows real gross domestic
product (GDP) per worker for the
group
of seven (G7) industrialized
countries. The United States has
clearly been the
world leader in productivity for
many years. During the postwar
period,
however, the other industrialized
countries are catching up to the
United
States because they have increased
productivity at a faster rate than
the
United States.
Despite the fact that other
countries are gaining on the United
States in
productivity, the United States is
still the world leader in
productivity, and the
trends do not necessarily signal a
significant decline in U.S. economic
capabilities. As of 1990, the United
States was still the leader in
productivity
between the G7countries. GDP per
worker was slightly higher than in
Canada
and about 25 percent higher than in
Italy (the country with the third
highest
GDP per worker) (figure 5.2).
Furthermore,
other countries are not positioned
to surpass the United States in the
next few
years; rather, they have been slowly
catching up over many decades.
Alternative data on productivity
presented in table 5.1 show that
this
phenomenon, which is not new,
actually began shortly after the end
of World
War II as other countries
experienced higher growth rates than
the United
States from 1950 through 1973.7
7 The data presented in table 5.1
and figure 5.2, are from different
sources and are based on different
productivity
measures--productivity is measured
as GDP per worker in figure 5.2 and
GDP per hour worked in table 2.1.
27
U.S. Economic Growth
Figure 5.2 Real GDP per worker in
G-7 nations: 1950-90 (in thousands
od
dol ars based on 1985 internationals
prices)
Japan
Italy
Germany
France
UK
Canada
U.S
40
35
30
25
20
15
10
5
0
FY1950 FY1954 FY1958 FY1962 FY1966
FY1970 FY1974 FY1978 FY1982 FY1986
FY1990
SOURC
E: Penn World Table (Mark 5.6),
distributed by the National Bureau
of Economic Research. For a
description, see Robert
Summers and Alan Heuston, The Penn
World Table (Mark 5): An Expanded
Set of International Comparisons,
1950
1988, Quarterly Journal of Economics
(May 1991):327368.
Worker Productivity and Education
Table 2.1 Growth in gross
domestic product per hour worked
(average annual growth rate)
I
II
III
Acceleration
Slowdown
1913-1950
1950-1973
1973-1984
from I to II
from II to III
France
2
5.1
3.4
3.1
1.7
Germany
1
6
3
5
3
Japan
1.7
7.7
3.2
6
1.5
Netherlands
1.7
4.4
1.9
2.7
2.5
United Kingdom
1.6
3.2
2.4
1.6
0.8
United States
2.4
2.5
1
0.1
1.5
SOURCE: Angus Maddison, Growth and
Slowdown in Advanced Capitalist
Economies: Techniques of
Quantitative
Assessment, Journal of Economic
Literature (June 1987): 649698
The data also indicate that the
pattern of growth in productivity
that occurred
in the United States in the
post-World War II period also
occurred in the other
28
U.S. Economic Growth
industrialized countries. As shown
in table 2.1, productivity grew at
an
accelerated rate in these countries
from 1950 through 1973, compared
with
the period from 1913 through 1950.
The slowdown in the growth of
productivity that occurred in the
United States in the early 1970s
appears also
to have occurred in the other
industrialized countries. The
percentage-point
magnitude of the decline was largest
in Japan (4.5 percentage points) and
smallest in the United Kingdom (0.8
percentage points). The decline in
productivity in the United States
(1.5 percentage points) was between
these two
extremes. The productivity trends in
figure 5.2 and table 2.1 appear to
be
consistent with the economic
hypothesis that productivity levels
in countries
with broadly similar labor resources
will converge over time.8 When the
productivity of one country is
superior to that of a number of
other countries,
largely as a result of differences
in technical knowledge, the follower
countries
can catch up to the leader by
acquiring new technical knowledge
from the
leader. Productivity converges
because countries eventually learn
these new
productive techniques through trade,
technology transfer, and their own
research and development efforts.
Figure 2.3, which shows that the
coefficient
of variation in productivity in the
G7 countries has declined steadily
since
1950, demonstrates that productivity
in these countries is, in fact,
converging.9
8 Baumol, Blackman, and Wolff (1989)
provide a detailed description and
analysis of this hypothesis.
9 The coefficient of variation is
equal to the standard deviation of
productivity divided by the mean.
29
U.S. Economic Growth
Contribution of Education to
Economic Productivity
Economic research based on
growth-accounting methods has shown
that
education has made a major
contribution to growth in U.S.
economic
productivity.10 Denison (1979)
estimated that education contributed
about 20
percent of the growth in national
income per person from 1948 through
1973.
Using similar methods and data for
the same period, Jorgenson (1984)
estimated that education accounted
for 38 percent of the total labor
contribution to U.S. output growth,
or about 17 percent of growth
overall.
Recent estimates for the period from
1973 through 1984 (Sturm 1993)
suggest
that education accounted for about
15 percent of the growth in output
per
hour worked over this period. A more
comprehensive study of productivity
from
1948 through 1990 using growth
accounting (U.S. Department of Labor
1993)
showed that during this period,
rising levels of educational
attainment were
responsible for about 14 percent of
the growth in output per hour worked
in
the private sector.
The growth-accounting methods used
in these studies have been
frequently
criticized. First, they use
variation in earnings to represent
variation in
productivity, which cannot be
observed directly. The relative
productivity
contributions of different levels of
educational attainment are set
according to
earnings differentials among
educational groups. If earnings are
not closely
correlated with productivity, this
approach is inappropriate. The use
of
10 In growth accounting, researchers
attribute growth in output to
changes in factor inputs, such as
capital and labor. The
relative value of different levels
of education attainment in the
growth accounts is determined by the
earnings of workers
with different levels of attainment.
30
U.S. Economic Growth
earnings differentials to measure
the effect of educational attainment
on
productivity is discussed in chapter
3. Second, growth-accounting methods
are
used to capture the direct effect of
different growth factors, but they
do not
account for interaction among the
factors. Many researchers have
discussed
the importance of interaction, such
as that between education and new
technology. For example, a country's
ability to exploit new technologies
may
depend on workers who have the
education necessary to use the new
technologies effectively. Third,
growth-accounting methods focus
exclusively on
changes in years of formal education
to measure the contribution of
education.
They do not control either for
changes in the quality of education
or for the
contribution of informal education
or training. Despite the weaknesses
of
growth-accounting methods, they have
provided the best available
estimates of
the contribution of education to
productivity growth. Although the
exact
magnitude of the contribution may be
unclear, studies consistently show
that
education makes a substantial
contribution to productivity growth.
Recent
attempts to generate estimates that
are not subject to the traditional
criticisms
of growth accounting methods support
this conclusion. Kim and Lau (1992)
use a new methodology called the
meta-production function approach to
estimate the relationship between
aggregate output and inputs.11 They
estimate that education accounted
for 11 percent of the growth in
aggregate
real output from 1948 through 1985.
11 The assumption of a
meta-production function implies
that the same production function
can be used to characterize
productivity in different countries.
Kim and Lau use the meta-production
function to perform an alternative
growth
accounting that dispenses with the
traditional assumptions of constant
returns to scale, neutrality of
technical progress,
and profit maximization. (Boskin and
Lau (1990) describe the alternative
growth-accounting procedure.)
31
U.S. Economic Growth
International evidence suggests that
education plays a similarly
important role
in influencing productivity in other
countries as it does in the United
States.
Sturm (1993) demonstrates that among
a select group of industrialized
countries, the contribution of
education to economic growth from
1973 through
1984 was the highest in France (22
percent) and the lowest in Germany
(4
percent).12 Using methods as well as
a sample period different from those
of
Sturm (1993), Kim and Lau (1992)
show that the contribution of
education to
growth in five industrialized
countries from 1957 through 1985 was
between
11 percent and 27 percent, depending
on the country. The lowest impact
was
11 percent in the United States and
Japan, and the highest impact was 27
percent in West Germany.13 Overall,
the estimates suggest that the
extent to
which education has contributed to
productivity growth in the United
States is
generally the same as in other
industrialized countries. Therefore,
the data
provide no indication that the
contribution of education to growth
in the United
States lags behind the contribution
of education to growth in other
countries.
Evidence related to the convergence
hypothesis also suggests that
education
plays an important role in
productivity. Baumol, Blackman, and
Wolff (1989)
find that different groups of
countries are converging to
different productivity
levels according to their
educational levels. The
industrialized countries with
12 According to the estimates
presented in Sturm (1993), the
percentage of the growth rate
explained by education is 15.5
percent in the United States, 22.0
percent in France, 20.9 percent in
the Netherlands, 18.9 percent in the
United Kingdom,
and 10.8 percent in Japan.
13 The impact of education on growth
in the other two countries was 19
percent in France and 24 percent in
the United
Kingdom. The difference between the
Kim and Lau (1992) estimate and the
Sturm (1993) estimate for Germany is
striking. Because the two studies
use different data, different
estimation methods, and different
(though overlapping) time
periods, it is difficult to
determine what causes this
difference.
32
U.S. Economic Growth
the highest educational levels are
converging to the highest
productivity levels.
Other countries are converging to
lower levels--countries with roughly
comparable educational levels are
converging to a similar level, but
they are not
closing the gap with countries at
higher educational levels.14
Supporting
evidence about the importance of
education in productivity
convergence is
presented in Barro (1991), who shows
that countries with low per capita
GDP
but relatively high levels of
schooling tend to catch up to the
GDP leaders.15
These findings suggest that
countries that lag in productivity
must have some
minimum level of education to be
able to catch up to the leaders in
productivity.16 Regressions
estimates presented in Baumol,
Blackman, and
Wolff (1989), which are based on a
broad cross-section of countries,
suggest
that high school education is
especially important in helping a
country absorb
and use new production technologies.
Based on these estimates, Baumol,
Blackman, and Wolff (1989) argue
that primary education alone may not
prepare the work force to adopt and
implement new technologies. At the
same
time, findings on higher education
appear to indicate that it may be
less
important than high school education
in the productivity catch-up process
for
the broad cross-section of
countries. However, higher education
may still be a
14 Baumol, Blackman, and Wolff
(1989) estimate the impact of
education on productivity using
cross-section data from the
Penn World Table (Summers and Heston
1991). Their findings show that
enrollment rates for primary,
secondary, and
higher education have significant
positive impacts on productivity
growth. Controlling for enrollment
rates, countries tend
to converge on the productivity
leader over time.
15 Barro (1991) examines data on a
cross-section of 98 countries from
1960 through 1985. Based on these
data, Barro
shows that the growth rate of real
per capita GDP over the observation
period is positively related to the
school enrollment
rates in 1960 and negatively related
to the 1960 level of real per capita
GDP.
16 Kyriacou (1991) also presents
findings that suggest productivity
convergence occurs only if
sufficient levels of schooling
among the labor force have been
accumulated.
33
U.S. Economic Growth
critical determinant of the relative
productivity levels among the most
industrialized countries.
CHAPTER 3
ECONOMIC CONSEQUENCES
OF EDUCATIONAL ATTAINMENT
While it is possible to link trends
in worker productivity at the
national level to
changes in education at the national
level, increases in worker
productivity at
the national level occur as
conditions in the economy, including
education,
change to make individual workers
more productive. In this chapter, we
focus
34
U.S. Economic Growth
on the economic consequences of
education at the individual level in
an
attempt to measure the economic
value of educational attainment and
the
incentive for individuals to invest
in education. As discussed in the
previous
chapter, estimates of the
contribution of educational
attainment to worker
productivity at the national level
are based on the observed average
earnings of
workers at different education
levels. Researchers characterize the
differences
in earnings by level of education as
the return to the investment in
human
capital that is inherent in the
acquisition of more education.17 The
returns as
measured by earnings differences are
used to represent the impact of
education on worker productivity.
This approach is based on economic
theory,
which states that in a competitive
labor market, a worker's wage rate
will be
equal to his or her marginal
productivity. Education may also
improve a
worker's long-term productivity
because it increases his or her
employment
stability, thereby minimizing
periods of unemployment in which the
worker is
not productive. In this chapter, we
consider the trends in the economic
returns
to education as measured by
differences in unemployment and
earnings. We
acknowledge the possibility that
differences among workers in
unemployment
and earnings may not closely mirror
differences in productivity.18 But
even if
17 Alternative theories to human
capital theory assert that
additional education does not
increase productivity, but rather
that it is valuable for sorting out
individuals with inherently low or
high abilities or aptitudes. Even in
this theory, additional
education represents a potentially
valuable investment from the
worker's perspective because
education is a signal that
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