MYTH: In todays global economy, having a more educated workforce is more important than ever as Americans compete with increasingly skilled workers from abroad. REALITY: This common political quip makes a mockery of basic economics. International trade is supremely about cooperation, not competition. Ceteris paribus, when one country provides an increased supply of a good, it drives the marginal benefit from that good down, prompting other countries to have their economies develop AWAY from that good and into others. Naturally, this is true for skilled labor as well. If some countries are providing more of it in a way that affects the global market, that would actually decrease the returns to human capital in other countries, making education less important, not more. But wait, havent returns to education been rising with globalization? Yes. However, that is due to the increased relevance of LOW-skilled labor from China et al reducing the returns to such in the US, and thus making higher-skilled jobs relatively more lucrative for Americans. Not only that, but technology also similarly competes for low-skill, routine-task employment, making skill-intensive positions all the more useful and demanded. What the larger education premium doesnt have to do with is the mere fact that theres more skilled labor from developed countries to compete with us. That may affect our relative rankings, but raw national competition of that sort is hardly the mainstay of the global economy.
Posted on: Fri, 17 Oct 2014 14:20:01 +0000
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