Archive for January 20th, 2011

Larry Mishel has a new briefing paper with the Economic Policy Institute. In it, he argues that more education will not cure our employment deficits or our inequality. The succinct claim is made early on:

The huge increase in wage and income inequality experienced over the last 30 years is not a reflection of a shortfall in the skills and education of the workforce. Rather, workers face a wage deficit, not a skills deficit.

Mishels brings a lot of time series and cross-tab data to refute the structural unemployment argument:

This argument implies that unemployment difficulties reside in the workers who are unemployed: they either are located in the wrong place or do not have the required skills for the currently available jobs. If this is so, then macroeconomic tools such as fiscal policy (spending or tax cuts) or monetary policy cannot address our unemployment or long-term unemployment situation. But surprisingly, perhaps amazingly, there is no systematic empirical evidence for such assertions.

He specifically takes on the claim that we need more higher education:

The point for our current purposes is that the pay of college graduates is as disconnected from productivity growth as is the pay of high school graduates. Vastly expanding college enrollment and completion will do nothing to address this problem…

Together, these trends suggest that the forthcoming supply of college graduates is meeting the growing demands of employers for such workers. Moreover, these trends suggest that a rapid expansion of the supply of college graduates will cause the wages of college graduates to decline, assuming that the productivity–pay gap continues unabated.

Mishels concludes:

It is not the economy that has limited or will limit strong income growth, but rather the economic policies pursued and the distribution of economic and political power that are the limiting factors.

Education is a favored response to inequality and unemployment for many mainstream economists of all stripes. Its proponents are then able to say that by favoring equal education, they favor equal opportunity. However, a class lens shows that this leveling does not actually happen. Rather, a relatively powerful and small group of people will continue to capture societal surplus, while wages for everyone else will stagnate relative to what they produce. It needs to be said again and again- power matters. There is also no guarantee that increased education will lead to more jobs, as our economy has clearly not shown that tendency in the last several decade.

If the bottom 90% of Americans have no say over how surplus is distributed, they will continue to get less than their productive share as the incomes of the very top fly away. This issue holds for the uneducated, high school educated, and college educated- however, the college educated are relatively productive enough that they end up earning plenty to get by (although this could become less true).

Thus, we realize that as Mishels says, the wage gap and jobs gap do not come from a skills gap but a class gap and a power gap. Unemployment and stagnant wages are structural, but not in the sense that conservative neoclassical economics define it. They are a result of the capitalist power dynamics and employer relations in our society. Fiscal stimulus and education are both admirable goals, but we need radical changes to restore our economy’s long-term ability to create quality jobs. Mishels doesn’t drive at the solutions to these problems, but I’m really glad he helps dispel some important mainstream economic myths.


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