The Very Basics- What is Purpose of Education?

Econ Duel: Is Education Signaling or Skill Building? - Tyler Cowen and Tabarrok

Related;; The Skills Delusion;

Most economists are certain that human capital is as important to productivity growth as physical capital. And to some degree, that’s obviously true. Modern economies would not be possible without widespread literacy and numeracy: many emerging economies are held back by inadequate skills.

But one striking feature of the modern economy is how few skilled people are needed to drive crucial areas of economic activity. Facebook has a market value of $374 billion but only 14,500 employees. Microsoft, with a market value of $400 billion, employs just 114,000. GlaxoSmithKline, valued at over $100 billion, has a headcount of just 96,000.

The workforces of these three companies are but a drop in the ocean of the global labor market. And yet they deliver consumer services enjoyed by billions of people, create software that supports economy-wide productivity improvements, or develop drugs that can deliver enormous health benefits to hundreds of millions of people...

Projections by the US Bureau of Labor Statistics (BLS) for job creation over the next ten years illustrate the pattern. Of the top ten occupational categories that account for 29% of all forecast job creation, only two – registered nurses and operational managers – pay more, on average, than US median earnings, while most of the other eight pay far less.

Employment is growing fastest in face-to-face services such as personal care. These jobs are more difficult to automate than manufacturing or information services; but, according to the BLS, they require only limited formal skills or on-the-job training. And job categories that require specialist ICT skills do not even make the top ten. The BLS foresees 458,000 more personal-care aides and 348,000 home health aides, but only 135,000 more software and application developers.

But wouldn’t better skills enable people currently in rapidly growing but low-pay job categories to get higher paid jobs? In many cases, the answer may be no. However many people are able to code, only a very small number will ever be employed for their coding skills. And even if someone currently in a low-skill job is equipped to perform a high-skilled one at least adequately, that job may still go to an employee with yet higher skills, and the pay differential may still be great: in many jobs, relative skill ranking may matter more than absolute capability.

So “better education and more skills for all” may be less important to productivity growth and a less powerful tool to offset inequality than conventional wisdom supposes. But that would not undermine in the least the personal and social value of education.