Outsourcing: Bigger Than You Thought

The great conservative political philosopher Edmund Burke, who probably would not have been a reader of The American Prospect, once observed, "You can never plan the future by the past." But when it comes to preparing the American workforce for the jobs of the future, we may be doing just that.

For about a quarter-century, demand for labor appears to have shifted toward the college-educated and away from high-school graduates and dropouts. This shift, most economists believe, is the primary (though not the sole) reason for rising income inequality, and there is no end in sight. Economists refer to this phenomenon by an antiseptic name: skill-biased technical progress. In plain English, it means that the labor market has turned ferociously against the low skilled and the uneducated.

In a progressive society, such a worrisome social phenomenon might elicit some strong policy responses, such as more compensatory education, stepped-up efforts at retraining, reinforcement (rather than shredding) of the social safety net, and so on. You don't fight the market's valuation of skills; you try to mitigate its more deleterious effects. We did a bit of this in the United States in the 1990s, by raising the minimum wage and expanding the Earned Income Tax Credit. Combined with tight labor markets, these measures improved things for the average worker. But in this decade, little or no mitigation has been attempted. Social Darwinism has come roaring back.

With one big exception: We have expended considerable efforts to keep more young people in school longer (e.g., reducing high-school dropouts and sending more kids to college) and to improve the quality of schooling (e.g., via charter schools and No Child Left Behind). Success in these domains may have been modest, but not for lack of trying. You don't have to remind Americans that education is important; the need for educational reform is etched into the public consciousness. Indeed, many people view education as the silver bullet. On hearing the question, "How do we best prepare the American workforce of the future?" many Americans react reflexively with: "Get more kids to study science and math, and send more of them to college."

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