[This continues the RR series on jobs and the economy, and illustrates the relationship between workforce skill levels and available jobs across a spectrum of productivity levels. The objective is to give the reader a firm understanding of why and how America’s systemic unemployment has come into place, and its future in terms of worker education. This problem has no current solution, and is the prime reason that politicians of all parties avoid it like the proverbial third rail. The portents of such a future are truly grim, promising to accelerate the growth of economic disparities or the imposition of wholesale misery on all of us. It is the mother of all our ills.]
Last May readers were alerted to a new initiative in online education called edX – ‘edX – ‘a revolution in education’’. Since then people have been busy, and Harvard has activated its HarvardX program with the launch of two edX courses. More than 100K students worldwide have signed up and are now taking the courses (more here). This is an exciting milestone that will soon have many universities convert curriculum to this delivery platform.
According to my lights, this is the kind of broad-based, economical, and widely available education product that can make a difference in US workforce participation – now about 61% - as technology pushes up worker productivity. For large scale analysis, the use of aggregate or average worker productivity is useful for evaluating alternative economic policies. Readers may recall previous RR posts on the topic – e.g. 'The jobs problem - shhh'.
But looking at the problem at a finer scale, one quickly realizes that jobs distribute themselves at various productivity levels from still very low (e.g. field hand harvesting tomatoes) to very high (e.g. laser eye surgeon with patients on a turntable). We can envision the number of available jobs at each productivity level as a bar graph (histogram) in the shape of a bell curve (Gaussian). These are represented by the green bars in the graph below (Figure 1) which illustrates a toy economy for discussion purposes.
The red bars represent the number of available workers in the workforce who are qualified at each of the indicated productivity levels (including, of course, lower productivity levels). We can also envision them being distributed more or less in the shape of a bell curve. But notice that in the real world, the available workers (red) distribution is shifted to the left of the available jobs (green) distribution. And here’s the punch line - to the extent that the red bars are taller than the green bars, there are more workers available at the low productivity level than there are jobs. Conversely, to the extent that the green bars are taller than the red bars, there are high productivity jobs unfilled due to the shortage of skilled workers. That is the systemic imbalance of workforce skills and jobs in our economy.
The excess of workers at any productivity (skill) level causes 1) unemployment and/or 2) lower wages for those working the jobs for which there are excess workers – i.e. supply of labor exceeds demand. So what to do?
Lest we forget, the red bell curve is not stationary either. As our population grows, each of the red bars grows taller, indicating more workers available at any given skill level. If the skill levels remain the same in the workforce, the inevitable result is that unemployment will go up as can be seen from Figure 3 where the workers’ red bell curve increases in height, but stays in the same place on the productivity axis.
But what we want is the red bell curve to migrate also to the right as it grows, and keep up with the increasingly productive jobs migrating to the right. This hopeful migration is shown in Figure 4. And here’s the inevitable punch line – that can only occur through education, which brings us full circle to what edX and related learning technologies that are being developed for today. And that is the import of why I want to keep RR readers up to date on these developments, because availability and application of new and more efficient educational methods are the only thing between us and blood in the streets.
However, educating the workforce to increase their skill sets (i.e. ability to fill more productive jobs) is not sufficient as was seen from the red worker bars being taller than the green job bars. If we just educate a higher number of workers and do nothing else, then all we have done is filled the available jobs but at the same time caused more unemployment. We can see from Figure 4 that there are more workers at the proper skill levels, but not enough jobs to get everyone working.
The obvious solution is that we need more jobs at the indicated skill levels – i.e. the green bars need to be taller. And that can only be done by growing the economy as reflected by the country’s GDP. The nation must have policies in place to attract investment and promote the growth of all sizes of businesses. It is then that the inevitable population growth will not result in more and more workers being left behind as technology continues to increase the productivity levels for available jobs. These arguments are all summarized in Figure 5
I can’t conclude this little dissertation without pointing out that thanks to our teachers unions dominating state run schools and education policy, the exact opposite has been happening with the red (worker) bell curve. It has been growing vertically while actually migrating to the LEFT, toward the ever lower skill levels. At the same time our governments continue to increase tax and regulatory burdens which greatly limit GDP growth. These are the twin wrong-headed policies that have taken us beyond the tipping point, and only a small fraction of Americans understand the causes and scope of the problem. Hope this has helped shed some light on what I believe is the biggest and most complex crisis facing America in its history as a sovereign nation-state.
[21oct12 update] Corroboration of the constant pressure of accelerating technological innovation is expanded in 'Why Can't Things Get Better Faster (or Slower)'. This phenomenon has been unstoppable by recessions and depressions over the last century plus, and gives no hint of slowing down. Please review the major forces explained above on the dynamics of workforce growth and productivity increase.
And I want to memorialize here that the established economists worldwide are almost uniformly blind to what I am expounding on here. The practioners of the dismal science are headed for the next and now traditional trainwreck of their Prognostication Express - today they are no longer the gang that can't shoot straight, they can't even find their guns. The Economist recently asked 'Is America Facing an Increase in Structural Unemployment?' Read the answer summaries, and not one of those worthies even hints at what I have described here. It appears that it's the technologists who see the obvious things happening around us about misdirected education, burgeoning workforce skills mismatch, and the growing impact of smart machines. The old gang still talks about the same ol' same ol' economic factors affecting employment rates that we all learned from Samuelson's Econ 101 text in the 1960s. And my informal survey of the general readership of today's current events literature indicates that they don't seem to have a clue about any of this - it's Cricket City out there. Just for the record as we look back on these times.