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Education Reform
Why Is Productivity Growth Slowing?

A new report from J.P. Morgan, relayed by the Wall Street Journal, suggests that one reason U.S. labor productivity growth rates have been falling since the turn of the century is that the quality of the labor force is stagnating or actually declining:

Growth in “labor quality,” a measure of the skill set of the average worker, has declined in the last few years, according to the report. In 2015, the growth in overall workforce skills contributed less than 0.1 percentage points to GDP growth, the smallest contribution of labor quality to growth since 1979. Michael Feroli, the author of the [J.P. Morgan] note, estimates that contribution will remain below 0.1 percentage points for the next few years.

Compare that with previous decades: In the postwar era through 1980, growth in labor quality contributed 0.25 percentage points to GDP growth each year. From 1980 to 2005, that contribution rose to around one-third of a percentage point.

Critically, the decline in the quality of the labor force has occurred even as per pupil public expenditures on education have steadily increased, and even as people are spending more and more time in school. 

These findings, if true, represent a dramatic illustration of the failure of American education institutions to provide the necessary results at a reasonable cost. This is a strong argument for major educational reform—for changing the ways students learn and the way education is structured—rather than doubling down on a system that is no longer delivering the results we took for granted in the 20th century.

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  • Pete

    The teachers unions, a truly destructive force.

  • Kevin


    I’d like to see how the change they identify varies by age, race, gender and educational attainment. Is the decline in younger or older workers,mcollege grads or HS grads, whites or minorities, immigrants or native born, etc. or the changing composition of different segments if the population!

    • f1b0nacc1

      Would be intrigued to see how it breaks down by regions as well.
      Wouldn’t be too surprised if the ‘low hanging fruit’ of a lot of modern technological change has been picked already, hence we aren’t seeing the same quality of change as in the past.

  • Andrew Allison explains it. Since kids are no longer required to work hard in school, they see no reason to do so later.

  • Pait

    It is hard to avoid noticing that the productivity growth slowdown came about as the children who went to school when the tax-cutting movement took hold reached their prime productive years. Proposition 13, which led the nation in tax cutting, and transformed California’s schools from the world’s best financed into some of the nation’s poorest, was passed in 1978; 22 years later, when the 1980’s elementary schoolers reached their 20s and 30s, productivity begins slowing down. Coincidence? Perhaps.

    Or perhaps not.

    • Dale Fayda

      “Perhaps not” is right. Over 80% of CA public school budget (which in itself is around 20% of the overall state budget) is spent on salaries, benefits and pensions of its union members. This systems, along with every other state-wide public union pension system is circling the drain:

      It’s not Proposition 13 that’s destroying (nay, destroyed) CA public school system – it’s the plague of union parasites and their Democrat party lackeys in state government. Progressives have run the CA public education system at EVERY level for decades now and it’s the biggest, most expensive clusterf@#$k in the country. A more likely culprit that Prop.13, perhaps? What say you?

      • Pait

        So you think it is not a coincidence. I don’t think so either, although the cause-effect relation is not straightforward.

        Anyone who stops for a minute to think about schools should not surprised that about 80% of a school’s budget would go to salaries in any – it’s a service, and the remaining cost items are rather small. Chalk, buildings, utilities, books, all small expenses compared to teacher’s salaries.

        • Dale Fayda

          Oh, sure… That’s why there is overcrowding, dilapidated school buildings, entire functionally illiterate school bodies, etc. But as long as the public union parasites are fat and happy, it will all be swept under the rug and every effort to reign in the ruinous pension obligations will be quietly strangled, as they have been up to now.

          Om the other hand, the progressive “wizards of smart” have found the funds for this disaster:

          • Pait

            I think I said before that your arguments by repetitive invective are uninteresting, uniforming, and rather tiresome.

            Additionally, if you don’t understand why a service organization should be spending the vast majority of its budget in personnel compensation, I do not think you have much of a clue about how a business works.

            Roger and out.

          • Dale Fayda

            Aeeeeeee, I have angered the enlightened Pait. So sorry, so sorry…

            As I stated numerous times before, liberalism is a mental disorder. When confronted with real-life, tangible, visible, quantifiable evidence of progressivism’s colossal failures, they change the subject, misdirect and shuck & jive. Wonder if the young “useful idiots” voting for Bernie Sanders think the impoverished people of socialist Venezuela are “feeling the Bern”?

            I have just shown you journalistically documented evidence of CA education system’s failures, from impeccably left-of-center sources. A simple Google search will yield a plethora of similar information, in case you’re not yet convinced.

            Per usual, you have no retort for the facts I presented, but instead whine about my writing style. Have you nothing to counter the crux of my arguments? After all, it was you, in your trademark liberal passive-aggressive style, who fired the first salvo by trying to blame the endemic progressive disfunction on Proposition 13. If you’re going to talk the talk, it helps to walk the walk. Go big or go home or something like that. Think about it.

          • Pait

            Rant on. Someone may read.

          • Dale Fayda

            Someone does, dingus.

          • Jim__L

            Pait, he’s provided an order of magnitude more facts and useful information than you have here. Sure, there’s some name-calling that’s a turn-off, but for the most part he’s right on the money — especially on his charge that you’re not engaging with his actual arguments.

          • Pait

            For my amusement I’ll collect what you call facts: “plague of union parasites”; “party lackeys”; “biggest, most expensive clusterf@#$k”; “ilapidated school buildings”; “functionally illiterate school bodies”; “parasites are fat and happy”; “liberalism is a mental disorder”; “progressivism’s colossal failures”; “useful idiots”…

            Jim_L, this is not an argument. There are no facts here. Not even opinions. This is garbage. An indicator of a dysfunctional mind, one is tempted to speculate.

            Let me hang on to the Venezuela reference. I doubt that any of you know the 1st thing about Venezuela, but in the unlikely case you do, I think you will recognize that the kind of “argument” being used here is what brought Venezuela to the disaster it is now. We who have a connection to Latin America always thought that, no matter how bad things get, there is a positive influence from America that will eventually bring things back. Reading the kind of trash talk that is considered acceptable argument even in a higher-quality opinion site such as this, I very much fear that this positive influence no longer exists.

            Additionally, let me repeat that a school should of course be spending the overwhelming majority of its budget on salaries. A person who does not understand has no understanding of how a business works. Not even their own business.

          • Jim__L

            Pait, I made a distinction between the name-calling and the facts for a reason. The fact that you’re having trouble seeing that tells me much about the problem here.

          • Pait

            There are no facts in his argument, only name calling. Neither in yours, as far as I can see. When you see a fact, or a reasoned opinion, you run away. It’s my turn to run now. Goodbye.

  • ljgude

    Structural reform, actually having anything like enough technical education that imparts skills might help. I’d like to line the little dears up and see how many of them can drive a nail. But its Lake Woebegone everywhere and all the children MUST be above average. ‘Mamma don’t allow no nail drivin’ round here’. Neither does Pappa who never knew how either.

  • Blackbeard

    Education is a bastion, perhaps the bastion, of the Democratic Party. Some 60% of college grads never find a job that actually requires a college degree which is perhaps not surprising when you realize the single most popular major is media studies. Not only do these kids end up with worthless degrees they end up with a ton of debt. Since they haven’t learned anything they don’t know what socialism is so they support Sanders who promises, among other pie in the sky nostrums, “free” college.

    None of this will ever be reformed at long as the progressives run the country.

  • Jacksonian_Libertarian

    I’m struck by how the labor productivity number drops from .33% to .1% after 2005. This is the exact time period when the economy rolled over from inflationary and into the deflationary trap. But I can’t identify any change in education over this period, just that it continues to become more dogmatically leftist. So I’m at a loss to understand why education is being blamed here for falling labor productivity. I’m thinking we should be looking at the huge increase in part-time vs. full-time work, as well as the steeply falling work force participation. We also should be looking at the large increases in immigration both legal and illegal, as immigrants are mostly poorly educated and are becoming a larger part of the work force. But the major factor here is the huge drop in business investment caused by deflation, as the M3 money supply stagnates. Businesses are milking their capital investments, rather than borrowing money and paying for improvements which would increase efficiency and productivity.

    • FriendlyGoat

      I think you just made some arguments here against high-end tax cuts, but would never admit it. What coincides with 2005 better than the kick-in of the 2001 and 2003 tax cuts? Why were working people forced to part-time or out of labor participation altogether? Why do you not have the (deductible) capital expenditures you might like?

  • qet

    A contrarian view: education has nothing to do with “labor productivity”, skills training does. Every argument TAI (and others) advances for education “reform” reduces to a call for substituting vocational technical training for education. Which does not make the proposal necessarily wrong. Just irrelevant to debates over “education.” Also, there are so many articulation points in the analytical chain leading from economic output to educational content that I would advise far more circumspection and skepticism over the true epistemological import of such analyses than TAI seems to have.

  • Boritz

    There is the issue of retirement. How does the staff at NASA today compare to the one that brought Apollo 13 home in 1970? Which team in its prime would you want helping you if you were in trouble “up there”? Oh that’s right. We don’t have a manned space program now except as hitchhikers.

    • Jim__L

      The NASA staff of today are far more over-educated, dream-oriented, and sensitive to internal politics than the hands-on engineers whose staunch federal banking allowed them to tend to the business of putting men on the moon and bringing them safely back.

      I suspect you will love this quote by Arturo Pérez-Reverte in “The Fencing Master”…

      “Do you know what the problem is? We find ourselves in the last of the
      three generations history chooses to repeat every now and then. The
      first generation needs a god, and so they invent one. The second erects
      temples to that god and tries to imitate him. And the third uses the
      marble from those temples to build brothels in which to worship their
      own greed, lust, and dishonesty. And that is why gods and heroes are
      always, inevitably, succeeded by mediocrities, cowards, and imbeciles.”

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