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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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