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Saturday, November 26, 2005

Education, Income, and Good Job Growth

Posts at this site, from Kash at Angry Bear, and many others have been talking about the value of education in the emerging global marketplace, often to a less than fully receptive audience. At the risk of overdoing this topic and of diverting attention from the health care discussion below which I'd rather not do just yet, here is a follow up to two recent posts from Kash on Education and Earnings and More Skills Needed. First, California is often a trend-setter, but the trends are not always good:

California's going to get a shocking education, by Patrick M. Callan, Commentary, LA Times: ...If current education policies continue unchanged, the California workforce of 2020 is going to be less educated than today's, according to a recent report ... and the state's per-capita income will drop more substantially than elsewhere in the country. The transformation will occur as baby boomers, the most highly educated generation in U.S. history, retire. Across the country they will be replaced by a growing population of young workers from the nation's least-educated minority groups. The share of the workforce that is college educated will shrink accordingly, losing the U.S. much of its advantage in the global marketplace. The problem is national, but in California it will be particularly severe. ... The Latino population, by far the least educated of any of the state's large minority groups, is expanding dramatically. By 2020, Latinos will make up as large a share of the state's working-age population ... as whites... This is a seismic shift; in 1990, only 22% of working-age adults were Latino and 61% were white. ... [T]he state is making only limited progress with its current students. ... the gaps between young Latinos ... and young whites, blacks and Asian Americans remain large. To some extent, the problem may be one of inadequate preparation in California's schools. ... But preparation is not the whole story. The expense of higher education can also be prohibitive. California provides more low-cost college options than most states and has recently increased ... need-based financial aid. But for the poorest 40% of California families, the cost each year of sending a child to community college still amounts to more than a third of the average family income. The cost of sending a child to a public four-year college, even after figuring in financial aid, amounts to nearly half of such a family's income. If California does nothing more to raise the education level of its residents, and particularly of its largest, fastest-growing and least-educated minority group, it can expect to lose economic ground against the world and other states. ...

Next, here's more from the St. Louis Fed:

Employment Growth in America
What Determines Good Jobs?

Employment growth is one of the most fundamental aspects of a strong economy. Yet not all jobs are created equal. Some pay generously and offer desirable working conditions, while others do not. A study by Federal Reserve Bank of St. Louis economist Christopher H. Wheeler examined the growth of high-paying (“good”) and low-paying (“bad”) jobs across a sample of 206 metropolitan areas in the United States. This study suggests that ... [c]ities that experience rapid growth in high-wage employment also tend to see increasing incomes throughout the entire labor market, not just among those who happen to hold high-paying jobs...

Does Education Matter? One of the fundamental sources of good job growth is an educated labor force. Within the past three decades, the demand for highly educated workers has grown dramatically in the United States. In 1980, the average proportion of workers across 200 industries with some education at the college level was 32 percent. By 2000, it had risen to 51 percent. In fact, no industry saw its proportion of college-educated workers decrease over this period. At the same time, high-paying jobs also tend to have a particularly strong demand for college-educated workers. Among the top 25 percent of jobs in the sample, the average proportion of workers with a bachelor’s degree rose from 18 percent in 1980 to 36 percent in 2000. There is also a strong positive association between an industry’s average hourly rate of pay and the fraction of its workers with a bachelor’s degree. ... Why is the general level of education so important? ... Not only is education associated with higher earnings for individuals, but as the general level of education within a city rises, the average labor earnings of all workers tend to rise. An additional benefit of a more-educated work force concerns the potential for future job growth. The level of education among a city’s population is strongly associated with subsequent rates of growth among high-paying sectors. ... [C]ities with more-educated populations tend to see the ratio of good to bad jobs increase over time...

Here are the top 5 and bottom 5 industries identified in the article:

Jobs in the U.S.: Average Hourly Pay and Total Employment

2000 Rank

  Average Hourly Wage ($)
1 Metal Mining 38.61 22,813
2 Security, Commodity Brokerage and Investment Companies 36.26 991,548
3 Business Management and Consulting Services 32.83 825,480
4 Railroads 29.73 291,944
5 Computer and Data Processing Services 29.70 1,385,009
192 Barber Shops 12.73 44,509
193 Retail Florists 12.57 152,538
194 Gasoline Service Stations 12.52 392,666
195 Eating and Drinking Places 12.06 5,151,237
196 Bowling Alleys, Billiard and Pool Parlors 12.02 49,759

This article was adapted from “Employment Growth in America” ... by Christopher H. Wheeler ... published ... in July 2005.

Here's a link to the July 2005 paper. It has quite a bit more information on the topic of growth in good/bad jobs for those who want to follow up.

    Posted by on Saturday, November 26, 2005 at 03:13 PM in Economics, Income Distribution, Unemployment, Universities | Permalink  TrackBack (0)  Comments (38)


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