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Education as a Driver of Growth

Anonymous on March 25, 2011 Source: Policy Dialogue on Entrepreneurship

With unemployment rates near nine percent, politicians of both parties continue to discuss ways to spur economic growth and job creation.  Lost in much of this debate is the role of education.  Indeed, some economists have suggested that structural (as well as cyclical) issues are preventing the unemployment rate from falling.  Dennis Lockhart, the President of the Atlanta Federal Reserve, recently discussed a number of factors which he said serve as structural impediments, such as a skills mismatch, geographic immobility, “house-lock” due to being unable to sell one’s home, and the effects of extended unemployment insurance.  He also noted, “Employment is increasing for people with a college degree, while those with a high school degree or less are still losing jobs.”   While a study from researchers at the Federal Reserve Bank of San Francisco downplays “structural frictions” in the job market for recent college graduates, they are less likely to have a skills mismatch, as they are just beginning their careers.  In general, college graduates are more likely to be highly mobile.  Others might not have it so easy.

In light of this, the House Committee on Education and the Workforce held two field hearings titled “Reviving Our Economy: The Role of Higher Education in Job Growth and Development.”  One of them was in Wilkes-Barre, Pennsylvania, and the other was in Uttica, New York.  In an op-ed published in the Wilkes-Barre Times-Leader, Rep. Lou Barletta (R-PA) and Rep. John Kline (R-MN) write:

… we are keenly aware of how closely related education is to the strength of the work force.  A student’s success in the classroom will help determine success in the workplace. The evidence overwhelmingly suggests that individuals who fail to advance in their educations are more likely to be unemployed and earn lower wages.…  We need an education system that can adapt to the needs of students, empower parents to protect the interests of their children and equip individuals with the tools they need succeed in the workplace.

A number of studies, including my own, find that higher levels of human capital are highly correlated with greater economic growth and entrepreneurship.  Moreover, educational attainment accounts for much of the difference in outcomes between urban and rural regions, which is particularly notable since the two Congressional field hearings were held in rural communities.  In fact, George Hammond and Eric Thompson have suggested that “state and local economic development officials should focus their efforts on encouraging education and retraining and attracting better-educated residents” to improve overall outcomes. 

The participants at the Congressional field hearings heard from local policymakers, business leaders, and academics, and many of them made the case that education played an important role in economic development in their regions.  Thomas Leary, the President of Luzerne County Community College in Nanticoke, Pennsylvania, said, “Community colleges have always played a key role in providing the workforce with the education and skills necessary to find sustainable employment in the business and industry that supports the economy, including high priority occupations….”  Raymond Angelli, the President of nearby Lackawanna College, discussed his college’s outreach with the business community to determine what needs were important to them, and they designed curricula around those needs.   Meanwhile, at the New York hearing, Bjong Wolf Yeigh, the President of the State University of New York Institute of Technology at Utica/Rome, stressed the important role that university innovation (e.g., nanotechnology) has played in developing new opportunities for students and entrepreneurs, and Judith Kirkpatrick, the Provost of Utica College, mentioned its fast-growing cybersecurity program and the need for keeping academic programs “innovative and forward looking” to meet the needs of industry.

Many of the panelists discussed the need for greater federal resources, particularly the need for increased Pell grant funding.  However, the central theme of the remarks at this hearing was the collaboration between colleges and universities with government leaders and business owners to address the educational needs of the communities in which they live.  Each of them understood the value of education, with a few of them lamenting “brain drain” of some of their more talented students to other opportunities elsewhere.  As the Committee Chairman Rep. Kline wrote with his colleague Rep. Richard Hanna (R-NY) in the Uttica Observer-Dispatch, “Washington cannot create jobs, but it can enact policies that foster an atmosphere that encourages creativity in our classrooms and promotes economic growth.  We look forward to hearing … how we can work together – on the local, state, and federal levels – to reinvigorate the American spirit of innovation and prepare the students of today to succeed in the workforce of tomorrow.”

Category:  Digesting DC  Tags:  economic growth, job creation, unemployment

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