More learning means more earning? Comments on some recent literature

Education is widely considered to have a significant influence on the general performance of the economy, as well as on an individual’s returns in the labour market. In contrast to the physical assets of an enterprise, education is regarded as ‘human capital’.  Because educated workers add more value, then according to this logic, the more rewards they are justifiably able to command. Even if there have been major differences in how policies are applied, human capital theory has continued to provide a major justification for the expansion of education by governments of both the left and the right.

In a recent and intriguing book, Rozelle & Hell (2020) sound a warning about China’s future prosperity. Economic growth in China has, they argue, been based on low waged, low skilled manufacturing enabled by mass migration from the countryside. But surrounded by neighbours enjoying even lower costs and with China’s own labour market already tightening, this situation cannot continue.  Moving to the ‘next stage’ requires much greater levels of skilled labour. But poor levels of education provision, combined with inadequate healthcare and child welfare in the countryside means this migrant workforce will no longer be able to secure employment.

Concerns about growing divisions between rural and urban China are surely justified. But arguments about increases in the quality of human capital being the essential ingredient for moving from a ‘middle income’ to an advanced (or a ‘knowledge’) economy  are less convincing. For example, there has already been a huge increase in opportunities for higher education in urban China and an almost universal recognition of the role of educational qualifications in securing better paid employment – as there is in other neighbouring economies where parents go to extreme lengths to improve the chances of their children getting top grades. But as is the case with more developed countries, the increases in high paid, high skilled jobs have not kept up with the increased levels of qualifications held by the population. Leading to a situation where more and more young people are now ‘overqualified and underemployed’.

Globally these developments have been intensified by developments in technology -first automation and now the digital revolution which have made work much more capital intensive. As a consequence, while there will always be some new and highly specialised  ‘high level’ jobs, there will not be nearly enough for those who ‘qualify’ for them.  With the continued ‘hollowing out’ of the occupational structure (a term used to explain the disappearance of ‘middle’/’routine’ administrative for example, as employers seek to cut costs) the alternative will likely be low paid work in the service sector  – in hospitality, retail and leisure in particular.

This is the argument of Brown, Lauder and Cheung (2020). Education can no longer provide the occupational mobility of the post-war years –far from it. And with national economies increasingly interlinked, expanding education by itself will not enable poor and middle income countries to develop. For Brown and colleagues there is an urgent need to rethink the relationship between education and the labour market –to redefine the concept of human capital in response to automation and AI, but also make sure there is quality, interesting and worthwhile work available. In short, a new type of labour market will require a new type of economy(!)

But has education ever made a serious contribution to economic prosperity?  Reviewing developments in the forty years since the original publication of The Credential Society, Randell Collins (2019) continues to argue that, apart from developing basic literacy and numeracy (most employment skills are, he reminds us, learnt in the workplace), it has not and does not. On the contrary educational qualifications should be regarded as ‘social’ rather than human or ‘economic’ capital. More accurately they should be seen as ‘positional’ goods sought because they will further one’s economic advantage against others. Educational qualifications also help powerful occupational groups to construct barriers to access thus protecting their scarcity. The intense competition for qualifications means that rather than being the result of a skills ‘mismatch’ credential inflation is an inevitable outcome. Like (though doing so much earlier than) Brown, Lauder and Cheung, Collins argues that differences educational performance are used to legitimise, rather than challenge economic inequalities. While educational qualifications continue to provide the main access to labour market opportunities, educational institutions will always be prevented from prioritising broader social goals. But apart from ‘making formal credential requirements for employment illegal’ we are not given any real detail about a possible way forward.

Scott Rozelle, Natalie Hell. (2020) Invisible China. How the Urban-Rural Divide Threatens China’s Rise.  University of Chicago Press

Phillip Brown, Hugh Lauder, Sin Yi Cheung. (2020) The Death of Human Capital? Its Failed Promise and How to Renew It in an Age of Disruption. Oxford University Press

Randall Collins. (2019 Legacy edition) The Credential Society. An Historical Sociology of Education and Stratification. Columbia

See also Ebook

Why young people can’t get the jobs they want and the education they need.