Education Alone Won’t Solve Poverty

Cross-posted at Education Week.

In last week’s blog, I shared my understanding of the challenges facing a large and growing number of Americans who have been left behind by globalization and advancing automation.  Many people wrote to me asking what part education might be able to play in addressing the issues I described.  That is a very large topic, about which I will have a lot to say in coming weeks.  In this blog, my aim is to create a setting for that discussion by placing education in the context of the galaxy of issues that have to be addressed.

It is tempting to think that, because one of the few things the people I wrote about have in common is that they are not well educated, the solution is simply to provide the education they did not have.  Education is certainly part of the puzzle, but there is far more to it than that.

For many of the people I wrote about, the issue is not poverty. It is their sense of being cast aside, of being looked down upon by elites that they feel have no respect for them or their way of life, of being displaced by people they see as outsiders.  Unable to support their families in a world in which they are expected to be providers, many can no longer face themselves in a mirror.  But there are others who can support themselves—sometimes very well—who nonetheless still see their values, their culture and their position in society under siege in a world they hardly recognize and they are very angry about it. These issues are not likely to be addressed by education policy.

I wrote in my last blog about the evils of social class and racial isolation as a major correlate of poverty and hopelessness.  Social class and racial isolation have, as I pointed out, been increasing in recent years. When University of Chicago Professor James Coleman led a massive research project in the 1960s on the inequality of educational opportunity, he and his colleagues, to their surprise, found that the two most important determinants of educational achievement had nothing to do with education policy or practice.  Those two factors are the socioeconomic background and education of the student’s parents and the socioeconomic background of the other students in the school. By this account, students living in communities with overwhelmingly poor and minority parents and students face overwhelmingly long odds irrespective of any particular educational practice to be found in the school.  Put another way, if your own parents grew up poor and are still poor, if they had very little education and if the other students in your school also have parents with little education who are also poor, the cards are stacked against you.  If these things are true not just of your own parents and the parents of the other kids in your school, but of virtually all the parents in your whole community, the odds against you are truly formidable.  The U.S. has many, many such communities and their numbers are growing.

If we really want to address this issue, which is getting worse each passing year, we would have to make fundamental changes in school system governance, tax policy and housing policy, changes that are likely to be opposed by the people who have the most to lose and who also have the most political power in our state houses.  Realistically, the only way these problems are likely to be addressed on a scale that will make a big difference is through the state courts on the grounds of the constitutional rights of the people who are being isolated in our poorest and most racially isolated communities.  This might happen, but I am not holding my breath waiting.

In my last blog, I pointed out that the problems faced by the people whose lives I was describing were mainly the result of globalization and automation—industrial, technological and economic forces.  If that is so, then one might reasonably conclude that these problems can best be addressed with industrial, technological and economic responses. There is, I think, a lot of merit in this analysis.

Here’s what I mean—I hope you will allow me a little economic jargon to make my point.  We can speak of an economy that is in low-skill, low-wage equilibrium, and of an economy that is in high-skill, high-wage equilibrium.  An economy that is in a low-skill, low-wage equilibrium is an economy in which employers are competing with each other on the price of labor and the cost of living.  Communities do this all the time. So do states when they try to attract or retain companies mainly on the basis of forgiving taxes, providing free roads and utilities and offering cheap non-union labor along with a low cost of living.

Communities like that are not interested in spending very much on education because education is costly and they are selling cheap labor, not expensive, highly-educated labor.  Even worse, to attract a really highly-educated workforce, they would have to offer many other amenities that cost money and that would make it even harder to offer big tax concessions to firms they are trying to attract or keep.  Communities and states that are competing with each other on these terms are constantly facing incentives to give ever-bigger tax concessions and build more and more free infrastructure.  Gradually, as more and more businesses come in with business plans that only work if wages are kept low, the community or state gets poorer and poorer.  It becomes immensely challenging for the state to change its economic strategy even if it wants to, because most of the businesses that call that state home would fail if wages went up and, in any case, the state has no money left to invest in the skills of its people.

Now consider the community or state that is pursuing a high-skill, high-wage strategy of economic development.  That community or state is not competing on the price of its labor.  It understands that, as wages go down, so does the standard of living of the workers.  Instead, the state’s aim is to raise the standard of living of its citizens.  That means that wages will have to go up.  The only way to justify higher wages is to produce products and services that people really want, want so much that they are willing to pay a higher price for them.  This turns out to describe products and services that are higher quality, distinctive in design, more original in conception, uniquely adapted to the users’ requirements and adapted regularly to improve those products or services.  It takes much more highly-educated and trained people to produce and deliver such things.

Communities and states that pursue a strategy of this sort find that each step in the journey leads to the next.  Investing in the quality of your people attracts companies that are looking for people who have the education, skills, entrepreneurial chops, creativity and curiosity to create products and services that customers will find irresistible.  They will pay a very high price for such people.  As they start to attract such people, those people will reach out to others like them to join the same firm.  Universities and R&D labs start to locate there because they know they can find the people that they are looking for.  The place becomes a mecca for such people, who, as they arrive, create more and more amenities that bring in even more of them.  Wages go up.  New firms are founded.  Companies go public.  Fortunes are made.  These “ecologies” of institutional capacity all reinforce each other in a virtuous circle that just keeps on going.

Why am I saying all this in this piece?  Because, when I look at the United States, I see whole collections of communities, counties and even states caught up in the low-wage, low-skill equilibrium economic trap and I see others that have figured out how to break out of that trap into the high-wage, high-skill equilibrium model.

What that suggests to me is that the first step in building highly-effective systems of education and skill development is essentially a task for political leaders.  The evidence suggests that no state that is pursuing a low-skill, low-wage economic strategy is going to invest much financial or political capital in rebuilding its education system for high performance if it is in the business of selling cheap, poorly educated labor.  But, if that state makes a decision that it wants broadly shared prosperity and rising—not falling—wages, it will quickly find that the only way it can get there is by building world-class education and training systems.  There is no alternative.

The fact is that any state or nation can be economically competitive.  All it has to do is lower the wages of its workers until wages reach the global wage for people with that level of skills.  Because American workers charge a great deal for their services when compared to wages in many other parts of the world, and most American workers are poorly educated compared to a quite a number of countries that charge much less for their labor, wages have a lot of room to fall if we decide to compete on the price of our labor.  So the incentive for states to think really hard about their economic strategy is very strong indeed and getting stronger every day.

Now we are finally on the topic with which we started, namely, given my portrait of those who have been left out that I left you with at the end of my last blog, what role does education have to play in addressing their plight?

My first order answer to you is: only a marginal role unless your state makes a decision to go for an economy designed to function as a high-wage, high-skill, high-value-added economy.  Make that decision and your state will discover that the only way to get there is to redesign your education system to produce results comparable to those produced by the most successful education systems in the world.  Better yet, figure out how they got to the top of the world’s rankings then figure out how to do even better than they are doing.

Why do I say that?  Because even the top-performing nations are not satisfied with the results they are getting.  They are reaching for much more.  And the shape of the next round of global education reform is beginning to take shape.

But I will leave that story for my next blog.