August 20th, 2015
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Technology is moving faster than people are being trained or educated. There used to be a time when what you learned in college, would serve you for your entire career; because knowledge was doubling every 50 years. Fast forward 60 years, and information is doubling every six months! If the skills necessary to use the technology that’s available is lacking, then structural unemployment occurs.
Structural unemployment is caused by a mismatch between jobs offered by employers and potential workers. Wages and incomes are determined by the value of the marginal output of the job performed. Marginal output grows as labor increasing utilizes technology to become more productive. How well labor utilizes technology depends on the level of skills and education. If technology advances faster than education, then skills fall behind and the utilization of new technologies slows. Therefore, a mismatch between skills of workers and skills required by jobs leads to lower wages and higher unemployment.
Rising income inequality since the 1970s has been a result of technology outpacing educations and skills. Wages have been rising for the more educated and more skilled workers. Wages have been falling for the less educated and less skilled workers.
The educational output in the US has lagged for the past several decades. Adjusted for inflation, the K-12 spending per student has more than doubled. During the same period, math and reading scores have not improved and science scores have declined. Meanwhile, the US spends more than any other OECD country (except Switzerland) per student. The US ranks 36th in Math, 24th in reading, and 28th in Science.
Academic achievement and education attainment are dramatically lower for children raised in single parent households. The percentage of single parent households in the US was fairly steady up through the 1960s. Since the 1970’s, the percentage of single parent households in the US has grown significantly (it has more than doubled) to over 40%.
So, the data indicate that education inequality has significantly contributed to growing income inequality in the US. The growth of single parent households appears to be an underlying factor.