The U.S. has fallen far behind in this key measure of human capital
Yesterday, I looked at how the nations of the world stack up on technology and innovation. Despite predictions of U.S. technological decline and the rapid rise of the BRIC countries, America and other advanced nations continue to hold an overwhelming lead in technology and innovation. Today I turn to another key dimension of economic progress: human capital.
Economists have long regarded human capital—basically the level of skill and education across a population—as a key factor, if not the key factor, driving economic prosperity and rising living standards. Many have noted that America’s declining educational performance and dependence on foreign talent pose substantial threats to its long run of economic competitiveness.
While most economists measure human capital by levels of educational attainment, my colleagues and I utilize a different measure: the share of a country’s workforce in high-skill, high wage Creative Class jobs spanning the fields of science, technology, and engineering; business, management and finance; design and architecture; arts, culture, entertainment, and media; law, healthcare, and education. A series of studies have found that these occupations, rather than college degrees, provide a more accurate measure of the key skills that comprise human capital. For one, occupations measure the work people actually do, as opposed to just the level of education they have. A college degree adds substantially to wages but it is not the only route to a high wage job and many of our greatest entrepreneurs, like Bill Gates and Steve Jobs, were college dropouts. In the U.S., for example, nearly three-quarters of adults with college degrees are members of the Creative Class, but less than 60 percent of the members of the Creative Class have college degrees: In other words, 4 in 10 members of the Creative Class – 16.6 million workers – do not have college degrees. Creative Class membership adds significantly to wages, carrying with it a 16 percent wage premium even after controlling for level of education and other factors, equivalent to another 1.5 years of additional education, according to research by economist Todd Gabe. Our estimates for Creative Class occupations are based on data from the International Labour Organization.
The United States does quite a bit worse on this measure than on innovation and technology – ranking 27th in the world, just behind Slovakia.
At the top of the list is Singapore (47.3 percent), followed by the Netherlands (46.3 percent), Switzerland (44.8 percent), Australia (44.5 percent) Sweden (43.9 percent), Belgium (43.8 percent), Denmark (43.7 percent), Finland (43.4 percent), Norway (42.1 percent), and Germany (41.7 percent).
One BRIC nation, Russia ranks higher than the U.S. at 20th (38.6 percent). Brazil is 57th (18.5 percent), and China 75th (7.4 percent).
Many studies have shown that a key factor in American competitiveness and prosperity was its once world-leading system for developing and deploying human talent. That edge has clearly eroded. And not just in terms of educational attainment and performance, but in the share of its workforce in high-skill, high-wage Creative Class jobs. While the U.S. still holds a substantial lead over China, many other nations have caught up and surpassed it on this score. But America is a big country and my own research shows that the distribution of Creative Class jobs is geographically concentrated, with certain regions like Silicon Valley, greater Washington, D.C. and college towns like Boulder, Colorado scoring as high as the leading nations. While such creative concentration may be enough to underpin continued clusters of technological innovation and entrepreneurial business formation, it means a larger share of Americans toil in lower-skill, lower wage jobs—a key factor in the nation’s deep and widening socioeconomic inequality. While I am not as pessimistic as the declinists—there is still time for the nation to reverse course—many of “the rest” have clearly caught up and jumped ahead on this score. Given the deep divides that vex this country, it may be an issue that is particularly difficult to address.
Tomorrow's post will cover our new comprehensive measure of economic performance, the Global Creativity Index.