Viewpoint June 24, 2010, 9:39PM EST

Failing U.S. Education Will Dumb Down Economic Growth

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Meanwhile, even as the share of workers with at least some college education rose from 28 percent in 1973 to 59 percent in 2007, the wage premium for advancing up the educational ladder has held up for a long time. For instance, the wage gap between men with a college degree and those with a high school degree was 20 percent and 27 percent, respectively. The gap is now around 44 percent for men and 49 percent for women.

A Shortage of Educated U.S. Workers?

The demand for well-educated workers is only growing, and the effect is cumulative. Powerful economic forces such as the rise of brutal global competition and the spread of sophisticated information technologies will continue to push employers to value better educated workers who are comfortable working in teams, quick to adjust to new tasks, and well-schooled in the latest high-tech gear. At least that's one conclusion to draw from a recent paper by Anthony Carnavale, director of the Georgetown University Center on Education and the Workforce. He projects that the economy will create 47 million job openings from 2008 to 2018, made up of 14 million new jobs and 33 million jobs replacing current workers who have retired, become disabled, or died.

The key finding: Most of the jobs demand some postsecondary education, with about 30 million openings requiring at least some college education and 21 million an associate's, bachelor's, or graduate degree. If educated workers aren't readily available, companies will automate the tasks or find educated employees overseas. After all, with many developing economies devoting more resources to university education, America's share of the world's college-level workers has shrunk from some 30 percent to about 15 percent, according to Carnevale and two Georgetown University colleagues, Jeff Strohl and Nicole Smith.

Sad to say, the ranks of poorly educated Americans are growing. The growth in high school graduation rates has slowed since the 1970s. The nation's four-year high school graduation rate hovers around 69 percent, according to the Alliance for Excellent Education, a Washington (D.C.) organization that advocates better high school performance. Some minority groups do even worse, with a 56 percent dropout rate for Hispanics and 54 percent for African Americans.

Tougher Road for Dropouts

The Center for Labor Market Studies at Northeastern University calculates that the average high school dropout will have a lifetime negative net fiscal contribution to society of some -$5,200. The average high school graduate generates a positive lifetime number of $287,384. The sharply lower figure for dropouts aged 18 to 64 reflects lower annual federal, state, and local tax payments, higher cash and in-kind transfers, and the costs of incarceration relative to a high school graduate. (The comparable figure for a college graduate with only a bachelor's degree is $793,079.)

Following the Great Depression and World War II, it appeared that the U.S. and other major industrial nations had banished the well-known phenomenon of mass unemployment. Most workers, including those who labored on a factory floor, lived a middle-class lifestyle, and the unemployment rate largely moved up and down with the business cycle.

But the specter of mass unemployment once again haunts the U.S. The Great Recession is exposing the cumulative effect of a three-decade shift toward high-education jobs and a failing education system. The trend has always been morally wrong—and financially stressful for low-income households. But now the swelling numbers of less educated unemployed-and-underemployed working-age adults is starting to call into question whether the U.S. can mount a sustained, robust economic recovery. Years of subpar growth and high unemployment would be a bitter lesson for Americans, college-educated or not.

Farrell is contributing economics editor for Bloomberg Businessweek. You can also hear him on American Public Media's nationally syndicated finance program, Marketplace Money, as well as on public radio's business program Marketplace. His Sound Money column appears on Businessweek.com.