Education and Free Markets: How Education Changes People’s Lives, Through Increased Upward Mobility
If you want to handicap a man for the rest of his life, deny him an education. This is manifestly true in America, as the disadvantages associated with a poor education tend to multiply in a free society and a free economy. It is our dedication to free markets that created a standard of living higher than has ever been observed for such a large and diverse group of people in history. This is all the more true for educated Americans, who currently enjoy rising wages, low unemployment and unprecedented opportunity for mobility and growth. The economic picture, however, is not nearly as rosy for less-educated workers.
Those without post-secondary education are often the first to be fired and the last to be hired. A recent analysis from Georgetown University’s Center on Education and the Workforce found that “over 95 percent of jobs created during the recovery have gone to workers with at least some college education.” So while the Great Recession had the biggest negative impact on blue-collar jobs and jobs held by high school graduates, these groups have been almost entirely left behind in the current recovery. The protective effect of higher education continues up the education ladder, with graduate degree recipients gaining 3.8 million jobs in the recovery compared to only 80,000 jobs for workers with a high school education or less (as of 2016), despite the fact that the latter group outnumbers the former considerably.
Minimum wage laws further stack the deck against low and less-skilled labor. Instead of allowing freedom of exchange and movement among employers and employees to decide what the appropriate wage for any given job should be based on the economic value it creates, the government instead steps in to mandate that the least-skilled workers struggle to find employment by setting a wage floor unrelated to their industry or the particulars of the job in question. It’s one thing to argue about the empirical effects of small minimum wage hikes implemented over time, which have likely been modest. It’s quite another to ignore over one hundred years of economic principle and evidence to decide that all jobs need to pay a “living wage,” defined however professional advocates in big cities decide to define it. Mandating a 15 dollar minimum wage does not guarantee that every worker in America will make 15 dollars per hour. It means that only people that can create more than 15 dollars per hour of economic value for their employers will have a job at all.
It’s not just about being able to get a job, but also about how well you are payed once you get one. The changing nature of our economy rewards college graduates and post-graduate degree holders with increasingly higher compensation relative to those without a college degree. College graduates earn nearly twice what high school graduates make on average, according to Census figures ($35,615 vs $65,482 in 2016). And because this compensation was determined through free enterprise and competition among millions of employers and employees rather than by government dictate, we can be confident that the increased salary demanded represents a real increase in economic value created. That is to say, educated workers are able to produce more of the things that other people demand, which increases productivity and the wealth of the nation as a whole.
Broadening our perspective, as the economy continues to become more globalized, Americans must secure our high standard of living by ensuring that our high wages are justified by equally high levels of productivity. We can do this, just as we have done it in the past, by continuing to combine intelligent investments in human and physical capital while still allowing the large majority of economic decisions to be determined through competition and free enterprise to ensure that Americans remain among the most productive people in the world.
Education is like a passport, but instead of allowing freedom of travel between countries it instead frees up its holder to travel up and down the ladders of success. Some people are born into certain socioeconomic strata and as a result come to take for granted the hidden “rules” that govern success in America. Broad access to a high quality education coupled with the dynamic economic forces unleashed through a commitment to free markets is the best solution we have to a whole host of issues vexing large swaths of our country, from unemployment and stagnant wages to a lack of social and economic mobility between generations. Once again, the answer to a vexing social issue isn’t a legislative “answer” at all. It is free markets and free peoples, each deciding for themselves how best to use the God-given talents with which they have been endowed and from which we all may benefit.
Damon Dunn writes the regular “Free Markets 101” column for “Right by the Bay”. He is a successful real estate developer, investor and businessman, former collegiate and pro football player, and was a Hoover Institution fellow from 2011-13.