Learning is to
the knowledge economy what coal was to the industrial economy—the
fuel for economic progress. That’s both the good news and the
bad news. The good news is that unlike natural resources that
are owned by a few, learning can be undertaken by anyone. The
bad news is that those who, for whatever reason, do not learn
are left out in the cold (so to speak).
learning is what separates the “haves” from the “have nots.”
Over the past two decades, formal education, which is the imperfect
but best proxy that we have for measuring learning on a large
scale, has become an increasingly powerful determinant of earnings
capacity. For example, in the U.S. the “wage gap” between those
with and without a college education has more than doubled since
1980. In European countries, where labor markets tend to operate
with less flexibility than in the U.S., this growing gap between
the highly educated and the less educated has manifested itself
more strongly in the form of differential unemployment—with
the least educated increasingly bearing a disproportionate portion
At the most fundamental
level, learning is the prerequisite for change. With it, people
are armed to take advantage of the new opportunities that emerge
with breathtaking regularity. Without it, the new opportunities
are just that—breathtaking. Without the capacity to learn, new
opportunities (which typically emerge as old opportunities disappear)
are not opportunities at all. They are a threat.
that the manner in which we approach learning will be a fundamental
determinant of the type of society that we create. Not only
does learning increasingly determine economic opportunity, it
also increasingly shapes all of that which accompanies economic
opportunity, or the lack thereof. It determines where we live,
who our neighbors are, where our children go to school, and
the safety of the streets that they walk on to and from school.
It also shapes our health and longevity, and in many ways determines
the extent to which each of us will contribute to society’s
problems, or be a source of the solution.
In other words,
learning has become far too important to be left to chance.
No matter how much of a believer you are in the powers of the
free market, it seems evident that learning should not be left
to it. Children certainly deserve better than the worst that
it has to offer—although that is not the point that I want to
focus on here. Rather, the point is that adults deserve better
too. Not only do they deserve better, it is in our enlightened
self-interest to make sure they get it.
Once a person
leaves the formal education system, it is their work that is
the primary source of their capacity to learn—especially to
learn skills and knowledge that have economic significance.
Research has shown that workplace learning has powerful effects
on people’s earnings capacity. For example, the “wage effect”
of 40 hours of formal training is estimated to be about 8% for
individuals with little previous work experience. That is to
say, an individual who has the good fortune to participate in
formal learning activities at work would be expected to earn
about 8% more per annum than an otherwise equivalent
person who did not participate in formal learning. That is a
huge effect—of approximately the same magnitude as an entire
additional year of formal education.
But here’s the
real clincher. Other research has shown that at the low end
of the income distribution, parents’ earnings have a huge impact
on the well-being of their children; a relatively small increase
in earnings can have a big impact on children of low-income
parents (although, not surprisingly, this is not true for children
of high income parents). In fact, it appears that the detrimental
effects that children too often experience as a result of being
raised by a single mother (e.g., low grades, drug and alcohol
problems, teenage pregnancy) are primarily attributable to low
income, rather than to being raised by a single mother.
So here’s the
point. Learning is not just a good thing. Given the high degree
of correlation between people’s economic well-being and other
non-economic dimensions of families’ well-being, learning is
an increasingly important determinant of the overall quality
This line of
argumentation leads inexorably to the conclusion that it is
in society’s interest to actively promote lifelong learning.
And since so much of life is spent at work, that seems like
an excellent place to start. Sure—people can go to night school.
But the reality is that when you’re working (potentially long
hours and/or more than one job), commuting (often on public
transportation), caring for your children and attending to whatever
other obligations you have, there is precious little time left
to go to school. Especially for those who could benefit the
most from doing so.
That means that
employers who make it easy for people to learn at work deserve
our special thanks. But they deserve more than our thanks. They
deserve our help.
given the laissez faire policies in vogue in the United
States, workplace learning is a topic that receives no attention
whatsoever from a public policy perspective. Implicitly, we
have taken the view that if it’s a good thing, then the market
will take care of it. But that view fails to distinguish between
the “private good” and the “public good.” Although “the market”
is terrific at maximizing the private good, and also the public
good when it coincides with the private good, the market is
lousy at arriving at optimal solutions when the two—public and
private good—do not coincide. And with regard to lifelong learning,
they do not.
Public good and
private good diverge in the presence of “externalities.” Because
there are “negative externalities” associated with smoking,
we impose a tax on it (both to discourage the activity and to
help pay for its negative effects). Because learning has “positive
externalities” associated with it (it makes for a better society),
we subsidize it heavily. But increasingly, learning does not
(or should not) stop when people leave the school system. In
the era of unprecedented change in which we live, learning must
be ongoing if people and families are to have a chance of benefiting
from—rather then being harmed by—change.
have no systematic public policy in place for fostering workplace
learning—especially for the low-income individuals who could
benefit from it most. Although some states governments promote
workplace literacy programs, the federal government has done
nothing. Moreover, there are federal policies in place that
actually create disincentives for employers to invest in workplace
Although it seems
unlikely (to say the least) that, under the current political
climate, there will be a surge of federal activity to promote
workplace learning among low-income individuals, one could hold
out hope that, at a minimum, the disincentives that employers
currently face in this regard could be eliminated. There are
at least two, closely related disincentives which could be eliminated—and
at virtually no cost to the federal coffers:
Employers’ spending on employee education and
training is accounted for as a cost (although a “hidden” cost—a
point which is taken up below). Consequently, unlike an investment
in tangible assets (computers, plant, equipment) an investment
in education and training cannot be amortized. So it reduces
this quarter’s earnings. And because executive compensation
is increasing tied to earnings (and stock prices), this puts
investments in learning on uneven footing with investments in
tangible assets. This is a poor policy for the knowledge era.
Unlike every other major source of investment
(including investments in intangibles assets such as research
and development), firms’ investments in education and training
are not publicly reported. So not only are the current earnings
lower for firms that make substantial investments in learning,
potential investors have no way of knowing that future earnings
can be expected to increase because of the investment that has
been made. This adds insult to the injury of the aforementioned
The long and
short of it is that firms must make investments in workers’
education and training despite public policy and related pressures
from financial markets, rather than because of those pressures.
Almost certainly, the tendency to cave in to these pressures
will be most evidence for the people who have the most to lose—those
workers who are at the bottom of the earnings distribution.
This is not only
wrong, it is foolish and shortsighted. Here we are, squarely
in the midst of the knowledge era, allowing industrial era mindsets
and policies to continue to shape our actions. These policies
have costs without benefits. They promote the perpetuation of
an under-class in a society that prides itself on providing
equal opportunity to all.
We are faced
with an opportunity (in the infamous words of Marie Antoinette)
to “let them eat cake.” But because learning is both an investment
and a necessity in the knowledge economy, there is an opportunity
for people to have and eat their cake. A rare opportunity, indeed.
One not to be missed.
she has a heretical streak in her, Laurie Bassi spends most
of her days passing as a conservative, mainstream economist
and president of Human Capital Dynamics, a research-based consulting
firm in Chevy Chase, Maryland. She also serves as a research
fellow to Saba and Accenture’s Institute for Strategic Change.
She can be reached at email@example.com.
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