Ben Bernanke's Speech on Education and Economic Competitiveness

Education and the Challenges Facing America Today
The educational challenges our society faces should be considered in the context of three broad trends: the retirement of the baby-boom generation, the inexorable advance of the technological frontier, and the ongoing globalization of economic activity.

As the baby boomers, now ranging in age from their late 40s to early 60s, leave the workforce, their places will be taken by the smaller cohort of workers born in the mid-to-late 1960s and early 1970s.  As a result, the U.S. workforce--as a matter of simple arithmetic--will increase more slowly and is likely to become less experienced on average (Jorgenson and others, 2007; Aaronson and Sullivan, 2002).  In a broader sense, the ratio of working people to retirees will decline, meaning that those still working will, in effect, be supporting relatively more non-working people.  This year, there are about five working-age people (20-64) for every person aged 65 and older; by 2030, the ratio will be about 3-to-1 (Bernanke, 2006).  The slower expansion of the labor force, all else equal, implies slower growth of potential output.  More schooling for more of the workforce could help cushion the impact of this demographic transition on economic growth by boosting productivity growth.

Continuing advances in technology also put a premium on education.  Which jobs will be most affected by technology is difficult to predict, although some research suggests that sectors that now use information technology (IT) relatively less intensively, such as health-care and other service sectors, are likely to step up their use of software and IT services (Mann, 2003).  Regardless, better-educated workers are likely better prepared to adapt to new technologies as they develop (Doms, Dunne, and Troske, 1997).

Ongoing globalization of economic activity will also lead to continuing changes in the structure of the U.S. economy--including the composition of our output of both goods and services, and thus the structure of our labor force.  The world economy is benefiting from the expansion of trade and the rising productivity of countries abroad that are making great strides expanding both their infrastructure and the educational attainment of their workforces.  That can be good for them, and for us.  Importantly, our ability to reap the benefits of globalization will depend on the flexibility of our labor force to adapt to changes in job opportunities, in part by investing in the education and training necessary to meet the new demands (Bernanke, 2004).

Educational Attainment and Achievement: Where Do We Stand?
The United States has a long tradition of recognizing the significant social and economic benefits of providing high-quality education for as many of its citizens as possible.  The United States led the world, first, in expanding access to high-school education and, then, in the post-World War II era, access to college (Goldin, 2001; Goldin and Katz, 1999).  By 1966, about half of the workforce aged 25 and older had completed high school and about 10 percent had completed college.  By 2006, more than 90 percent of adults in the labor force had a high-school education and more than 20 percent held at least a bachelor’s degree.  However, most of the progress over the past forty years occurred in the 1970s and early 1980s.  Since then, for example, the high-school graduation rate for 25-to-29-year-olds has not increased, and the college completion rate has risen only modestly (U.S. Department of Education, 2007b).

One trend is particularly disappointing:  Both high-school and college completion rates for minorities continue to lag.3  Over the past ten years, the high-school completion rate for whites aged 25 to 29 hovered above 93 percent, while the rate for blacks of the same age stayed near 87 percent; the rate for Hispanics, though trending up over the period, was only 63 percent last year.  The gaps in college completion are wider.  In recent years, more than one-third of whites aged 25 to 29 had at least a bachelor’s degree, compared with less than one-fifth of same-aged blacks and around 10 percent of Hispanics.

Assessing where we stand in terms of educational achievement (how much students learn) is fraught with considerably greater difficulties than assessing attainment (how far students progress in their schooling).  And, the results of various metrics highlight both discouraging and encouraging elements.  The Department of Education’s National Assessment of Educational Progress shows the average reading levels of our high-school seniors have stagnated in recent years; however, our fourth graders continue to improve in reading, and both fourth and eighth graders have improved in math (U.S. Department of Education, National Center for Education Statistics, 2007b).  At the same time, some initial results from the adoption of state accountability standards suggest that they have had a positive effect on students’ test-score gains (Jacob, 2005; Hanushek and Raymond, 2004).  International comparisons of student achievement are even more difficult and present a mixed picture.4  Compared with students around the world, U.S. students still perform relatively well in reading and, in the lower grades, at math and science.  Older U.S. students, however, show less ability to apply math and science skills than their peers in other industrialized countries.

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