Education has not plateaued. Does this mean that Goldin and Katz's The
Race Between Education and Technology is wrong? No. Goldin-Katz never claim that the stock of education has stagnated.* When Goldin-Katz talk about a "standstill" in
educational attainment, they mean a standstill of flow, not a standstill of
For cohorts born from the 1870s to about 1950, every decade
was accompanied by an increase of about 0.8 years of education. During
that 80-year period the vast majority of parents had children whose educational
attainment greatly exceeded theirs. Educational change between the
generations then came to an abrupt standstill.
But if stock is the right measure of labor supply, how can
Goldin-Katz explain the sharp increase in the college premium? Their
story is that the college premium rose because educational attainment is rising
at a slower rate than it used to. Katz sent me a figure to
Goldin-Katz aren't explaining a big change (the large rise in the college
premium) with another big change (stagnant educational attainment).
They're explaining a big change (the large rise in the college premium) with a small
change (a decline in the rate of growth of educational attainment). If
the stock of education had actually stagnated, Goldin-Katz's model predicts
that the college premium would have risen far more than it did. That's internally consistent, but I think it strains credulity.
Last point: Using the Goldin-Katz measure, even straight-line progress implies relative stagnation. Imagine a society where the fraction of the population with college degrees starts at 1%, and rises by .5% per year. Here's educational attainment over the course of 50 years:
Here's what log relative supply will look like over the course of 50 years:
To win Goldin-Katz's "race between education and technology," education attainment must permanently exceed straight-line increase. Perhaps I'm biased, but that strikes me as completely unrealistic goal. If that's our choice, we might as well just let technology win.
* Goldin and Katz kindly confirmed this over email.