In 1999 China embarked on a radical program to increase higher education. Most of the developed world has followed the same path in recent years. China though has good data on where this new talent went and into what type of employment.
In a paper for the European Bank for Reconstruction and Development Federica Coelli, Difei Ouyang, Weidi Yuan, and Yuan Zi discover that all this skilled-up labor didn’t lead to economic growth in the locales into which it was deployed.
What in fact happened was the newly-minted talent presented itself as available talent for the expanding service sector that grew over this time. These new service businesses in turn assisted lower skilled labor coming off the land to find new sources of income.
The problem was the new-smarts didn’t, a) have the qualifications necessary for the growth businesses over the period, and b) they initially gravitated to slower growing businesses where they could find work.
In conclusion the researchers note “..the returns to higher education depend not only on how many skilled workers an economy produces, but also on the activities into which those skills are absorbed.” You can review the work on full by clicking on the following link Educating like China
As a footnote I’d add two things.
First, the research shows that without this educational shift the service sector was unlikely to have grown at the rate it did and therefore the coming-off-the-land trend may have been retarded; which would have been a net negative, no doubt.
Second, the researchers themselves note their findings cover only the first-flush of the transformation, perhaps an analysis over a longer time period, in say 20-years or so, may provide a more complete picture?
I’ll take a lot of persuading that more education, like saving, is ever a bad thing!
Happy Sunday.