Endangering Prosperity: A Global View of the American School

2. Human Capital and Economic Prosperity

17 Measured against global standards, far too many U.S. schools are failing to teach students the academic skills and knowledge they need to compete and succeed. —Independent Task Force Report on U.S. Education Reform and National Security, 2012 Few doubt that human capital is important to economic prosperity. But how do we measure a nation’s human capital ? Is it high school completion and the amount of education attained by the citizens of a country, that is, the number of years of schooling the average person has received? Or is it the accumulated knowledge and skills that have been acquired? And if it is the latter, how do we accurately measure the skills of a young person? The question is more than academic. As the old adage goes, what gets measured gets done. How we measure human capital will affect the policies we adopt to enhance human capital. Chapter two HUMAN CAPITAL AND ECONOMIC PROSPERITY 13291-02_CH02_3rdPgs.indd 17 6/6/13 10:38 AM 18 human Capital and eConomiC prosperity Traditionally, human capital development was measured by the amount of time students spent in school—the number of hours a day, the number of days a year, and the number of years logged before leaving the formal education system. In the United States, local school districts are typically given additional money for every additional day a student is in school. Not surprisingly, school districts have steadily improved their ability to measure whether or not a child attended school. They have reduced absenteeism and truancy rates, and they have encouraged students to remain in school until they graduate from high school, around age seventeen or eighteen. After measures of high school graduation rates were refined in the early years of the twenty-first century, the percentage of students graduating from high school within four years of entering ninth grade shifted upward after remaining essentially unchanged for nearly four decades.1 What gets measured gets done. Is It Schooling or Learning That Matters? Those with a stake in the education industry applaud the measurement of the time students spend in school, because more employees are needed if more students are to be educated. Every additional year that a student is in school creates demand for additional time from an adult who expects to be paid for instructing that child. Until quite recently, economists added their weight to the time measurement scale. When they measured a country’s human capital, they did so by measuring the number of years the average member of the workforce had attended school or college. Information about the average number of years of schooling was easily obtained both from administrative records and surveys of students and adults. Using time spent in school as a measure of human capital, they were able to show that individuals who spent more years in school or college would be more prosperous in their 13291-02_CH02_3rdPgs.indd 18 6/6/13 10:38 AM 19 human Capital and eConomiC prosperity economic career later in life. Further, they showed that countries where a higher percentage of the population was in school or college for a longer period of time enjoyed a higher level of economic growth. Those findings propelled further efforts to measure time in school more accurately and to encourage more people to remain in school for longer periods of time. The World Bank, for example, has encouraged developing countries, under the aegis of its Education for All initiative, to build more schools so that more young people can attend school for longer periods of time. It takes only a modest amount of reflection to realize, however , that time spent in school means little unless one is learning something. Ideally, measures of a person’s human capital, or a nation’s total human capital, would be gleaned from information about what the person knows, not the amount of time spent inside a building with a particular name on it. Similarly, the human capital of a country is best estimated from information about the knowledge and skills demonstrated by its citizens, not the number of years they spent in school. Days and years spent in an educational institution are necessarily inferior indicators of human capital than a more direct measure of knowledge accumulated. Until the 1960s direct, quantitative measures of the human capital of a nationally representative cross section of an age cohort were unavailable. Then, in 1969, the...