Over at Bloomberg, Adrian Wooldridge has produced yet another superb essay. This one is on the declining status of the US in the global talent competition. It echoes many of the themes we discussed in class in recent weeks. Wooldridge observed that the US is experiencing: 1) A declining share of the working-age population that is in the labor force, especially compared to other OECD peers. 2) Declining legal immigration flows, especially by historical standard but also by the standards of recent times. 3) Stagnant fertility rates, and concurrently a stagnant population (which grew by only 0.1% in 2021). 4) Stagnant or declining college enrollment rates, particularly for males. 5) Significant problems in the talent pipeline, not just in STEM fields, but also when it comes to vocational training. 6) A relative decline of innovation in the US, compared to countries like China, Japan and Korea (though the EU fares even worse).
Together, these trends, along with other worrisome signs (such as the greater share of foreign students with US advanced degrees opting to return to their countries of origin after a stint in the US) constitute significant bottlenecks in the US talent pools. In a market economy, a price mechanism usually allows adjustment to new developments such as this one. The price of talent should rise to reflect its relative scarcity. If the supply of talent were elastic, this should lead to more people investing in skills. But since raising the supply of talent is so difficult, what we may get instead is ever growing inequality: inequality in educational attainment is directly reflected in inequality in earnings.
Let me cite the last two paragraphs of the column, which summarize the key takeaways:
"Today, in the face of the multifaceted economic and technological challenges posed by the ascent of an autocratic China, the U.S. needs to adopt the same seriousness about intellectual leadership that it mustered following the beep, beep, beep heard round the world. Massively increase spending on gifted children. Improve selection into gifted programs so that they choose the truly able rather than the socially advantaged. Expand the academically selective schools like Lowell that did such a formidable job of providing opportunities for poor immigrants after the great wave of immigration in the late 19th century. Understand that diversity is a tool of excellence, not its antithesis. Force universities to broaden their social catchment as a condition of keeping federal money.
Official America seems to have concluded that the pandemic is over: CEOs are preparing assaults on the “work from home” culture; central bankers are preparing to raise interest rates; the federal government is removing income support. But normality is likely to prove illusive. Workers have more power now than they have had for decades. The immigration spigot is harder to turn than before. Universities are not churning out enough homegrown first-rate technologists. The age of unearned plenty is over. To thrive in the coming age of talent shortages and meet the challenge posed by China, America will have to reengineer what first made it great."