Education; “An Economic Necessity”

failing grade


Education and Immigration. In world of politics the parties of left and right have been arguing over education and immigration policy. Republicans on right, while use rhetoric on importance of education, have spoken against the need for further funding in area and for increases in immigrant visas. For education, the recent budget proposal by Paul Ryan asked for 30% cut in federal spending on education.

The majority of education funding in America comes from state taxes. However over the past 10 years, states have severely cut budgets across the board at types of funding. Over the past 3 years, 34 states have cut funding for K-12 education and 43 states have cut funding for colleges and universities. For full understanding to severity these cuts look at report from Center on Budget and Policy Priorities.

The federal allotment towards education gives states some help but mostly to fund loans and scholarships for higher education.

So we need to cut spending? According the Ryan budget he wants to cut education spending by 30%. Kind of confusing since Mitt has stated in his last debate that he wouldn’t cut education at all. Even though Obama has increased education spending at federal level, state budgets that make up the majority of education expenditures have been falling drastically.

So how much does the U.S. government (federal, state and local) spend on education? This chart lists the figures that various countries spend on education as percentage of edu_spendingGDP per capita in 2009.  Primary education is typically K-8th grades. Secondary is 9th through 12 grades and Tertiary is advanced schooling such as college, university and other advanced vocational studies. Out of all these developed countries, the United States is only one that spends less on Tertiary education.  How much less? On average all these other countries spend 12 percentage points more on tertiary education than their secondary education. We in the U.S. spend 5.8% less on our higher education.

OECD test scores

Lets compare the above spending chart with this chart of OECD test scores in Math, Science and Reading. All the countries here that spent more on tertiary education have scored higher in three categories of reading, math and sciences. The only exception being Iceland and Norway, which scored slightly lower the U.S. in science.

It is clear have problem with failing education system. Many would like to blame our teachers. Attracting competent teachers is definitely part of equation and great steps are being made to ensure better competency in our teachers. A recent article in New York Times points out measures of improvement in our evaluation of teachers.

But can we rely on reforms to teacher evaluation as the sole reason for our declining scores in education?  Are the charts above compelling enough that we need to be spending more on education, especially higher education.

Why is education such an important component? President Obama has called increased funding for education an “economic necessity”, and it is.

In my book I make reference to a study by the U.S. Manufacturing Institute in early 2012 that estimates 600,000 jobs are available in the U.S. but unable to be filled because of a lack of qualified workers.

When we think of outsourcing jobs, we typically think of outsourcing low-skilled jobs that anyone can do in countries with cheap labor markets. This has been mostly true from the start of expanded outsourcing in the 1980s. Defendants of outsourcing have always used such arguments in support of these practices:

“Moving low-skilled, low paying jobs overseas, increases higher skilled jobs among our own work force.”

This may have been true at one point, but it no longer holds any meaning. Companies are outsourcing high skilled, higher paying jobs as well now. Jobs such as Data Analysts, Computer Programmers, Engineers, Drafters, Financial and Accounting positions, is just the tip of the iceberg in a long list of jobs moving overseas. Goldman Sachs recently announced it was moving 1,000 jobs to Singapore. You think they are hiring low-wage, low-skilled people in Singapore to do their Market Analysis? Look again above at what Singapore spends on education compared to us and look at Singapore’s OECD test results.

Just about every major U.S. company or firm has high-skilled, high-paid employees abroad. Everyone from GE to Alcoa to IBM, together employ hundreds of thousands of high skilled workers around the globe. None of this is done because of cheap labor. It has to do more with where the skilled people are. They are increasingly not in the U.S.

Our immigration system doesn’t help much either. We limit the number of H1B visas to 65 thousand per year. On the surface, people have argued that we shouldn’t allow more foreign workers to come to the U.S. cause it takes away American jobs. My first response would be, “Foreigners are taking our jobs anyway, whether we allow them to work in the U.S. or not.” The other point I would make is that many of these foreigners with H1B visas stay in the U.S. and start businesses. A study from the Kaufmann Center estimates that between 1995-2005(the tech boom) 52% of Silicon Valley start-up companies were started by immigrants on H1B visas. Silicon Valley and the tech boom isn’t the only phenomena where we have benefited from attracting foreign talent. Our entire economic history has been drastically improved from the contributions of foreign talent. (And I don’t just mean back in the late 1800s and early 1900s when we had huge waves of immigrants.) Thousands of today’s companies are the result of immigrant ingenuity.

Alexander Gram Bell was from Scotland; William Boeing was from Germany, as well as Albert Einstein. William Procter and James Gamble of Proctor and Gamble are English and Irish immigrants. More recent foreign contributors are those such as Sergey Brin, who cofounded Google. Sergey was also a H1B immigrant who went to the University of Maryland.  Then there’s Pierre Omindyar who started eBay, both Fortune 500 companies. And the list goes on and on.

Either way, between immigration and own education system, America is experiencing a severe “brain drain”. We aren’t attracting enough foreign talent, nor are enough to educate our own. Whether is immigration or education, we can look at our history and our current policies as compared to the rest of the world. When we do this, we should gain a clear direction which to follow are ensure our economic prosperity.

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