who once deployed them: See Acemoglu, “Technical Change,” 37, 39.
tasks of unprecedented complexity: Some of these newly minted super-skilled workers took jobs in the public rather than the private sector, as regulators in the increasingly intricate administrative regime that the state adopted in the years following World War II. The rising complexity of government regulation exerted an additional force in favor of super-skilled private-sector labor, by increasing the analytic and managerial skills private firms needed to deploy in order to navigate regulations and comply with the law. More recently, the rise of a global administrative order—associated, for example, with the World Trade Organization or the European Union—added a further layer of complexity to commercial affairs, and this imposes a further increase on the skills that private enterprise must deploy in order to achieve commercial success within the law.
with intense industry: Law embraced and even mandated the new norms’ inversion of the old order: even as low- and mid-skilled workers became subject to labor law regimes that limited weekly hours, elite workers—managers and professionals—insistently exempted themselves from labor regulation, including on dignitary grounds that presaged the Stakhanovite norms that now govern the superordinate working class. See, e.g., Fair Labor Standards Act of 1938, 29 U.S.C. §§ 206, 207 & 213 (1938) (putting in place a minimum hourly wage, limiting the maximum hours in a workweek without overtime pay, and exempting from these requirements those employees “employed in a bona fide executive, administrative, or professional capacity”); National Labor Relations Act, 29 U.S.C. § 152(3) (1935) (defining employees covered by the act broadly, but explicitly excluding “any individual employed as a supervisor”).
to build on one another: Inventions interact to make the product of skill-biased innovation, taken all together, exceed the sum of its several parts. Abraham Wickelgren emphasized the importance of this point.
had previously relied: Acemoglu, “Technical Change,” 37. See also Anthony B. Atkinson and Joseph E. Stiglitz, “A New View of Technological Change,” Economic Journal 79, no. 315 (September 1969): 573–78.
funded the innovations: It is hard to miss the irony that this process follows Marx’s logic of proletarian exploitation almost perfectly, now applied to the elite. Even rising elite labor incomes and rising elite training investments are connected by a Marxist logic, namely the thought that the present wage includes the cost of reproducing the next generation of workers. An exchange with David Grewal contributed substantially to my thinking on this point.
“highly skilled men”: See David Montgomery, Workers’ Control in America: Studies in the History of Work, Technology, and Labor Struggles (Cambridge: Cambridge University Press, 1979), 188, quoting S. H. Bunnell, “Jigs and Fixtures as Substitutes for Skill,” Iron Age (March 1914): 610–11.
invent jigs that make other workers cheap: A theoretical account of the mechanism appears in Acemoglu, “Technical Change,” 7. The theory stresses that induced-innovation-driven demand for super-skills can (at least in the short to medium term) even outstrip the supply of super-skilled workers, causing elite wages to rise still further. See Acemoglu, “Technical Change,” 7, 37–38 (“The endogenous response of firms to the increase in supply will raise the demand for skills. In fact, supply may not simply create its own demand, but the response of firms could be so pronounced that demand could overshoot the supply. In this theory, therefore, the increased supply may be the cause of the increase in the skill premium [see Acemoglu 1998, and also Michael Kiley 1999].”)
unprecedentedly large cohort of college graduates: The data behind these claims come from Daron Acemoglu and David Autor, “Skills, Tasks, and Technologies: Implications for Employment and Earnings,” in Handbook of Labor Economic Economics, vol. 4b, ed. David Card and Orley Ashenfelter (Amsterdam: Elsevier, 2011). Acemoglu and Autor use raw data from the Census Bureau’s March CPS. See also Acemoglu, “Technical Change,” 37.
According to another estimate, the relative supply of college-educated workers grew nearly twice as fast in the 1970s as over the previous three decades. According this estimate, the relative supply of college-educated workers (measured as 100 times annual log changes) grew by a factor of 2.35 in the 1940s, 2.91 in the 1950s, 2.55 in the 1960s, and 4.99 in the 1970s. See Goldin and Katz, The Race Between Education and Technology, 297, Table 8.1. Goldin and Katz note elsewhere that the supply of skilled workers measured more broadly—by the mean years of education of the American workforce—also increased more rapidly between 1960 and 1980 than in the decades either before or afterward. Between 1940 and 1960, the mean worker’s education increased by 1.52 years; between 1960 and 1980, the increase was 1.93 years; and between 1980 and 2005, the increase was 1.08 years. See Goldin and Katz, The Race Between Education and Technology, 39, Table 1.3.
than over the previous four decades: According this estimate, the relative demand of college-educated workers (measured as 100 times annual log changes) grew by a factor of −0.69 in the 1940s, 4.28 in the 1950s, 3.69 in the 1960s, 3.77 in the 1970s, and 5.01 in the 1980s. See Goldin and Katz, The Race Between Education and Technology, 297, Table 8.1 (these numbers come from the column that uses the preferred estimate for the elasticity of substitution between skilled and unskilled labor, 1.64).
the wage premium that they enjoy: An alternative explanation proposes that the demand for college skills grew more or less steadily over this period and that the wage premium increased when the growth in the supply of college skills began to slow. See, e.g., Goldin and Katz, The Race Between Education and Technology. The two explanations use the same raw data but classify and interpret it differently.
elite BAs or professional degrees: Data concerning these workers is too thin and journalistic for the argument here to proceed through anything other than speculative inferences.
to 10.4 percent in 1976: See World Top Incomes Database, United States / Pre-tax national income / P99-P100 / Share, 29 October 2018, https://wid.world/data/#countrytimeseries/spt inc_p0p50_992_j;sptinc_p99p100_992_j/US/1970/2014/eu/k/p/yearly/s.
continuing to rise into the new millennium: See World Top Incomes Database, United States / Pre-tax national income / P99-P100 / Share, 29 October 2018, https://wid.world/data/#countrytimeseries/sptinc_p0p50_992_j;sptinc_p99p100_992_j/US/1970/2014/eu/k/p/yearly/s. Recall, moreover, that these incomes increasingly came from labor rather than capital, which is to say that they took the form of an economic return to super-skill.
that the meritocratic revolution in elite education created: Acemoglu, who aspires to a general theory of induced innovation—a general account of the relationship between the skill distribution of the labor pool and the skill bias of new technologies—proposes that the pattern also arose, in an earlier era, nearer the bottom of the skill distribution. Acemoglu thus suggests that the returns to a high school education, after declining in response to rising supply during the first years of the high school boom in the earlier part of the twentieth century, then rose rapidly as the new supply of high-school-educated workers induced innovations that increased the demand for high school skills. Acemoglu, “Technical Change.” The labor economist and later senator Paul Douglas embraced a similar explanation when he suggested that newly invented office machinery reduced the demand for high school clerical skills over the first decades of the twentieth century (although he did not claim that the rise of high school education induced these innovations). See Goldin and Katz, The Race Between Education and Technology, 288. Goldin and Katz, by contrast, claim that the return to high school fell for much longer in response to rising supply, falling steadily from 1915 right through 1945—probably too long a period for the induced innovation theory to explain its path. See Goldin and Katz, The Race Between Education and Technology, 82, 85, Figure 2.9, 288–89. One possible account for this disagreement about the facts is that Acemoglu reports the return to a high school degree while Goldin and Katz emphasize the return to an additional y
ear of post-elementary schooling. It is not immediately obvious whose analysis this difference favors.
the rise of a super-skilled workforce: Other factors besides the feedback loop between education and work of course also contribute to the exceptional concentration of industry and income in the elite in the United States. But often these mechanisms complement rather than substitute for the mechanism emphasized here.
GDP per capita of about $50,000: See World Bank, World Economic Outlook Database, October 2018 Edition, accessed March 11, 2019, www.imf.org/external/pubs/ft/weo/2018/02/weodata/index.aspx. These data measure GDP per capita not in terms of purchasing power parity but rather in nominal dollars. The data therefore adjust for exchange rates, differences in inflation, and differences in cost of living, in order to produce an international measure of the material standards of living in different countries.
per capita GDPs greater than $50,000: See World Bank, World Economic Outlook Database, October 2018 Edition, accessed March 11, 2019, www.imf.org/external/pubs/ft/weo/2018/02/weodata/index.aspx.
a larger and larger segment of its population: Between 1970 and 2015, Germany increased the share of students who attend academic high schools (called Gymnasia) that qualify graduates for university places and the professions from under a tenth to over a third. See “Abitur Für Alle,” Welt am Sonntag, June 15, 2014, www.welt.de/print/wams/article129082343/Abitur-fuer-alle.html. German universities naturally experienced parallel increases in enrollments: while roughly 5 percent of German adults had university degrees in 1970, roughly half of Germans enroll in and roughly a third of Germans graduate from university today. See OECD, Education at a Glance: OECD Indicators—Germany, www.oecd.org/edu/Germany-EAG2014-Country-Note.pdf.
outside of the university-educated elite: German firms, supported by the German state, have embraced a massive program of vocational education, with over 70 percent of young German workers receiving formal workplace training (as compared to only 10 percent in the United States). See Daron Acemoglu and Jörn-Steffen Pischke, “The Structure of Wages and Investment in General Training,” Journal of Political Economy 107, no. 3 (June 1999): 542 (citing an OECD report that 71.5 percent of young workers receive formal training in Germany while only 10.2 percent of U.S. workers receive any formal training during their first seven years of work [the shares in Japan and France are 67.1 and 23.6 percent respectively]). Hereafter cited as Acemoglu and Pischke, “The Structure of Wages.” The training, moreover, can be intensive, as German firms commonly offer young workers apprenticeships that cost employers as much as $10,000 per apprentice per year. See Acemoglu and Pischke, “The Structure of Wages,” 540. Workplace training binds workers to firms, and so worker turnover rates convey the extent of training, and conspicuously reveal the size of the difference between the United States and Germany: while the median male U.S. worker holds six jobs in his first decade in the labor market, the median German holds between one and two. See Acemoglu and Pischke, “The Structure of Wages,” 549. See also Daron Acemoglu and Jörn-Steffen Pischke, ‘‘Why Do Firms Train? Theory and Evidence,’’ Quarterly Journal of Economics 113 (February 1998): 79–119 (who estimate one), and Christian Dustmann and Costas Meghir, ‘‘Wages, Experience and Seniority,’’ manuscript, London: University College London, Economics Department, 1997 (who estimate two).
90 euros a month: See “Gesetz über die Beteiligung an den Kosten der Betreuung von Kindern in Tageseinrichtungen und in Kindertagespflege sowie in außerunterrichtlichen schulischen Betreuungsangeboten (Tagesbetreuungskostenbeteiligungsgesetz—TKBG) in der Fassung vom 23. April 2010, “Berliner Vorschrifteninformationssystem,” http://gesetze.berlin.de/jportal/?quelle=jlink&query=TagEinrKostBetG+BE&psml=bsbeprod.psml&max=true. See also Senatsverwaltung für Bildung, Jugend und Familie, “Kostenbeteiligung und Zuzahlungen,” www.berlin.de/sen/jugend/familie-und-kinder/kindertagesbetreuung/kostenbeteiligung/.
disproportionately to complement high-skilled workers: Increases in the capital-to-labor ratio in the U.S. economy have quite generally been heavily concentrated in skill-intensive industries. See Winfried Koeniger and Marco Leonardi, “Capital Deepening and Wage Differentials: Germany Versus the U.S.,” Economic Policy 22, no. 49 (January 2007): 74. See also Daron Acemoglu, “Cross-Country Inequality Trends,” Economic Journal 113, no. 485 (February 2003): 121–49; Daron Acemoglu and Jörn-Steffen Pischke, “Worker Well-Being and Public Policy,” Research in Labor Economics 22 (2003): 159–202; Acemoglu, “Changes in Unemployment and Wage Inequality,” 1259.
This result holds even within industries. For example, beginning in the 1970s manufacturing firms that employed more skilled workers began to invest more heavily in equipment than those that employed less skilled workers. See Acemoglu, “Changes in Unemployment and Wage Inequality,” 1259, 1275–76. Acemoglu cites Franceso Caselli, “Technological Revolutions,” American Economic Review 89, no. 1 (March 1999): 78–102.
Moreover, the rush toward investing in capital that complements specifically high-skilled labor encompasses not just investment in existing technology but also research and development into new ones. For example, in 1960, only 3 percent of privately funded research and development expenditures promoted innovations in office computing; by 1987, the share had risen fourfold, to 13 percent. See Acemoglu, “Why Do New Technologies Complement Skills?,” 1083. College graduates are twice as likely to use computers in their jobs as are workers with only a high school education. See Acemoglu, “Why Do New Technologies Complement Skills?” Acemoglu cites to David Autor, Alan Krueger, and Lawrence Katz, “Computing Inequality: Have Computers Changed the Labor Market?,” Quarterly Journal of Economics 113 (1998): 1169–1213.
unskilled or mid-skilled labor dominates production: Winfried Koeniger and Marco Leonardi, “Capital Deepening and Wage Differentials: Germany Versus the U.S.,” Economic Policy 22, no. 49 (January 2007): 72–116; Daron Acemoglu, “Cross-Country Inequality Trends,” Economic Journal 113, no. 485 (February 2003): 121–49; Daron Acemoglu and Jörn-Steffen Pischke, “Worker Well-Being and Public Policy,” Research in Labor Economics 22 (2003): 159–202; Acemoglu, “Changes in Unemployment and Wage Inequality,” 1275–76.
decreased wage inequality in that sector by fully a third: Winfried Koeniger and Marco Leonardi, “Capital Deepening and Wage Differentials: Germany Versus the U.S.,” Economic Policy 22, no. 49 (January 2007): 72–116. Note that Koeniger and Leonardi test this conclusion against alternative explanations that emphasize other general differences between the U.S. and German labor markets, including generally higher German unemployment over the period and greater skill specificity in European production.
rise and fall in tandem: The OECD directly measures the returns to skill across its member states. See OECD, OECD Skills Outlook 2013, Table A4.13. No direct measure of the gap between elite and middle-class investments in education across countries exists. But good proxies do exist. Most notably, the OECD measures the effects of parents’ income and education on children’s skills. These differences in outputs are a reasonable proxy for differences in inputs—which is to say in parental investment in their children’s education. See, e.g., OECD, OECD Skills Outlook 2013, Table A3.1.
meritocratic developments in elite education: I borrow the term designed from Daron Acemoglu, “Why Do New Technologies Complement Skills?,” 1055, 1056 (“new technologies are not complementary to skills by nature, but by design”).
“the Vietnam War draft laws”: Acemoglu, “Technical Change,” 7. On pp. 37–38, Acemoglu notes that “such an interpretation is not literal.”
pulling the ladder of opportunity up behind them: See, e.g., Reeves, Dream Hoarders. See also Chrystia Freeland, “When Supercitizens Pull Up the Opportunity Ladder,” New York Times, February 28, 2013, accessed November 19, 2018, www.nytimes.com/2013/03/01/us/when-supercitizens-pull-up-the-opportunity-ladder.html.
resource curse: See Jeffrey A. Frankel, “The Natural Resource Curse: A Survey,” NBER Wo
rking Paper No. 15836 (March 2010), www.nber.org/papers/w15836.pdf. See also Stanley Engerman and Kenneth Sokoloff, “Factor Endowments, Institutions, and Differential Paths of Growth Among New World Economies: A View from Economic Historians of the United States,” in How Latin America Fell Behind, ed. Stephen Haber (Stanford, CA: Stanford University Press, 1997), 260–304; Stanley Engerman and Kenneth Sokoloff, “Institutions, Factor Endowments, and Paths of Development in the New World.” Journal of Economic Perspectives 14 (2000): 217–32; Stanley Engerman and Kenneth Sokoloff, “Factor Endowments, Inequality, and Paths of Development Among New World Economies,” NBER Working Paper No. 9259 (October 2002); Jeffrey D. Sachs and Andrew M. Warner, “Natural Resource Abundance and Economic Growth,” NBER Working Paper No. 5398 (December 1995).
Chapter Nine: The Myth of Merit
The word meritocracy: Oxford Etymology Dictionary, s.v., “Meritocracy,” accessed October 2, 2018, www.etymonline.com/word/meritocracy#etymonline_v_31201.
The Rise of the Meritocracy: Young, The Rise of the Meritocracy.
even into the new millennium: Michael Young, “Comment: Down with Meritocracy,” Guardian, June 29, 2001, accessed September 28, 2018, www.theguardian.com/politics/2001/jun/29/comment.
by deploying the norms of the old regime: The rise of mass democracy, for example, cannot be assessed according to earlier political principles concerning lineage and the authority of a sovereign over her subjects. Rather, democracy requires a new politics, constructed to be sensitive to the new relation between a republic and citizens who themselves, collectively, constitute the sovereign. The invention of companionate marriage similarly ushered in a new complex of values concerning intimacy, transforming domestic life from a tool for pooling resources and asserting governance into an institution that corrals sexuality into a site of communication, understanding, and recognition. Even the discovery of analgesics fundamentally transformed the ethics of self-control and self-possession, to demote stoic determination in the face of pain from its earlier high perch among the virtues.
The Meritocracy Trap Page 76