Study: Economic outlook depends on education offerings

States seeking to strengthen their economy should look to educational offerings, urges The Economic Policy Institute in a recent study, titled “A Well Educated Workforce is Key to State Prosperity.” More

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Study: Economic outlook depends on education offerings

Educational attainment and the loss of manufacturing jobs have contributed to a widening hourly wage gap between workers since the late 1970s.
Posted 8/30/13

PROVIDENCE – States seeking to strengthen their economy should look to educational offerings, urges The Economic Policy Institute in a recent study, titled “A Well Educated Workforce is Key to State Prosperity,” written by Noah Berger, president of the Massachusetts Budget and Policy Center, and Peter Fisher, research director at the Iowa Policy Project.

The study identifies a strong link between the educational attainment of state workforces and both productivity and median wages. The institute, a Washington, D.C., think tank broadening discussions about economic policy and the needs of low-and middle-income workers, supports expanding access to high-quality education to improve economic opportunity for residents and strengthen state economies.

The gap between low- and high-wage workers has nearly doubled since the late 1970s, rising from $12.22 an hour in 1979 to $20.12 in 2012, an increase of 65 percent. Wages at the bottom of the wage scale have been stagnant while those at the top have risen over the past three decades, according to the Economic Progress Institute.

“As we celebrate Labor Day, we must ramp up our commitment to making our workforce more productive through increased investments in high-quality education for both current and future workers,” said Kate Brewster, executive director of The Economic Progress Institute, a Rhode Island research and advocacy organization. “This paper provides strong evidence that an educated workforce may be the best incentive we can give employers to grow jobs and wages in the Ocean State.”

The link between education and higher earnings were not always correlated. According to the report, as recently as the late 1970s, many states with higher wages didn’t necessarily have a well-educated workforce, but the shift from industrial to a knowledge-based economy has eliminated once abundant manufacturing jobs that offered better wages to less educated workers. Since the 1990s, Rhode Island has lost 56 percent of its manufacturing jobs - the largest percentage loss of these jobs in the nation according to data from The Economic Progress Institute.

The Economic Progress Institute also revealed that Rhode Islanders age 25 and older who have higher education degrees (bachelors degree and above) earn a median wage ($26.55) that is almost twice what those with just a high school diploma ($14.35) earn.

Despite these inequities, The Economic Progress Institute offers actions the state can take to improve the outlook for current and future workers, including:

  • Improve access to early childhood learning by continuing the state’s planned expansions of pre-kindergarten classrooms and maintaining expansions of affordable, quality child care

  • Increase the number of Rhode Islanders who obtain high school equivalency diplomas by helping them to meet the new test requirements and fees

  • Increase investments in adult education, including basic literacy, math and English language services for non-native speakers

  • Continue to invest in quality K-12 education and continue to reinvest in higher education to slow down, or preferably freeze, tuition increases

“States have fewer tools to build a strong economy than the federal government does, but states do play a major role in education — one area that turns out to be crucial for building a high-wage economy.” said Berger, co-author of the national report. “Across the board, states with better educated workforces have higher wages and more productive economies. For states trying to build long-term economic strength, there is no more important challenge than expanding access to quality education and supporting children in the classroom.”

The report indicates that other strategies such as cutting taxes to lure employers and capture private investments from other states are shortsighted, and promote a race to the bottom that undermines states’ ability to invest in and attract an educated workforce.

The paper finds no clear relationship between a state’s tax rates and its wages.

To see the full report, click HERE.

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