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position – one in which a signifi cant fraction
of workers is likely to experience economic
hardship. There are no magic bullets here, but
economic theory does provide a useful way of
thinking about these problems.
The argument is part of what is called
Kaldor-Hicks improvements and begins by
granting that economic growth can create
losers as well as winners. Under these conditions,
the argument goes, growth still represents
a societal improvement – a gain in economic
effi ciency – if the winners could compensate
the losers and still be better off themselves.
The argument does not require that
compensation actually be paid. But that is
the important social implication, with compensation
for the losers coming through government
benefi ts or private charity. Note that
compensation will not come through the
market, since the market is creating the winners
and losers in the fi rst place.
Why should those better off pay compensation
through taxes or charity? Enlightened
self-interest. Our market economy exists in
a framework of institutions that requires
the political consent of the governed. People
doing well today have a strong interest in preserving
this consent. If enough people come
to see the job market as stacked against them,
the nation’s institutions will be at great risk.
Examples of compensation include subsidized
health insurance coverage for lowincome
families and retraining opportunities
coupled with temporary income support.
Equally important are policies to improve
life chances for the next generation, especially
intensive efforts to improve education, so
that the children of today’s workers will be in
a stronger position to earn a decent living.
In economic terms, improved education
If enough people come
to see the job market as
stacked against them,
the nation’s institutions
will be at great risk.
82 The Milken Institute Review
is required to restore the labor market to balance.
Recall Gary Burtless’s point: the falling
wages of lower skilled jobs refl ect the fact that
demand was not keeping up with supply. If
our predictions are right, this trend will continue
as blue-collar and clerical jobs continue
to disappear.
Better education is an imperfect tool
for solving the problem. The job market is
changing fast, and improving education is a
slow and diffi cult process; even the best education
cannot reach everyone. But it remains
the best tool we have to prepare the population
for a rapidly changing job market.
Beyond economics, better education is
also needed to prepare for what will be a challenging
political time. In less than a decade,
computers have created many workplace tensions:
wage inequality, the monitoring of
work, lack of employee privacy, and a neverending
workday in which cellphones place
employees constantly on call. Such tension is
not new. What is new is the increasing power
of information technology to intrude on the
lives of every citizen, along with the growing
complexity of the resulting social issues.
In the past, Americans have used the political
process to address such issues through
laws that guarantee the right to bargain collectively,
that mandate overtime pay and that
regulate the use of surveillance technologies.
Many of these new problems are candidates
for legislation as well, since they require collective
solutions. For example, a fi rm may be
reluctant to drop intensive employee monitoring
unless it can be sure that competing
fi rms are dropping it as well.
Historically we have relied on our educational
system both to prepare people to earn
a living and to teach them the values, knowledge
and skills to participate in a democratic
society. Because both goals are increasingly
important, it is reasonable to ask whether we
are asking schools to do too much – whether
one agenda must now crowd out the other.
We believe the answer is no. The skills
needed to excel at expert thinking and complex
communication – the job skills that will
grow in importance – are not specifi c subjects
that compete for instructional time with,
say, social studies or science. Rather, they are
strategies for tackling problems that cannot
be solved by applying sets of rules. And they
are also strategies for helping others to make
sense of the many kinds of information to
which we are all exposed.
Indeed, students need to learn expert thinking
and complex communication in order to
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