Larry Summers has had an epiphany!
Last month, Larry Summers ripped into those arguing that more education is the answer to the country’s rampant inequality.
“The core problem is that there aren’t enough jobs,” said the former Treasury Secretary under Bill Clinton and top economics adviser to Barack Obama. “If you help some people, you could help them get the jobs, but then someone else won’t get the jobs. Unless you’re doing things that have things that are affecting the demand for jobs, you’re helping people win a race to get a finite number of jobs.”
He made these comments at a conference at the Brookings Institution put on by the Hamilton Project, the economics think tank funded by Summers’ predecessor at the Clinton Treasury, Robert Rubin.
If the significance of these comments is not clear, the most important economic figure of the Democratic Party mainstream was demolishing one of the party’s central themes over the last two decades. Summers was arguing that the problems of the labor force — weak employment opportunities, stagnant wages and rising inequality — were not going to be addressed by increasing the education and skills of the workforce. Rather, the problem was the overall state of the economy.
The standard education story puts the blame for stagnant wages on workers. The key to getting ahead is education. On the contrary, Summers argued at Brookings: The blame for the economic malaise goes to the people who design economic policy. It is their fault that workers aren’t able to secure decent-paying jobs.
Summers was responding to evidence that can’t be reconciled with the education story. As my friends and colleagues Larry Mishel, John Schmitt and Heidi Shierholz have shown, inequality has continued to grow since 2000 even though demand for workers in highly skilled occupations has not increased. Similarly, there has been little change in the wage premium that college-educated workers enjoy relative to less-educated workers, as pay for the typical college grad has barely risen since the turn of the century.
For this reason, anyone who blames stagnating wages on a lack of education is ignoring the data. With the data no longer supporting the theory, at least some mainstream economists have chosen to adjust their views.
There’s more, on trade deals. You should read it!