Teaching/Communication/Extension/Profession,

Eldridge, Eber

English

Research Papers in Economics

EDUCATION,  TRAINING,  AND
ECONOMIC  GROWTH
Eber Eldridge, Extension Economist
Iowa State University
In  my  relatively  limited  contacts  with  professional  educators  in
public  affairs  I have  been  disturbed  occasionally  by  the heterogeneity
of  the  activities  which  parade  under  the  public  affairs  label.  Perhaps
differing  interpretations  should  not  surprise  me.  Obviously,  public
problems  are  varied  and  complex,  and  the  meager  educational  re-
sources  devoted to them are inadequate.
This  situation  demands  that  we  carefully  analyze  the  importance
of alternative activities.  I will offer two premises:
1. National  economic  growth  and  progress  are  priority  goals  of
the  American  people.
2.  Extension  economists  who  spend  some  time  on  public  affairs
are interested in activities which contribute to economic growth.
Any public  affairs specialist who accepts  these two premises cannot
avoid giving attention to the  nation's education and training  programs.
Education  and  training,  both  past  and  potential,  is  becoming  recog-
nized  as the major contributor to economic  and social growth.
Improved  education  and  training  can  contribute  to  national  eco-
nomic growth in three ways:
1.  Improve human  resource productivity.
2.  Utilize human  resources  previously  unemployed.
3.  Stimulate  invention and innovation.
Increasing  the productivity of any resource tends to increase growth
potential.  The  rising  productivity  of the human  resource  is due  to  the
improved  quality  of  labor;  or  as  T.  W.  Schultz  writes,  investment  in
human capital.
Educators  point to  agriculture  as "the pace-setter  in the productiv-
ity contest"  and medicine  as  a  close  second.  The  6  percent  man  hour
productivity  increase  in  agriculture  as compared  with  2.5  percent  for
nonfarmers  is  accounted for by research,  education-knowledge.
The  relationship  of  productivity  to  education  is  indicated  by  the
average  earnings  at  age  45  of  a  college  graduate  of  $8,800,  a  high
school graduate $5,100,  and below high school $4,200.
93A  short time ago  the Department  of Labor  issued  a list of over  80
critical  jobs-jobs  essential  to  the  economic  well-being  and  common
defense of the country for which not enough workers  are now available
and  for which  few  qualified  people  are  in sight.  At the  same time be-
tween 4.5  and 5.5 million people are  unemployed.
I do not  intend to  imply that we have  no lack of demand  for labor
at our present rate of national growth.  However, I do say that if training
and  education  can  shift  a worker  from  the  unemployed  list to  useful
productive  labor,  the  result  is  a contribution  to economic  growth.
New  ideas  are  not entirely  dependent  on education  and  research-
but  the  relationship  appears  to  be  growing.  Invention  and innovation
have  become  major factors  of economic  growth.  Education  and train-
ing are required for research. After successful  research  more education
and  training  is  needed  in  order  to  utilize  the  research.  Research  has
served  as  the  initiating  factor or catalyst  in  almost every major indus-
trial  development.  Economic  growth  is  not  the  only  justification  for
training and education,  but it is an important one.
I have  used "training  and education"  as one term in order to avoid
the  definition  difficulties  encountered  when  the  terms  are  separated.
In  order to  isolate  more precisely  the  interest  of  the  economist I  will
divide  training and education  into three areas.
1.  Occupational  Information and  Guidance  Prior to
Entering the  Labor  Market
Information  causing excess  labor supply in an occupation results in
relatively  lower wage returns for that occupation.  It is frequently  stated
that  potential  entrants  into  farming  greatly  exceed  the  satisfactory
farming  opportunities  available,  resulting  in low wage  returns in farm-
ing.  In  order  to  investigate  this  question  one-sixth  of  all  Iowa  farm
boys  in  the  senior  high  school  class  of  1958  were  interviewed.  The
results  of the  870 questionnaires  collected  are shown in  Table  1.
Three  years  later  the  same  boys  were  interviewed  again.  Only  9
percent  were  farming,  and  it appears  unlikely  that  all  38  percent will
find  satisfactory farming opportunities.
Why  did 38  percent  plan to  farm?  This  study  indicated that occu-
pational  information  was  one  of the  important factors  influencing  the
decision.  For  example,  the income  expectations  from  given  resource
combinations  were  much  higher  among  those  planning  to  farm  than
among those  not planning  to farm  (Table 2).
94TABLE  1.  CAREER  PLANS  OF  IOWA  FARM  BOYS  IN
SENIOR  HIGH  SCHOOL  CLASS  OF  1958
Career  Plans  Number  Percent
Plan  to  farm  330  37.9 Plan  a  combination  farm  and  nonfarm  job  10  1.2
Had  given  no  thought  24  2.7 Plan  a  nonfarm  job
Professions  216  24.8 Craftsman  110  12.6 Military  career  23  2.6 Clerical  23  2.6 Managers  and  officials  19  2.2 Laborers  14  1.7
Service  9  1.1
Sales  3  .3 Nonfarm  unspecified  74  8.5
TABLE  2.  ESTIMATES  OF  1965  NET CASH  INCOME  FOR  SMALL,  MEDIUM,  AND
LARGE  FARMS BY  BOYS  WHO  WERE  "CERTAIN"  OF  THEIR PLANS
Estimated  Mean  Net  Cash Farm  Size  Income  in  1965
Specific  Resource  Boys "Certain"  Boys "Certain" Combinations  Were  of Their  Plans  of Their  Plans Described  to Farm  Not to  Farm
Small  farm  $  6,920  $  3,970
Medium  farm  13,140  7,390
Large farm  24,200  14,570 Average  all  three  sizes  14,753  8,643
Data  from  Iowa  Farm  Business  Association  records  and  the accepted  outlook  information show  that the  boys  not planning  to farm
are  basing  their  occupation  decisions  on  more  realistic  information
than are the boys  planning to farm.
Decreasing  income  expectations  greatly  affected  the  number  of boys  planning  to  farm  (Table  3).  When the ratio  was  .67  ($6,000  in nonfarm  job  and  $4,000  net  in  farming),  89  percent  of  the  group preferred  nonfarm  employment,  whereas  only  11  percent  preferred
farming.  A 20 percent decrease  in relative  income  in farming from the base  of  1.00  was  associated  with  a  39  percent  decline  in  the  number
preferring  farming.
I am not saying that adequate occupational  information would solve all of the problems of less than comparable  wage in farming.  However,
95TABLE  3.  NUMBER  OF  BOYS  WHO WOULD  PREFER  TO FARM  AT  DIFFERENT
LEVELS  OF  FARM  INCOME  AS  COMPARED  WITH  NONFARM  INCOME
Would  Prefer  to  Farm
Relative  Income  at  Stated  Relative  Income
(Ratio  of  Income  in Farming
to Income  in  Nonfarm  Job)  Number  Percent
1.62  and  over  793  92
1.50  770  90
1.37  696  81
1.25  624  73
1.12  550  64
1.00  480  55
.89  406  47
.80  292  34
.73  191  22
.67  98  11
.62  or  less  69  8
it  does  appear  to  offer  more  promise  in  solving  the  adjustment  prob-
lems  in  agriculture  than many  of the  abortive attempts  of the past.
Top priority should be given to providing occupational  information
to  the  potential  entrant  before  he  enters  the  labor  market.  The  most
effective  method  of dissemination  would  be through the  guidance  and
counseling system of schools. However,  parents of the potential entrant
and unemployed  adults  also need occupational  information.
2.  Training and  Education  to  Match  Human  Resources
With  Society's  Needs
College,  vocational,  technical,  and  retraining  programs  should  all
be tuned to the changing occupational demands  as our economy under-
goes structural adjustments.
The  need  for this  consideration  is  apparent  if we  assume  that the
Iowa  farm  boys  are  successful  in  realizing  their  occupational  plans
(Table  4).
The  figures  show  that  39.1  percent  of  the  boys  are  planning  to
enter  an  occupation  which  includes  7.9 percent  of the  total jobs  with
prospects  of  a  17  percent  decrease  in  number of opportunities  before
1970.  Obviously  this  is  not  a  very  desirable  matching  of  human  re-
sources with society's  needs.
Training  and  education  must  be  geared  to  society's  needs  if  it  is
to  make  maximum  contributions  to  the  nation's  economic  growth.
Society's  needs  are  an  important  consideration  for  the  trainee.  A  re-
training  program  in  Massachusetts  rewarded  the  retrainees  with  a  16
96TABLE  4.  OCCUPATIONAL  PLANS  OF  BOYS  AND
PROSPECTIVE  JOB  OPPORTUNITIES
Percentage  of  Expected  Actual  Percentage
Occupational  Iowa  Farm  Boys  Increase  in  Jobs  of Working Force
Classification  Planning  to Enter  1960-1970  in U.S.  1960  in  U.S.
Professional  and technical  28.4  +42  10.8
Managers  and  proprietors  2.5  +23  10.2
Clerical  2.6  +25  14.5
Sales  .6  +20  6.5
Industrial
(skilled  and  semi-skilled)  16.3  +21  30.5
Unskilled  labor  1.9  ....  7.0
Service  4.2  +24  12.6
Farm  39.1  -17  7.9
(Percentage  excludes  boys who had no occupational  plan)
percent  increase  in  weekly wages  and a 50  percent  increase  in annual
average  income-except  for  barbers!  Those  who  became  barbers  and
beauticians  suffered  a  $10  loss  in  weekly  wages.  My  guess  would  be
that Massachusetts  was already well supplied with barbers!
3.  Information  and  Education  on  the  Social  Mechanism
Certainly  we all need  more information  on the type  of social  inno-
vation that will accomplish society's needs with high quality at low cost,
and  more  information  on  the  tax  structure  which  will  equitably  dis-
tribute  these  costs.  Before  we  can  provide  effective  counseling  and
guidance,  before  we  can  provide  effective  training and  education,  we
must  have  the  appropriate  "mechanism."  The  school  and  the  school
system and  the adult education programs must  be structured  in a man-
ner that makes "success"  possible.  People must understand  the alterna-
tives  and  the consequences  if they  are  to make  an intelligent  decision.
In  1957  our  total  expenditure  on public  education  was  only  3.4
percent  of  our  Gross  National  Product.  The Rockefeller  Fund report
for the  White  House  Conference  on Education  estimated that "With  a
5  percent  growth  rate  all  of  our  education  expense  goals  could  be
achieved  by  increasing  the  public  educational  expenditures  to  4.2
percent  of GNP."
This  does  not  appear to  be  an  unreasonable  goal for  a purpose so
vital  to  the  nation's  security,  progress,  and  welfare.  From  the  econo-
mist's  viewpoint  such  an  investment  is  good  business,  since  according
to  T.  W.  Schultz,  the rate of  return on  a dollar  spent on education  is
11  percent,  much higher than many other investment  opportunities.
97Our  changing  economy  places  a  premium  on  innovation,  skills,
mobility,  and flexibility.  James Reston asked  in the  New  York  Times,
"With  unemployment present how  do you absorb  3 million  new Amer-
icans  every  year  while  labor-saving  automatic  machinery  is  knocking
off  1,250,000  jobs  every  12  months,  and mass  production  is  rising  in
Japan  and Europe?"
Such a difficult question has no one answer, but training, retraining,
and  education,  both  formal  and  informal,  can  make  an  important
contribution.
98

EDUCATION, TRAINING, AND ECONOMIC GROWTH

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Research Papers in Economics