Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “There are an amazing number of good ideas and interesting points made in Unintended Consequences. The thinking underlying it, and the obvious depth of understanding of the author, are very impressive.” - Steven Levitt, coauthor of Freakonomics; 2004 John Bates Clark Medal
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Monday, August 12, 2019

AI Summary. Economists are reassessing the value of a college degree, citing inflation-adjusted wages for graduates that have been mostly flat this century, sharply higher attendance costs, and recent graduates struggling to build wealth comparable to earlier generations. The financial payoff remains, but varies by individual circumstance.

Josh Mitchell Wall Street Journal
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College graduates’ wages have remained flat this century after adjusting for inflation, while college costs have soared, making the payoff not universal & varying based on individual circumstances & economic conditions.

Does a college degree still pay off for everyone?

Core argument: Inflation-adjusted wages for college graduates have been mostly flat this century, prompting economists to re-evaluate the financial returns of a college degree.

Economists are re-evaluating the returns of college due to three key shifts. First, wages for college graduates have remained mostly flat this century after adjusting for inflation, indicating limited income growth. Second, the cost of attending college has soared, increasing the financial burden on students and families. Third, despite higher salaries, many recent college graduates are struggling to build wealth comparable to previous generations. These factors suggest that while college can still offer financial benefits, the payoff is not universal and varies significantly based on individual circumstances and economic conditions.

Takeaways by Macro Roundup® AI

  1. Inflation-adjusted wages for college graduates have been mostly flat this century, prompting economists to re-evaluate the financial returns of a college degree.
  2. The cost of attending college has soared, increasing the financial burden on students and families even as graduate wage growth has stalled.
  3. Many recent college graduates are struggling to build wealth comparable to earlier generations despite higher salaries, suggesting the payoff from college is not universal.

"...There are three related shifts causing economists to re-examine the returns of college. First, the wages of college graduates have remained mostly flat this century, after inflation. Second, the cost of attending college has soared. Third, even with higher salaries, significant numbers of college graduates in recent years are failing to build the kind of wealth that previous generations did....."Josh Mitchell, "College Still Pays Off, but Not for Everyone,"Wall Street Journal, August 9, 2019, https://www.wsj.com/articles/college-still-pays-off-but-not-for-everyone-11565343000

Tuesday, August 13, 2019

AI Summary. Growth in the college wage premium has slowed since 2000 after expanding rapidly in the 1980s, with the college–high school gap rising from 40–67% to 72–120%. The authors attribute the flattening to job polarization away from middle-skilled work and skill downgrading, as college-educated workers shift into routine occupations.

Robert Valletta National Bureau of Economic Research
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The wage gap btw college and non-college workers expanded rapidly in the 1980s, but its growth has slowed significantly since 2000, remaining largely unchanged btw 2010 and 2015.

Why has growth in the college wage premium slowed?

Core argument: The wage gap between college and high school graduates widened from 40–67% in 1980 to 72–120% by 2015, but its growth slowed markedly after 2000 and was largely unchanged between 2010 and 2015.

The wage gap between college and non-college workers expanded rapidly in the 1980s, but its growth has slowed significantly since 2000, remaining largely unchanged between 2010 and 2015. This flattening is attributed to two main factors: polarization, where technological changes shift employment away from middle-skilled jobs, and skill downgrading, reflecting a reduced demand for advanced cognitive skills. Data from the U.S. Current Population Survey indicates that only graduate degree holders saw real wage increases between 2000 and 2010, while real wages were flat or slightly down for all groups from 2010 to 2015. The wage gap between college and high school graduates rose from 40-67% in 1980 to 72-120% by 2015. However, occupational shifts have led college-educated workers into routine jobs, reducing the college-only premium. This suggests rising competition for well-paid jobs and questions the financial viability of higher education as costs continue to rise.

Takeaways by Macro Roundup® AI

  1. The wage gap between college and high school graduates widened from 40–67% in 1980 to 72–120% by 2015, but its growth slowed markedly after 2000 and was largely unchanged between 2010 and 2015.
  2. U.S. Current Population Survey data indicate only graduate degree holders gained real wages between 2000 and 2010, while real wages were flat or slightly down for all education groups from 2010 to 2015.
  3. The flattening premium is attributed to polarization, in which technological change shifts employment away from middle-skilled jobs, and skill downgrading, with college-educated workers moving into routine jobs that reduce the college-only premium.

Valletta's research cited in WSJ article (Note attached) on college wage premium, finds that the wage gap btw college and now college grew rapidly during the 1980's, and that growth of the wage gap flattened btw 2010-2015. note he adjust for composition shift, "...These controls adjust for the changing composition of the estimation sample, so that the results for the education categories reflect the average wage premium associated with educational attainment for an individual with a fixed set of other demographic characteristics..."but does so by demographic factors not by the likely deterioration in quality of college graduates in section. He does find, "....Figure 3 also indicates that the higher education wage premiums are larger for older than for younger workers, by about 5-10 log points on average.."which is perhaps capturing the quality deterioration in college graduates

"..Wage gaps between workers with a college or graduate degree and those with only a high school degree rose rapidly in the United States during the 1980s. Since then, the rate of growth in these wage gaps has progressively slowed, and though the gaps remain large, they were essentially unchanged between 2010 and 2015.... I assess this flattening over time in higher education wage premiums with reference to two related explanations for changing U.S. employment patterns: (i) a shift away from middle-skilled occupations driven largely by technological change (“polarization”); and (ii) a general weakening in the demand for advanced cognitive skills (“skill downgrading”). Analyses of wage and employment data from the U.S. Current Population Survey suggest that both factors have contributed to the flattening of higher education wage premiums.... In particular, after rising substantially in the 1980s, growth in the wage gap between individuals with a four-year college or graduate degree and those with a high school degree slowed progressively. The gaps have changed little since the year 2000, and they were flat to down during the period 2010-2015.... Between 2000 and 2010, only holders of graduate degrees saw any meaningful increase in real wages. Between 2010 and 2015, real wages were flat to down slightly for all groups. The gap in average real wages between individuals with a four-year college degree or graduate degree and high school graduates rose from 40-67 percent in 1980 to 72-120 percent as of 2015.... These patterns suggest that the previously growing complementarity between highly educated labor and new production technologies, especially those that rely on computers and related organizational capital, may be leveling off..... Occupational employment shifts have held down the college-only premium somewhat since the year 2000, suggesting that college-educated workers are increasingly sliding down into routine jobs. This is consistent with polarization or skill downgrading. More recently, since 2010, the wage gap between graduate degree holders and the college-only group within the same broad occupations has declined somewhat, suggesting that graduate training may be providing less of a competitive edge than it has in the past. This suggests that skill downgrading may be playing an increasingly important role at the top of the skill distribution. Overall, the results suggest rising competition between education groups for increasingly scarce well-paid jobs.....Although higher education may be financially advantageous on average, the flattening of returns as costs have continued to rise suggests that college may be an unfavorable financial investment for rising numbers of individuals..."

Robert Valletta, "Recent Flattening in the Higher Education Wage Premium: Polarization, Skill Downgrading, or Both?," National Bureau of Economic Research, August 2016, https://www.nber.org/chapters/c13705.pdf

AI Summary. The authors find that US demand for cognitive skills reversed after having driven labor market growth, with high-skilled workers moving into jobs traditionally held by lower-skilled workers and pushing down wages for high-school graduates. They attribute this to the information technology revolution maturing as a general purpose technology, reducing demand for cognitive tasks relative to its investment stage.

Paul Beaudry National Bureau of Economic Research
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The US economy experienced a significant reversal in the demand for cognitive skills around 2000, pushing down wages for high-school graduates & increasing employment in low-skilled manual jobs.

Has US demand for cognitive skills reversed as information technology matured?

Core argument: Real wages for cognitive tasks fell 2% in the 2000s while manual task wages fell 8%, a pattern the analysis attributes to an outward shift in the supply of workers into manual jobs.

Around 2000, the US economy experienced a significant reversal in the demand for cognitive skills, which had been a key driver of labor market growth. This shift led to high-skilled workers moving into roles traditionally held by lower-skilled workers, pushing down wages for high-school graduates and increasing employment in low-skilled manual jobs. The IT revolution, seen as a General Purpose Technology, reached maturity, reducing the demand for cognitive tasks relative to the investment stage. Consequently, real wages for cognitive tasks fell by 2% in the 2000s, while manual task wages declined by 8%, reflecting an outward supply shift. This de-skilling process has contributed to poor labor market outcomes post-2000, with many low-skilled individuals being pushed out of the labor market entirely.

Takeaways by Macro Roundup® AI

  1. Real wages for cognitive tasks fell 2% in the 2000s while manual task wages fell 8%, a pattern the analysis attributes to an outward shift in the supply of workers into manual jobs.
  2. A reversal in US demand for cognitive skills around 2000 pushed high-skilled workers into roles traditionally held by lower-skilled workers, depressing wages for high-school graduates and raising employment in low-skilled manual jobs.
  3. The IT revolution, treated as a General Purpose Technology, reached maturity and reduced demand for cognitive tasks relative to its investment stage, a de-skilling process linked to poor labor market outcomes after 2000 and to many low-skilled individuals leaving the labor market.

Note mentioned in WSJ (Attached)

paper you requested cited in WSJ article on college wage premium to support, "...After the tech bust of the early 2000s, the economy demanded less of the type of cognitive skills that college graduates typically have....As a result, college graduates started taking up jobs previously held by those who went only to high school, pushing down wages for high-school graduates. College grads thus maintained an earnings advantage over nongrads, but their real wages didn’t rise...."

Paul Beaudry, David Green and Benjamin Sand, "The Great Reversal in the Demand for Skill and Cognitive Tasks," National Bureau of Economic Research, March 2013, https://www.nber.org/papers/w18901.pdf

"..In this paper, we present theory and evidence suggesting that to understand the current low rates of employment in the US one needs to recognize the large reversal in the demand for skill and cognitive tasks that took place around the year 2000. In particular, we have argued that after two decades of growth in the demand for occupations high in cognitive tasks, the US economy reversed and experienced a decline in the demand for such skills. The demand for cognitive tasks was to a large extent the motor of the US labor market prior to 2000. Once this motor reversed, the employment rate in the US economy started to contract. As we have emphasized, while this demand for cognitive tasks directly effects mainly high skilled workers, we have provided evidence that it has indirectly affected lower skill workers by pushing them out of jobs that have been taken up by higher skilled worker displaced from cognitive occupations. This has resulted in high growth in employment in low skilled manual jobs with declining wages in those occupations, and has pushed many low skill individual's out of the labor market.....we argue that in about the year 2000, the demand for skill (or, more specifically, the demand for cognitive tasks that are often associated with high educational skill) underwent a reversal, and that this reversal can help in understanding poor labor market outcomes after 2000 more generally.... The key idea is that the IT revolution, and the revolution in organizational form that has gone with it, can be seen as a General Purpose Technology (GPT) and, like all GPTs before it, it will eventually reach maturity. If the implementation of the GPT has a capital investment form and cognitive tasks are a key component of the investment then, under reasonable conditions, demand for cognitive tasks will have an over-shooting property. During the key investment stage, there will be high and growing demand for cognitive tasks to build the new capital, but once the new capital is in place, cognitive task workers are only needed to maintain the new capital. At this maturity stage, there will be greater demand for cognitive tasks than before the technological revolution but we will see a reduction in demand for these tasks relative to the investment stage. We argue that the turn of the century is that approximate turning point from the investment to the maturity stage....Our second main contribution is that we provide a detailed picture of the changes in employment patterns and wages over the last thirty years with a particular focus on the reversal in the growth in demand for more cognitive intensive occupations and the adjustment of more skilled workers to this change. Importantly, we view this contribution as standing even if the reader is not convinced about our specific story behind the cognitive task demand reversal.....But all three task prices fall in the 2000s and, notably, are declining well before the onset of the late 2000s recession. Our measure of the cognitive task price falls by about 2% in real terms, fitting with our story of declining demand for these tasks. This decline is dwarfed by the 8% decline in the price of manual tasks. The latter drop fits with our claim that the manual task market in the 2000s can be characterized as being dominated by an outward supply shift. To complete the wage picture,in Figure 30 we report changes in real wage by deciles for young workers when we do not divide by education level. This has both advantages and disadvantages relative to the earlier figures controlling for education. On the one hand, if there has been sorting of individuals between education groups over the period in question, the distribution of unobservable skill within an education group may change, and comparing percentiles while conditioning on education is less clean as a measure of task prices. On the other hand, increases in educational attainment over time may change the quality at a given percentile. Hence, we choose to present results with and without conditioning on education. When we do not condition on education, as in Figure 30, the 1990s show a clear ‘U’ shaped wage growth pattern that has been documented elsewhere....In this paper, we document a decline in that demand in the years since 2000, even as the supply of high education workers continues to grow. We go on to show that, in response to this demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together...."

Paper finds that in 2000 demand for skill (for cognitive tasks often associated with high educational skill, they are using education as a proxy for skill) underwent a reversal and high-skilled workers have started to moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers