The Competitive Pressure of Labor Economics

lang: en

Bloomberg has a lengthy article on the plight of South Korea's college graduates:

With almost three out of four high school students going to college in an effort to get a top-paying job in one of the leading industrial groups, known as chaebols, South Korea is being flooded with more college graduates than it needs. Its 30 biggest companies hired 260,000 of them last year, leaving another 60,000 to swell the youth unemployment rate to 6.4 percent in August, more than twice the national average.

This complements a recent article I read by Dr. Se Hoon Park, who wrote earlier this year about the reasons why Korea's education system is not producing the results it wants:

Essentially, years of extra tutoring prepares Korean students for college entrance exams but not for acquiring a college education. That is, Koreans are so good on international test scores because they work overtime being taught to pass these tests. When they enter the real academic world in college, they do not have the skills necessary to succeed.

These two stories are intimately related. A college education has no value whatsoever if it is about memorizing facts, or simply excellent test taking. Instead, college must be seen as a laboratory of the mind, a place where one can be independent, try new things and discover new ideas, learn about one's self, and develop a diverse skillset in a world that is changing rapidly.

One of the interesting elements of the debate around education these days in the United States is that we seem to forget that the country did quite well the past few decades in spite of our system. Not everyone did well, mind you, but the economy remains the envy of much of the rest of the world. How can we reconcile the performance of the American economy with the generally-perceived poor performance of US schools?

I think the core piece is that American schools, particularly colleges, get a lot of things right. Education performance is surprisingly not one of the most important factors in the development of the human mind. That may sound like heresy, but think of the other activities that probably matter a lot more: doing independent research, taking on leadership positions in extracurricular groups, and learning about new ideas that might come just as much from outside the classroom as inside it.

Korea has an enormous number of college graduates, but companies don't want them. Part of this is the actual structure of the labor market ā€“ the large conglomerates really do depress the number of these graduates that are hired. But I think there is also a case to be made that the right skills were not fostered in the educational system, and telling kids not to go to college just isn't solving that core problem.

One of the most important lessons I learned from my time in Korea is that competition has a price, particularly when the variance in the prizes become too large and the tournament is zero-sum. No one wants to live or work in such a pressure-filled environment, and everyone becomes much more conservative and safe in their approach to education and careers. Much like start-ups, monitoring metrics too closely can actually result in stunted growth, because people become fearful of missing their targets more than reaching a better outcome.

I want to leave with this: Educating every person is good, but we have to be cautious about connecting all of education to specific economic outcomes. Education is not an end, it is a means of development, and it has to be balanced. If you get that right, the jobs will follow.