The teenagers in our classes may not realize it, but they are on the verge of making one of the most important decisions of their lives: How will they develop their “human capital”?
Our challenge is to make sure they understand how critical this is — and to help them make the best decisions possible.
Earlier today, I was at a conference — the St. Cloud Winter Institute — to present a personal finance lesson designed to get kids thinking about human capital.
In this lesson, one in a series I wrote for the Economics Center of Cincinnati, students make paper airplanes to demonstrate productivity. Some get clear, step-by-step instructions and the full use of their hands. Others have to struggle to interpret the instructions (representing lack of literacy) or make the airplanes with only one hand (representing lack of physical ability).
We calculate productivity of the different groups, then debrief by talking about the importance of human capital — its impact on productivity and wages — and how you can develop your own human capital, whether through college, technical training or apprenticeships/internships.
The lesson isn’t meant for students who already have it figured out — who know they’ll be going to college and becoming doctors, lawyers, engineers and entrepreneurs. It’s meant for students who aren’t motivated and don’t see the point of all this schooling. We not only have to help them see the point, but we have to make the opportunities more accessible to them.
Before my presentation, this point was brought home by the conference keynote speaker, Robert Putnam, author of Our Kids: The American Dream in Crisis. Putnam, speaking to us remotely, painted a bleak portrait of life for families on the wrong side of the education divide.
He described his granddaughter, graduating this year from an elite college with the world at her feet. She has a loving family, opportunities galore, and a safety net that will help her bounce back from any mistakes.
He also described another young woman, the granddaughter of a man who graduated the same Ohio high school as Putnam in the ’50s. Her grandparents and parents didn’t seek higher education, counting on good pay at local factories, and their fortunes sunk with the Rust Belt. Over two generations, her family structure collapsed, and she is now unmarried, pregnant, impoverished and poorly educated. Instead of embarking on a life of opportunity, this young woman is already facing a dead end at 22. Putnam described her — and others in her situation — as “cynical, distrusting and angry.”
He was careful not to blame schools or teachers for the education divide, which he argues was caused by growing economic isolation across the United States.
“Schools contributed almost nothing to this growing opportunity gap,” he said.
But because school is the gateway to human capital, public education can be part of the solution. Putnam explained that the U.S. faced a very similar situation over a century ago, when the Gilded Age produced extreme levels of income inequality. Jacob Riis’s book, How the Other Half Lives, drew critical attention to the problem then, and the nation ultimately helped level the playing field by building public high schools to educate every student — something that had never been done before by any nation.
“That decision was one of the best decisions America has ever made,” he said. “That single decision to give all kids in America a free high school education so raised the productivity level of the American workforce… it accounts for almost all productivity growth in the 20th century.”
Putnam suggested a number of possible solutions to the current problem — including higher wages, universal pre-K, mentoring of parents and children, criminal justice reform and more pay to attract top teachers to high-poverty schools — without endorsing any particular political view.
The bottom line is we must find a way to help all students access opportunity by building their human capital.
“Shared investment in everyone’s kids was key to American growth and fairness in the past, and it is key to restoring the American Dream today,” he said.
I couldn’t agree more.