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Friday, April 27, 2007

Microeconomics quiz of the week

From ProfessorJournal.com:
"It's a mystery. With all the energy devoted to expanding prekindergarten programs, leaving no K-12 child behind, improving community colleges and sweetening aid for college students, how can the U.S be short of educated workers? The shortage is evident from this fact: Employers are paying the typical four-year college graduate [without graduate school] 75% more than they pay high-school grads. Twenty-five years ago, they were paying 40% more." This week's Capital column reports that the increased relative earnings of four-year college graduates is due to increasing demand combined with the stock of these workers that has not been keeping pace with the increasing demand. The column reports that according to the latest Organization for Economic Cooperation and Development (OECD) data that six countries have a higher share of 25- to 34-year-olds with college degrees (Belgium, Canada, Ireland, Japan, Korea and Sweden). The column offers three reasons why the stock of educated American is growing so slowly. The first is a birth dearth followed by a baby boom. Second, roughly 80 percent of American 18-year-olds have not graduated from high school. Third, a large percentage of high-school graduates who start college do not finish.

QUESTIONS:
1.) Answer the column's question: "It's a mystery. With all the energy devoted to expanding prekindergarten programs, leaving no K-12 child behind, improving community colleges and sweetening aid for college students, how can the U.S be short of educated workers?"

2.) What is the effect of a less-educated population on the economic performance of an economy?

3.) Why has the median annual earned income of four-year college graduates relative to the median earned income of high-school graduates decreased over the past 25 years? Use the supply and demand of skilled and unskilled labor to answer the question.


Reviewed By: James Dearden, Lehigh University
80% of all 18 year olds haven't graduated from high school? That sounds awfully high, but perhaps students are starting K-12 a year later than they did in the past?

Comments:
It seems to me that measuring the graduated rate of 18 year olds can be misleading. Obviously if you measure 18 year old graduation rate in September, it's going to be extremely low.

A much better metric would be to examine the graduated rate of 19 or 20 year olds, as all normal track students should have graduated high school by then, if intended.
 
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