What Does Adult Mediocrity Mean for U.S. Competitiveness? It's Complicated

It is old news that average American student performance is mediocre on international tests. With the recent release of the OECD’s first survey of adult skills, we now know that American adults continue that mediocre track record. And once again, the big achievers are Japan and small Nordic countries like Finland.

There will be columns written about the grave threat this constitutes to U.S. economic competitiveness. But the picture is far more complicated. The internal dynamics of the U.S. labor market and how it creates and treats winners and losers for different skill sets may be the more relevant policy issues.

To be sure, these adult test results—which measure literacy, numeracy, and digital problem-solving—do point to some weaknesses in the U.S. human capital development system. The average American adult is the equivalent of half a year of school behind the average OECD adult. The average Japanese adult is three years ahead. Especially troubling in the U.S. case is the lack of progress over time. In nearly every other advanced economy, young people joining the labor market are substantially more skilled than those retiring. Not so in the United States—and this lack of progress holds for high school and college attainment as well. U.S. dominance in the global pool of high-scoring workers is also eroding. Among OECD countries, the United States is home to 42 percent of high-scoring adults aged 55 to 64, but only 28 percent of high-scoring adults aged 16 to 24.

But in other ways, the pool of U.S. human capital does not look hugely different from other countries. One fascinating finding from the survey is that, taken broadly, there is far more variability in performance within countries than between them. The score spread between the highest skilled adults and lowest skilled adults is more or less the same across countries. Even Japan has a significant subset of low-skilled adults who are far behind their high-skilled brethren. According to Andreas Schleicher, who is the master architect of the survey, the consistency of this achievement gap across countries is far more compelling and powerful in the data than any differences between the average American and Japanese worker.

What makes the United States stand apart from the rest is the way in which its labor market efficiently uses and rewards skilled workers, and punishes those who lack such skills. The U.S. economy is exceptionally good at extracting value from its workforce. Although Japanese adults test better, they are far less likely to use their skills at work than Americans. This helps to reconcile how the United States can at the same time have mediocre average human capital and a high-performing economy.

One consequence of such an efficient labor market is more generous rewards for talent and more brutal punishments for the unskilled. Put simply, the U.S. labor market is good in that it promotes more productivity, but bad in that it generates more inequality. A big challenge for the United States is how to cushion the blow of such a productive labor market on its unskilled adults.

Unfortunately the same OECD study suggests that more adult education may not be a great solution to this problem. In most countries, continuing education tends to reinforce existing inequalities. The highly skilled are more likely to amp up their qualifications mid-career than the unskilled who need it most. In a world where education is highly rewarded, it’s always better (and cheaper) to start early.