In a post-Christmas blog post my indefatigable American Enterprise Institute colleague Jim Pethokoukis points to a study that shows that no economy in the world rewards smart, skilled workers more than the United States. the study, by economists Eric Hanushek, Guido Schwerdt, Simon Wiederhold and Ludger Woessmann, and published by the National Bureau for Economic Research, quantifies the return on numeracy skills for the U.S. at 28 percent, significantly ahead of Ireland, Germany, Spain and the U.K., which range between 21 percent and 23 percent. Korea, Canada, Poland and Japan hover below 20 percent.
Pethokoukis argues that the higher returns come in “economies with more open, private-sector-based labor markets.” He goes on to ask, “Wouldn’t this seem to argue that higher U.S. inequality — based on pre-tax, pre-transfer market incomes — reflects 21st century market forces rewarding ability rather than some sort of breakdown in social norms.”
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To this (seemingly rhetorical) question I would answer “yes,” and would go on to say that it tends to confirm the thesis of my 2004 book Hard America, Soft America. In it, I contrasted Hard America — the parts of American society in which there is competition and accountability, and Soft America, the parts of American society in which there isn’t. K-12 education, in my view, is part of Soft America; the competitive market economy is part of Hard America.