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Economic
Hh
Review B1
KDERAL RESERVE BANK OF ATLANTA
NOVEMBER 1984
1 Education and Southeastern
Economic Growth
Special Issue
President
Robert P. Forrestal
Sr. Vice President and
Director of Research
Sheila L. Tschinkel
Vice President and
Associate Director of Research
B. Frank King
Financial Institutions and Payments
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Larry D. Wall
Robert E. Goudreau
National Economics
Robert E. Keleher, Research Officer
Mary S. Rosenbaum
Joseph A. Whitt, Jr.
Regional Economics
Gene D. Sullivan, Research Officer
Charlie Carter
William J. Kahley
Bobbie H. McCrackin
Joel R. Parker
Database M a n a g e m e n t
Pamela V. Whigham
Visiting Scholars
George J. Benston
University of Rochester
Gerald P Dwyer
Emory University
Robert A. Eisenbeis
University of North Carolina
John Hekman
University of North Carolina
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University of Houston
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Peter Merrill Associates
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ISSN 0 7 3 2 - 1 8 1 3
Special Issue:
Education and Southeastern
Economic Growth
VOLUME LXIX, NO. 10
Overview
Education's Contribution to
Productivity and
Economic Growth
Educational Inventory:
Where Does the
Southeast Stand?
FEDERAL RESERVE BANK O F ATLANTA 3
Financing Education
in the Southeast
The Southeast's
Occupational
Employment
Outlook
Selected
Bibliography
Overview
Promoting stable growth is one of the most
important objectives of the Federal Reserve
System's monetary policy, and productivity is an
important component of growth. The successful
conduct of monetary policy depends on a sound
understanding of current and projected productivity and economic growth. Productivity is
the relationship of production inputs to outputs;
more specifically, it is the value of goods and
services produced per unit of labor, capital, or other
i n p u t Productivity gains are a prominent source
of economic growth because they enable economies to expand beyond what can be achieved
by merely increasing the quantity of labor and
capital inputs. Labor productivity, the most commonly used measure, is the ratio of output to
man-hours worked. However, changes in this
incomplete measure of productivity reflect not
4
only improvements or declines in the quality and
efficiency of workers, but changes in the capital
stock with which laborers work.
The Federal Reserve Bank of Atlanta is particularly interested in the Sixth District's future
economy and the sources contributing to growth.
(That District includes Alabama, Florida, Georgia
and parts of Louisiana Mississippi, and Tennessee.)
The Atlanta Fed's Research Department conducts
studies of productivity and economic growth.
For some time, the Bank's Research Department
has sought to identify, analyze, and publish its
findings about the sources of longer term growth
and change in the region. This continuing analysis
helps us better understand current developments
in the Southeast's economy and improve our
assessments of their implications for the future.
In the 1970s and early 1980s, productivity
failed to show the kind of improvement that has
characterized the U.S. economy for decades.
This lack of improvement was one of the causes
of poor economic performance, as evidenced by
the "stagflation" that we experienced. It was
thought that our capital stock was becoming
antiquated and that we were rigid in the way we
operated our nation's factories—and, as a result
that we were becoming less competitive in world
markets for manufactured goods. Many observers
concerned with the troubling performance cited
education as one explanatory factor. Their logic
was straightforward: education improves the
quality of future workers in a variety of ways, they
reasoned, enhancing their productivity.
Some critics pointed todecliningstandardized
test scores from the late 1960s forward as evidence that our educational system has been
slipping. They argued that lower scores showed
that schools were failing to produce workers as
qualified as those w h o had entered the labor
force in earlier periods. Increased competition
from foreign countries, where the quality of
schooling appeared to be more rigorous or where
NOVEMBER 1984, E C O N O M I C REVIEW
I
the emphasis on science, mathematics, and technical subjects was relatively greater, reinforced
the view that America's school system was a
factor in the nation's slower economic growth
and waning productivity gains, and that changes
in the educational system were needed.
Numerous special reports by national, regional,
and state task forces, commissions, and specialists
(listed on page 58) added legitimacy to the view
that shortcomings in our school system contributed
to lagging economic growth. Despite their diverse
authorship and varying specific concerns, most
of these reports allege that the nation's schools
are in serious trouble and in need of major
reform. The most widely known example of this
" n e e d to improve" view is A Nation at Risk, the
final report of the Special Presidential Commission
on Education, published in 1983.
Policymakers in the Southeast were among the
first to become concerned about education and
its relation to economic growth. The Southeast
has long suffered a reputation for inferior educational institutions and, concomitantly, a work
force suited primarily for low-skill, low-wage
jobs. Notwithstanding this apparent shortage of
better educated workers, the region has grown
rapidly since World War II. This expansion has
helped narrow the regional-national gap in per
capita personal incomes, from half the U.S. norm
in some southeastern states in the immediate
postwar period to an average of around 90
percent by the late 1970s. The region attracted
an in-migration of manufacturers and businesses
during this period because its less skilled work
force commanded lower wages.
In the past several years, however, accelerating
international trade has heightened competition
from low-wage foreign producers in many industries important to the region. The dollars rise
in the foreign exchange market since 1980 has
further weakened markets for many products.
Southeastern localities increasingly have had to
vie with lower wage offshore sites in their bids to
attract manufacturers. In addition, the service
sector, which has been growing more rapidly in
the Southeast than nationally, has tended to
create jobs that pay lower wages than those in
the goods sector. Policymakers have thus looked
to advanced technology industries for growth
opportunities that could help offset j o b losses in
import-threatened industries such as textiles and
apparel. However, many believe this shift requires
an educational foundation that is lacking in most
areas of the region.
Numerous southeastern opinion leaders and
policymakers now believe that educational policies must be changed if regional states are to
continue progressing toward national income
norms. Several southeastern states already have
begun to enact programs designed to upgrade
the quality of their school systems. For example,
Tennessee has raised the state's sales tax to fund
an incentive system geared to retaining and
rewarding high-quality teachers, and Mississippi
recently raised taxes to support a statewide
kindergarten program.
For a better understanding of the chief issues
in the education debate, the Atlanta Fed's Research Department sponsored a symposium last
May. The participants, southeastern specialists
with an academic or policy interest in the economics of education, addressed the symposium
topic, "Education and Southeastern Economic
Growth," from their professional perspectives. 1
This gathering helped staff members to identify
the numerous and complex issues that remain
unresolved.
As a result of this symposium and other research,
the department's regional economists identified
four important topics, which are addressed as
separate c o n t r i b u t i o n s in this special issue:
(1) What is the relationship between education
and economic growth and productivity? (2) How
does the Southeast's"inventory of human capital,"
as measured by educational attainment levels,
literacy rates, and standardized test scores, compare w i t h t h a t of o t h e r regions? (3) Does t h e
financing of education in the Southeast differ
significantly from the rest of the nation, and, if so,
what does that imply for the region's capacity to
alter its educational system to enhance worker
productivity and regional growth? (4) Finally,
does the Southeast's educational system seem
adequate to prepare its work force for the jobs of
the 1990s and beyond?
These topics were chosen for research because
they formed a logical progression of questions
important to policymakers and voters, and together appeared to cover the critical issues in the
current debate. The research was conducted
primarily to provide a broad, updated regional
perspective rather than to advance the theoretical understanding of the relationship of education to productivity and growth. Nonetheless,
by identifying aspects of the linkage that need to
be understood better, we believe that our contributions do enhance appreciation of the overall
relationship.
This special issue could not, of course, treat all
of the aspects of the current debate over education
and regional or national economic growth. The
intentionally broad topics addressed here exclude some subjects, such as the proper role of
vocational education. They also omit certain
important social policy questions, such as whether
additional spending on education would promote equality of opportunity, or to what extent
racial discrimination has contributed to the region's
lagging educational performance or to lingering
differences in black-white education levels. Moreover, the authors have not attempted to prescribe
how schools might move toward greater efficiency
or quality. Such vital questions as how smaller
class size, higher per pupil expenditures, or
better trained teachers might improve student
performance and subsequently raise worker productivity seem better left to educators, psychologists, and other specialists.
The findings presented in these articles are
striking in that they contradict some widely held
popular views. In the first article, Bobbie
McCrackin surveys economic theory and empirical research on the relationship of education
to productivity and growth. Her conclusion is that
economists and other social scientists investigating this issue for nearly three decades have by
no means reached a consensus that an increase
in years of schooling contributes substantially to
productivity and growth. Although economists
6
are not ready to reject investments in schooling
as worthwhile, extensive research has revealed—
but not resolved—complexities and fundamental
methodological problems. Many factors other
than education, including parent income and
social status, personal ability, race, and sex, also
are related to differences in income. Moreover,
these social and psychological factors interact
with education in such a way that better-endowed
students seem able to use schooling experience
more effectively to achieve higher subsequent
earnings. Furthermore, economists have been
unable to determine what portion of education's
contribution to aggregate productivity is due to
substantive improvements in job-related skills
derived from formal schooling and what portion
is attributable to the more efficient allocation of
manpower that schooling produces. Such unresolved questions call for further research and
suggest caution on the part of policymakers
considering increasing public investment in education because they assume that such expenditures are causally related to economic growth.
In the second article, Gene Wilson and Gene
Sullivan conduct an "inventory" of the Southeast's " h u m a n capital assets." They find that the
educational level of the Southeast's population,
traditionally lower than the rest of the country, is
catching up with levels of other regions, thanks
to sharp local gains in years of formal schooling
and rapid in-migration of better educated residents in recent decades. Moreover, a careful
analysis of the generation of students now entering
the work force indicates that the amount of
schooling they have acquired is virtually the
same as for those in other parts of the country.
Analysis further shows that the region's educational infrastructure (teachers and schools) has
converged toward national norms. Whether quality also is approaching parity is difficult to measure
because consistent data for gauging differences
between states in this region and the nation are
lacking. As older workers retire and are replaced
by the better educated younger generation, and
as people of above-average educational levels
are attracted from other areas, the Southeast's
labor force should grow increasingly competitive
with that of other regions.
In the third article, Bobbie McCrackin and
Gene Sullivan find several contrasts between the
financing of education in the Southeast and in
other regions. Regional and national increases in
per pupil expenditures in the last decade have
run only moderately ahead of the rate of inflation,
NOVEMBER 1984, E C O N O M I C REVIEW
and progress in closing the gap between regional
and national spending has been slight The authors
examined several economic explanations that
might account for this disparity in spending.
The regional factors include inflexible funding
mechanisms in some southeastern states, rapidly
rising educational costs, relatively large school
age populations, and lower personal incomes. In
some respects the Southeast's financial burden
clearly is heavier, constraining the region from
moving more rapidly toward national educational
spending patterns. Nonetheless, the evidence
does not rule out the possibility that lower
spending simply reflects less demand for education
in the Southeast. However, growing demands
for higher educational quality, revised methods of
generating educational revenue, and the likelihood that pressures for capital expansion will
ease as student enrollments decline all brighten
prospects for increased financing in the years
ahead.
In the final article, William Kahley assesses the
capacity of the Southeast's education system to
prepare the region's residents for the jobs of the
future. He concludes that it exhibits no serious
shortcomings in this respect since the Southeasts
education system has proven adequate in recent
decades to accommodate a higher- than-nationalaverage growth rate, and since no sharp change
in labor market demand seems likely. Occupational
employment changes expected in both the nation
and the Southeast in the next 10 years are similar
to changes that have occurred over the past few
decades. Many fast-growing occupations will
demand a college education or specialized training,
but numerous jobs also are expected to be
created that will require only a high school
d i p l o m a Although the region's jobs will grow
faster than nationally, a continuing in-migration
of workers educated elsewhere will narrow the
gap between the educational level and quality of
the region's work force and that of the nation.
Some evidence exists that workers in the Southeast will require less formal education than
nationally because of disparities in the mix of
industry and occupational growth. However, the
average wage rate of new workers in the region is
likely to continue moving toward the national
norm, helping its income level to rise toward the
national level.
Any economic analysis of education entails
several limitations and problems of which the
reader should be aware. First, education, to a
greater extent than many public programs, has
social benefits that economists are not equipped
FEDERAL RESERVE BANK OF ATLANTA
to measure in their calculations of comparative
returns on expenditures. For instance, they cannot place a dollar value on such beneficial effects
as the civic virtues and social stability of a better
educated electorate or the enhanced cultural
level of a people with an average of, say, twelve
rather than eight years of formal schooling. In this
respect, schools are similar to parks: the value of
the recreation, tranquility, and beauty derived by
current and future generations cannot be determined economically.
Second, even if economists consider only the
measurable economic effects of schooling, productivity is difficult to gauge. Consequently,
most researchers are forced to rely on income as
a surrogate for productivity on the assumption
that earnings differences reflect productivity differences in competitive markets. Although this
assumption is theoretically sound, various market
imperfections render it unrealistic in the contemporary mixed economy of the United States
and most developed countries. In many cases,
incomes are much lower than the true productivity involved in the j o b being performed: the
lower salaries of many key public officials exemplify this phenomenon.
Another problem involves the geographic scope
of policymakers. Policy decisions on education
typically are made at the state and local level, but
labor markets, especially for jobs requiring advanced training or education, are national. Given
reasonably competitive markets, labor is mobile
and seeks the best opportunities regardless of
local educational opportunities. Expanding the
infrastructure of higher education in one state
makes no sense, for example, if there is excess
college and university capacity nationwide When
the purpose of education becomes focused on
improving aggregate regional productivity, therefore, policymakers need to take national labor
force characteristics into account
Having raised these caveats, we hope that
readers of this special issue of our Review will
find its contents both useful and thought-provoking.
' S y m p o s i u m p a r t i c i p a n t s i n c l u d e d C l a r e n c e J u n g , p r o f e s s o r of e c o n o m i c s
at t h e U n i v e r s i t y of R i c h m o n d ' s E. C l a i b o r n e R o b i n s S c h o o l of B u s i n e s s ;
E l c h a n a n C o h n , p r o f e s s o r of e c o n o m i c s at t h e U n i v e r s i t y o f S o u t h
C a r o l i n a a n d e d i t o r of t h e Economics
ot Education
Review, E v a G a l a m b o s ,
research associate, S o u t h e r n Regional E d u c a t i o n Board; H o w a r d Tuckm a n , d i s t i n g u i s h e d p r o f e s s o r of e c o n o m i c s at M e m p h i s S t a t e U n i v e r s i t y ,
D a n i e l S a k s , p r o f e s s o r of e d u c a t i o n p o l i c y a n d e c o n o m i c s a n d s e n i o r
r e s e a r c h a s s o c i a t e i n t h e I n s t i t u t e f o r P u b l i c P o l i c y S t u d i e s at P e a b o d y
C o l l e g e , V a n d e r b i l t U n i v e r s i t y ; R o n a l d Bird, r e s e a r c h d i r e c t o r f o r t h e
S o u t h e a s t e r n Regional C o u n c i l for Educational Improvement; a n d Kern
A l e x a n d e r , e d u c a t i o n p o l i c y c o o r d i n a t o r for t h e F l o r i d a G o v e r n o r ' s O f f i c e
of P l a n n i n g a n d B u d g e t i n g , p r o f e s s o r of e d u c a t i o n a d m i n i s t r a t i o n at t h e
U n i v e r s i t y ot F l o r i d a , a n d e d i t o r of t h e Journal ol Educational
Finance.
7
Education's Contribution to
Productivity and
Economic Growth
Bobbie McCrackin
As this review of relevant studies indicates,
social scientists have tried to clarify the
link between education and productivity for
several decades. In attempting to gauge
the social returns to education, their
studies ultimately seek to understand
how public funds can be
allocated most efficiently.
For nearly three decades, economists have studied
the extent to which education adds to worker
productivity at the microeconomic level and to
economic growth in the aggregate. This article
reviews the major theoretical and empirical contributions to these issues as well as less familiar
works whose research and analysis are more
current. It discusses the arguments and policy
implications developed by leading scholars in this
field, weighs the empirical evidence, and identifies areas for further research.
Studies in the late 1950s and early 1960s
suggested that the "externalities" of education
were significant (An externality exists when an
economic activity has output, either good or bad,
for which those who are affected do not pay or
receive compensation. That is, the gains or losses
are external to the economic unit producing
them. Examples often cited are research and
pollution.) These discussions, as well as others
treated in this article, do not consider the noneconomic externalities of education which may
add to public welfare. For example, the cultural
environment of an educated society may be
better, and civic responsibilities may improve as
a result of widespread educational achievements.
Such research implicitly supported public policies
of increased expenditures for schooling. As subsequent research has refined the methodologies
employed, the positive relationship between
education and productivity has come under
increasing challenge. One line of criticism maintains that the apparent relationship between
education and higher lifetime incomes is really
the result of greater ability or favorable family
characteristics. This challenge has far-reaching
policy implications because it suggests that increased public spending for education is an
The author
Department
8
is a member
of the Atlanta
Fed's
Research
NOVEMBER 1984, E C O N O M I C REVIEW
inequitable allocation of taxpayers' money. According to this view, the chief beneficiaries were
those who, by virtue of their family's higher
socioeconomic status or their own superior abilities,
are most likely to succeed without public financial support of additional schooling.
A second important criticism stresses the interaction of demand and supply in determining
returns to investment in education. Proponents
of this view maintain that if demand for"educated"
workers fails to keep pace with supply, the rate of
return to additional education may fall overtime.
In addition, if some segments of the labor market
are closed to certain groups like w o m e n and
blacks, increased investments in education will
not have the expected effect.
A third major criticism alleges that schooling
contributes minimally to productivity even though
additional years of schooling add to income. The
explanation given is that employers use education
as a means of screening job applicants: the
higher the level of education, the more likely is
an applicant to be a productive employee. This
criticism also implies that less rather than more
public support of education is desirable, especially
at the college level, since returns to education
accrue primarily to individuals, not to society.
This approach claims to mount a profound
challenge to human capital theory. However, the
criticism is based on a microeconomic analysis.
To the extent that screening results in a better
allocation of workers among occupations and
jobs, it may improve aggregate productivity and
output
Economists have yet to reach a consensus
regarding the relationship between education
and productivity. The "screening hypothesis" is
difficult to test empirically and has not led to
outright rejection of the original hypothesis. Still,
an appreciation of the complexity of the relationship has developed. Current economic research
FEDERAL RESERVE BANK O F ATLANTA 9
thus suggests cautious expectations of returns to
increasing investment in education and a preference for specific rather than global policy
goals. Further research is needed specifying the
complexities of the relationship of education to
productivity and economic growth. In addition,
the regional dimensions of the relationship, such
as the extent to which underinvestment in education retards economic development in a particular region, require more investigation, especially since state and local governments are
primarily responsible for educational administration and funding.
Classical and Neoclassical
Views of Education
The relationship between education and productivity is part of a subset of economics known
as "economics of human capital." Economists
have long recognized that certain factors such as
education, on-the-job training, migration, and
health care enhance worker productivity. Just as
technological advances improve physical capital,
education presumably increases cognitive skills
and thereby enables workers to perform more
efficiently. Although the term " h u m a n capital"
came into prominence in the 1960s, the concept
was recognized several centuries ago. From
the seventeenth to the nineteenth century, a
number of statisticians and public finance specialists tried to estimate the value of their nation's
human capital as the basis for tax reforms or for
insurance purposes. 1
Classical economists also acknowledged the
importance of human capital. Adam Smith
discussed differences in training as the basis for
wage variations: just as investment in physical
capital increases the return to entrepreneurs,
he argued, so does the worker's investment in
training produce a return that may more than
cover the costs of acquiring those skills. Early
economists who emphasized the role of education in productivity gains include Nassau Senior
(1790-1864), Johann von Thunen (1783-1850),
J. B. Say (1767-1832), and J. S. Mill (18061873). The concept of human capital, however,
was not thoroughly explored or advanced as a
major tenet of classical economics. 2 Even the
widespread practice of loosely incorporating
acquired skills into definitions of the capital
stock essentially ended with the neoclassical
economist Alfred Marshall (1842-1924). He
viewed the practice as unrealistic since humans
are not marketable in the same manner as
physical capital.
National Income Growth Accounting
After virtually disappearing, economists' interest in human capital revived in the 1950s
because of an anomaly discovered in the study
of national income growth. Analyses of increasing
U.S. national income over the previous t w o
decades were unable to account for the volume
of growth in terms of expansion of the physical
capital and of the quantity of labor.3 Economists
engaged in national income growth accounting
faced a puzzle: how could output rise faster
than the growth rate of input resources?
In attempting to account for this unexplained
residual of growth, economists began to shift
their focus from the quantity to the quality of
the labor force. They revised their basic concept of the production function: national income was to be construed not simply as a
function of capital and labor but as a function
of capital and the quality as well as the quantity
of labor. The higher levels of education that
workers had achieved relative to earlier periods,
they believed, could have increased productivity through labor's more efficient use of
capital. The leaders of this early research were
Theodore Schultz and Edward Denison, who,
working independently, both developed empirical estimates suggesting education's substantial
contribution to growth. Denison's research
concluded that education was responsible for
one-fifth of the economic growth between
1930 and 1957, which was double its contribution from 1909 to 1929. 4 Schultz's estimates
were very close to Denison's.
In addition to his early empirical work, Schultz
formulated the broad conceptual and theoretical foundations for a theory of human
10
capital.5 One of his most important contributions
was the concept of education as investment,
not merely consumption, as it was then viewed
by most economists. This break with the past
had far-reaching implications. For example, it
implied a higher savings and investment rate
for the United States. National income accountants tally as investment only inventories,
machinery, factories, office buildings, and other
structures. (Although consumers' durable goods
also are machines yielding a flow of returns,
they do not count as investment because they
make no further contribution to market production.) Schultz conceded that some portion
of education consists of present consumption
but maintained that education is an act of
investment insofar as it contributes to future
productivity. He also noted that education involves future consumption: in his view, better
educated individuals make wiser consumption
decisions in the future and, thus, indirectly affect
the economy positively.
Schultz also stressed the importance of including opportunity costs in calculating returns
to education rather than merely estimating
direct costs and benefits. The practice of computing the cost of earnings opportunities forgone while in school, he remarked, would
lower estimates of the return to education
substantially but would more accurately assess
the contribution of education. 6 Another conceptual contribution by Schultz was the establishment of number of years of schooling as
a unit measure of education. 7
Rate of Return to
Investment in Education
After the initial discovery of education's potentially large role in economic growth and the
development of a conceptual base for human
capital theory, empirical research on that theory
began to proliferate. 8 However, the method of
research shifted away from the national income
growth accounting used by Denison and Schultz
to one centered on rates of return. One reason
for this shift was economists' widespread disillusionment with aggregate production functions.
Another was interest in testing and specifying
the relationship more thoroughly.
In addition, researchers sought to understand
the microeconomic relationship between education and productivity better so that they
NOVEMBER 1984, E C O N O M I C REVIEW
might clarify the macroeconomic linkage between education and growth advanced by
Denison and Schultz. On the assumption that
in a market economy workers are paid their
marginal productivities and that education
enhances productivity by improving workers'
cognitive skills, most research used earnings or
income as a proxy for productivity. However,
some researchers probed the complexities of
the process by which education boosts productivity and earnings.
Finally, the practical nature of this research
rendered return rates important: policymakers
must allocate scarce funds on a marginal basis.
For example, from the point of view of a state or
federal policymaker, it is less useful to know
how much variance in income is accounted for
by education than how much an incremental
expenditure for schooling will return in comparison with the amount allocated to improve
highways or airports. The pioneer in this effort
was Gary Becker, w h o in the early 1960s
developed estimates as well as extensive theoretical specifications of a rate of return model. 9
At that time researchers generally agreed on
several findings. 10 First, they concurred that
the rate of return was greater than or equal to
that of investment in physical capital, whose
rate of return was then held to be 10 percent.
Second, the rate of return declines with higher
levels of education. Third, the private rate of
return is higher than the social rate of return.
The private rate of return is based on direct
tuition costs incurred by the individual or his
FEDERAL RESERVE BANK OF ATLANTA
family and the opportunity costs of employment
forgone during the years spent in school. Social
costs also include those borne by the public
sector, such as tax-supported subsidies of educational institutions and student loans offered
at below-market rates. Fourth, rates of return
are fairly consistent from nation to nation,
although the return to education diminishes
with economic development returns are higher
in less developed economies than in advanced
ones.
Schultz calculated that the rate of return to
elementary school is 35 percent while that to
high school is close to 11 percent 1 1 The return
to elementary school is higher because the
opportunity cost of elementary school is low in
developed countries and because such costs
make up the lion's share of the costs, according
to Schultz.
Despite generally declining returns to higher
levels of education, research indicated the
existence of a "credential e f f e c t " by which
returns for completing a given level of education
added more to earnings than for completing
any year of study within that level. Jerry D.
Goodman calculated that although obtaining a
high school diploma had a surprisingly small
effect, graduation from college offered almost
seven times the return of a single year of
college. 12 Although his model is quite simple
and the amount of variance explained is only
16 percent, his findings are supported by the
work of others.
Research by George Psacharopoulos exemplifies comparisons of social and private rates
of return. He estimated the private rate of
return to secondary schooling as 19-20 percent
and its social rate of return as 11-14 percent.
His calculations indicated the private rate of
return to higher education is 14-15 percent,
whereas the social return to college is 10-11
percent
The first systematic comparison of rates of
return in various countries was Psacharopoulos'
1973 investigation of 32 countries. His findings
were strengthened by his 1980 replication,
which corroborated most of his original results.
He concluded that in developing economies
the social rate of return to primary schooling is
27 percent that to high school 16 percent, and
to higher education 13 percent In developed
countries, the rates were 10 percent for secondary schooling and 9 percent for higher
education. 13
11
Better Specification
As research into human capital theory continued to expand, economists produced more
complete specifications of the theoretical
model and subjected it to more rigorous tests.
Jacob Mincer refined and further specified the
linkage between education and growth through
his research into on-the-job training and its
contribution to higher productivity and earnings,
which he maintains is substantial. Mincer attributed the rather weak 10 percent correlation
between education and income to the fact that
the return to education varies over workers' life
cycles. At its maximum, he said, schooling has a
coefficient of determination of .33 and accounts
for one-fourth of the variance in earnings. 14
This maximum occurs during the first decade
after entering the work force, when the effects
of education investment have depreciated the
least and the contribution made by experience is
minimal.
Some economists began to examine the
direct linkage between education and productivity to understand more precisely how education adds to productivity and earnings. The
foundation for such research was established
in the mid-1960s by Richard Nelson and Edmund
Phelps, who argued that education's chief value
might lie in its capacity to expedite the application of technology. 15 The role of schooling,
they contended, was to enable workers and
managers or entrepreneurs to adapt to change.
Although subsequent researchers did not
test all ramifications of the Nelson-Phelps
hypothesis, several analyzed education's importance in fostering the application of technology by farmers. Using 1964 American census
data on farmers in four midwestern states,
George Fane analyzed sales per farm in relation
to education and other independent variables.
He found that more highly educated farmers
exhibit superior managerial efficiency; that is,
education enables farmers to produce more
with the same volume of resources.16 According
to Marlaine E. Lockheed's analysis of the relationship of education to farm productivity in 18
low-income countries, farm productivity increases 7.4 percent, on the average, as a result
of the completion of four additional years of
elementary education. Four to six years seemed
to be a threshold below which education has
little impact on productivity. 1 7 Rati Ram found
the impact of education to be greater on farm
12
operators than on farm laborers, presumably
because the former have more authority to
apply their knowledge. 18 Most of these studies
used data on farmers in developing countries,
and so their empirical findings in support of the
Nelson-Phelps hypothesis cannot necessarily
be applied to the United States and other
developed economies.
A related approach to examining educationproductivity linkages has been through research
on vocational education. Since its curricula are
targeted more directly toward specific jobs,
some thought that vocational education could
have a stronger link to productivity than general
secondary or higher education. This extensive
body of research has not substantiated the
hypothesis. August C. Bolino and Noel D. Uri,
using sophisticated techniques, found only
weak evidence of productivity gains in manufacturing related to vocational education. 19
Their results also proved to be inconsistent at
different points in time over the period tested,
1958-69. More recent research has produced
similar results, raising questions about the relationship between vocational education and
productivity. 2 0
Another refinement to the human capital
model was the standardization of incomes
according to the number of hours worked.
Since jobs requiring advanced education tend
NOVEMBER 1984, E C O N O M I C REVIEW
to entail longer working hours, and concomitantly the sacrifice of leisure time, calculating
returns in relation to hours worked seemed
important. 21 Empirical tests showed that adjusting for hours worked lowered the return to
graduate and high school education from that
estimated by previous researchers. 22
A final major refinement was the search for
better data sets allowing more detailed analyses
of critical linkages. Anita A Summers and Barbara
L Wolfe, reasoning that years of schooling may
be too crude a measure to determine the
impact of education, used a longitudinal sample
of Philadelphia students to assess the relationship between various measures of school performance and subsequent changes in cognitive
achievements. (A longitudinal sample provides
observations of a fixed population sample over
multiple time periods. A cross-sectional sample
does so only at a fixed point in time, and
thus infers changes over time by examining
differences between age groups, or "cohorts.")
The authors' sample offered information on a
variety of quality measures. Their results indicated that differences in educational quality
were indeed a significant determinant of improved achievement, as measured by performance on standardized tests. Yet teachers'
advanced degrees and higher test scores turned
out to be much less important than experience
in improving students' achievement in most
subjects. 23
Other research has extended Summers' and
Wolfe's investigation of school quality and
student achievement linkages to the relationship
between achievement and subsequent earnings.
Paul Wachtel, for example, made a preliminary
investigation into the effects on subsequent
earnings of attending a higher quality college.24
Wachtel used college costs as a surrogate for
quality on the assumption that, if colleges
operate like efficient firms, cost differences
imply quality (productivity) differences. Using
this specification, he found a lower rate of
return than most research then had. Although
he cautioned readers regarding the applicability
of his specific rates of return because of possible
sample bias and the still rather crude measure
of quality differences, the implication of his
findings is that estimates that do not take
quality differences into account are biased,
and human capital policy based on such estimates results in an overinvestment in education.
FEDERAL RESERVE BANK OF ATLANTA
Education vs. Ability, Personality,
and Family Background
As human capital research mushroomed and
replications failed to produce consistently positive results, some of the initial consensus regarding educational investments eroded. Yet-scientific theories may linger for years even though
empirical support is weak; they are rejected
only when alternatives arise that better account
for current scientific puzzles. 25
One such puzzle in the 1970s was income
distribution, which gained prominence over
earlier interest in growth and productivity gains.
As economists attempted to explain income
inequality at the same time they were specifying
the human capital model more precisely, contradictions and criticisms grew more salient.
Some researchers argued that the statistical
relationship between education and earnings
was spurious: they contended that factors omitted from research, such as ability, family
background, and personality traits like ambition,
were actually responsible for higher earnings.
Fully specified equations that included these
variables would eliminate the effects of education, they contended.
One of the most influential spokesmen for
this view was Christopher Jencks. His early
arguments and evidence implied that public
policies designed to decrease inequality through
educational investments would fail to achieve
their objective because education was strongly
correlated with such background factors as
socioeconomic status, native ability, race, gender,
and personality traits. By providing supplementary financial support to education, he believed,
public policy was further skewing income distribution by aiding those already most likely to
succeed economically.
Although Jencks' 1972 book was less rigorous
in its methodology than the work of many
human capital practitioners, it prompted a
significant response from other economists,
w h o began to estimate the amount of bias that
resulted when such factors were ignored. John
Hause's studies suggested that schooling and
ability interact, biasing estimates of the importance of education upward by 3-18 percent. 26
Paul Taubman and Terence Wales found that
exclusion of certain ability and personality
traits resulted in a 35 percent upward bias in
the estimated effect of higher education on
earnings. Controlling for ability, they calculated
13
that the social and private rates of return were
essentially equal and less than that from investing
in physical capital. 27
B. F. Kiker and W. P. Liles tested for bias by
controlling sequentially not only for ability but
for motivational and behavioral traits. Using
longitudinal data drawn from a five-year panel
study of 3,200 respondents, they estimated
that the introduction of ability measures reduces
the impact of education by 13 percent; incorporation of personal traits such as risk avoidance,
sense of efficacy, trust, and mobility reduces
the coefficient of education by 27 percent. 28
Although ability by itself explained only a small
portion of variance in earnings, jointly the three
sets of variables—education, ability, and behavioral traits—accounted for 50 percent of the
variance, a much higher percentage than that
of models linking education alone with earnings.
Although Jencks and his colleagues modified
their arguments somewhat after their more
sophisticated later replications produced less
dramatic results, they still concluded that education per se is not the most efficient method
for achieving income equality or promoting
productivity gains. They employed 11 samples
and ran stepwise regressions to determine the
effect of education on income and occupational
status before and after introducing causally
prior independent variables into their equations.
(In stepwise regressions dependent variables
are either added to or subtracted from equations
singly and sequentially in an effort to determine
the independent magnitude of each variable.)
According to the estimate derived from their
best sample, and holding ability and family
background constant they calculated that education accounts for 20 percent of the variance in
income, while family background accounts for
22 percent Personality traits and ability had a
much smaller impact. 29 They concluded that
education has a greater effect on occupational
status than on earnings, which suggests that the
effect of schooling on earnings works through
choice of occupation.
The most far-reaching critique deriving from
this "self-selection" hypothesis was formulated
by Samuel Bowles and Herbert Cintis. Their
empirical work, which is consistent with that of
Jencks and others, is less important than their
philosophical attack, which essentially maintained that schools serve as a mechanism for
perpetuating inequality. 3 0 Education, they
14
argue, most benefits those with higher socioeconomic status and ability. Moreover, rather
than contributing to productivity by transferring
cognitive skills, education merely fosters social
stability. It does so, they contended, by inculcating future workers with the skills needed for factory w o r k — o b e d i e n c e to hierarchy and acceptance of sharp inequalities between incomes of
workers and managers or owners. 31 They hold
that because success in school ostensibly is
based on meritocratic norms, whereby rewards
accrue to achievement rather than traits such
as class, race, or gender, individuals with lower
grades, test scores, and levels of education
come to believe their subsequent lower earnings
are fair. In reality, they reasoned, the students
most likely to succeed in school are those with
the greatest initial resources (ability, family
income, higher social status). The authors did
not strongly dispute the contribution of education to growth. Instead, they argued that the
real issue is how much more growth could have
been achieved under an alternative system
that fosters creativity and autonomy rather
than conformity and obsequiousness. 32
Although Bowles' and Gintis' critique stems
from their Marxian perspective, which most
human capital theorists reject other economists
have confirmed that increased educational
investment has not achieved equity to the extent
expected. W. Lee Hansen found that the proportion of lower-than-median income students
enrolled or planning to enroll in college relative
to that of above-median income students failed
to increase as expected from federal policies
from the early to the late 1970s. 33 Furthermore,
Bowles' and Gintis' charges have sharpened
the debate about the process through which
schooling contributes to productivity.
One problem now recognized with many studies is due to a phenomenon known as "multicollinearity." When this occurs, variables specified
as causal tend to move together. As a result, it is
often not possible to isolate the impact of a
single variable on the results being studied.
Thus, in a statistical sense the explanatory
variables are not independent If measures of
ability are highly correlated with measures of
education, we may not be able to tell which
factor explains differences in income among
individuals. Family background variables, such
as income or parents' education, also might be
closely related to other variables in the equation.34
NOVEMBER 1984, E C O N O M I C REVIEW
Another confounding factor relates to the
validity of the indicator used to measure ability.
Typically it is measured in a manner closely
related to schooling, for example, by achievement test scores. In fact, productivit^related
ability requisite to professional success may be
closer to motivation than to test-taking skills.
Some productivity studies have shown only a
weak correlation b e t w e e n test scores and
specific productivity-related tasks.35 Despite
by protective legislation, self-exclusion, or discrimination, then merely equalizing educational
investments w o u l d not overcome income disparities. The lower incomes and occupational
status of blacks with the same educational level
as whites implicitly supported this hypothesis. 36
This critique has not gained popularity, but it
does point to another potential weakness of
human capital theory, particularly as the basis
for achieving equity goals.
Interaction of Supply and Demand
n!
fgPTA
shortcomings of research on the importance of
ability, personality, and family background in
determining education's impact on productivity,
earnings, and growth, this challenge to human
capital theory remains important It has tempered
the claims of even the most sanguine advocates
of investment in education as a means of
fostering economic growth.
Segmented Labor Markets
An offshoot of the debate over ascriptive
traits versus education in influencing productivity was derived from the theory of dual or
segmented labor markets. In the 1960s, economists noted the existence of dual economic
sectors in some developing economies. Some
proponents of human capital theory applied
this concept to advanced economies. If blacks
or w o m e n were effectively excluded from certain occupations or levels of advancement either
FEDERAL RESERVE BANK OF ATLANTA
Another challenge to human capital theory
was presented by the sharp increases in the
labor force during the 1970s. The result of this
change was a mismatch of supply and demand
that forced many college-educated entrants to
the labor force to take jobs in lower status
occupations than normally associated with their
level of training. As a result, the measured
return to higher education began to fall. These
findings revealed an important methodological
shortcoming of most human capital research.
Despite advances in statistical methods, most
empirical studies consisted of single equation
models rather than equations that determine
results simultaneously. Notwithstanding the
large number of variables in some of these
equations, they were "reduced form equations,"
incorporating both supply and demand interactions in an unspecified manner. Human capital
theory focuses on supply variables and implicitly
assumes that demand keeps pace with a higher
quality labor supply. Rapid expansion of the
labor force in the 1970s refocused attention on
the interaction of demand and supply as a
determinant of the rate of return to investment
in education.
Several researchers have provided indirect
evidence in support of demand-side factors. In
comparing skill and educational requirements
for over 200 occupations with the levels of
workers in such occupations, Ivar Berg found
that jobs were being filled by people with
greater educational qualifications than earlier.37
Factory foremen typically held college degrees,
where previously this job had been filled by
promoting blue-collar workers from the shop
floor.
Employing a method similar to Berg's and
using large, more current Census Bureau samples,
Russell Rumberger concluded that the labor
15
force had become increasingly overeducated
from 1960 to 1976. He estimated that in 1960
white males with some college education had
completed .69 more years of schooling than
needed for the jobs they held; by 1976, such
workers had .83 more years of schooling than
needed. In 1960 white males with a college
degree had 1.20 more years of schooling than
required and in 1976, 1.23. 38
Using more recent data (1970-81), Anne
McDougall Young found that the supply of
college graduates still outstripped demand for
professional and technical jobs traditionally
filled by those holding bachelor's degrees. The
percentage of college graduates finding such
occupations declined from 67 to 54 percent
over the period; a larger proportion of college
graduates became blue-collar or service workers.39 Concomitantly, the proportion of high
U.S. Employment Service, which categorizes
jobs according to qualifications. Thus, this
method has elements of subjectivity that cloud
the reliability of several indicators. Moreover,
occupational status is a less useful indicator
than earnings because the latter, in a competitive
market, may connote marginal productivity.
R. B. Freeman advanced the demand-side
criticism of human capital theory by comparing
returns to college training in 1969 and 1974.
He found that the wages of college-trained
workers, particularly new entrants to the labor
force, had fallen relative to high school graduates
over the period. The resultant drop in rates of
return was 2 to 4 percentage points.41 Freeman's
findings probably lack general validity because
they were based on a short time period during
which Vietnam War veterans were being absorbed into the labor force. However, Finis
Welch confirmed that cohort size affects the
age-earnings profile and the educationalearnings relationship. 42 Notwithstanding certain weaknesses of findings by Freeman, Young,
and Berg, they demonstrated the problems of
focusing exclusively on aspects of supply and
ignoring demand factors.
Screening Hypothesis
school graduates w h o found jobs as sales and
clerical workers fell by half during the 1970s as
competition from college graduates unable to
find professional and technical jobs increased.40
Young attributed this decline to the entry of
the baby-boom cohort into the labor force and
predicted that, as those workers are absorbed,
supply will more closely match demand for
college-educated labor in the future.
One problem with the method used by Berg
and Rumberger is that it entails two distinct j o b
classifications, one used in the Census Bureau's
sampling of households to determine occupational and employment status, the other by the
16
A serious challenge to human capital theory,
particularly the education-productivity linkage,
is termed the "screening" or "signaling hypothesis." Proponents of this approach contend that education does not intrinsically enhance individual productivity. Rather, they say,
it serves as a filtering mechanism for employers
or as a signaling device for would-be employees.
Education, according to this perspective, serves
both parties as a symbol of potential productivity,
not as a vehicle for acquiring cognitive skills
relevant to more productive performance on
the job. Thus, the screening hypothesis shifts
attention to the interaction of supply and
demand, although its focus is at the microeconomic level of the worker and the firm
rather than at the macroeconomic level emphasized by Berg, Freeman, and others.
The screening hypothesis downplays the
significance of education far more than the selfselection hypothesis does. Most advocates of
the latter hold that education interacts with
other personal traits such as ability and socioNOVEMBER 1984, E C O N O M I C REVIEW
economic status in fostering individual productivity gains, not that education makes no contribution to individual productivity. The screening hypothesis does not deny that individuals
ought to invest in education, since they stand
to reap the benefits of a job, but it suggests that
any social rate of return to investment in
education is due to the efficient distribution of
manpower it promotes by steering students to
the jobs where they have the greatest comparative advantages. Advocates consider increased
or even continued public finance of education,
particularly at the postsecondary level, a suboptimal allocation of funds because they believe
schooling adds little to individuals' on-the-job
performance beyond what they could offer by
virtue of their own abilities. Its high cost is not
justified by the efficiency gains that it reaps.
The screening hypothesis grew out of the
economic consideration of markets in which
uncertainty is a significant factor. The theoretical basis of the screening hypothesis was
most fully articulated by Michael A. Spence,
but Kenneth J. Arrow contributed to its conceptual formulation. 4 3 Like Arrow, Spence
assumed, for the sake of developing his mathematical model, that there are t w o types of
labor, one with a marginal productivity of 1, the
other with a marginal productivity of 2. In the
absence of signaling, the employer has no way
of distinguishing the t w o types and, hence,
pays each one his expected marginal productivity, which is the same for everyone. This
situation is disadvantageous to those with a
marginal productivity of 2. 44 Spence sought to
demonstrate mathematically that jobs may
have prerequisites that convey no essential
information and serve no significant function. 45
Kenneth I. Wolpin devised a simple and
straightforward test of the screening hypothesis.
He contrasted educational levels of selfemployed workers with those of organizations'
employees. Presumably, the self-employed
would not need schooling to serve as a screening
device to obtain jobs. From a longitudinal
sample of 5,000 males, he selected individuals
w h o were self-employed during at least their
first and latest jobs over a 20-year period. He
compared their schooling and earnings with
those of a comparable group of nonprofessional salaried employees and found that selfemployed respondents had .6 fewer years of
schooling than their control group counterparts.
FEDERAL RESERVE BANK O F ATLANTA
Since the difference in education was so slight,
he concluded that schooling serves only a
minor screening function. However, Wolpin
did not control for ability differences. This
omission is particularly important as selfemployed respondents scored slightly lower
on the intelligence test, and other research has
shown a correlation between ability and educational achievement In addition, the selfemployed subset of 157 was considerably
smaller than the control group, which numbered
1,099. 46
Others w h o have attempted to subject the
screening hypothesis to empirical verification
have produced mixed results. These results owe
in part to the complexity of the hypothesis, and
in part to the assumptions most researchers have
felt necessary to adopt in subjecting the hypothesis to empirical scrutiny. T w o of these
assumptions are that better educated workers
perceive their productivity to be lower (or are
uncertain about it) and they are risk-averse.
Thus, most tests of the screening hypothesis
are indirect, and conclusions rely heavily on
sometimes questionable inferences. Work by
Taubman and Wales and John Riley exemplies
these problems. 47 , 48
A variant of the screening hypothesis was
developed by Lester C. Thurow. Called the
" j o b competition model," this version is based
on the assumption that employers minimize
costs by hiring the candidates with the lowest
17
probable training costs. According to the job
competition model, most skills are learned
informally on the job. 4 9 It contends that the
focal point of labor market competition is not
wages, as neoclassical economics maintains,
but rather entry-level positions that provide a
start up the promotional ladder. Wage differentials and rates of increase vary according to
the career ladder on which a labor market
entrant begins. The labor market's chief purpose
is to allocate employees to training ladders so
employers can minimize training costs.
Thurow's explanation for the failure of increased investment in education to reduce
The screening hypothesis presents a serious
challenge to the alleged linkage between education and productivity, although it does not
claim that education contributes nothing to
aggregate productivity. By signaling to employers
the potential productivity of j o b candidates, it
results in a more efficient allocation of workers
to jobs where they have a comparative advantage
than that which would occur in the absence of
schooling. The key question is whether an
alternative, less expensive signaling mechanism
than 12-16 years of schooling is feasible. However, the hypothesis has not been well supported
empirically. Indeed, it may not be testable.
Consumption Value of Education
income inequality is distinct from the approach
of Jencks, Bowles, and others. If wage competition followed the precepts of neoclassical economics, then increasing numbers of collegeeducated workers should lower wages for such
workers. Instead, college graduates increasingly
take jobs formerly held by high school graduates
because the focus of competition is the job
itself, not wages. The j o b candidate's focus is
not on the entry-level salary but on the expected
lifetime incomes of various career tracks. This
trend lowers the average earnings of college
graduates in the aggregate but not the absolute
wage level of jobs requiring a college degree.
Thurow tested his model by comparing actual
income distribution patterns with those predicted by the job competition model, but, as
he acknowledged, the test is indirect and
capable of alternative interpretations. 50
18
Some economists have attempted to muster
empirical support for human capital theory by
showing how the consumption benefits of
education contribute to social as well as private
economic well-being. 52 Lewis Solmon developed evidence showing that better educated
individuals have a higher saving rate and manage
their portfolios more effectively by their choice
of savings instruments. 53 Numerous studies
have demonstrated a correlation between education and health. For example, infant mortality
declines as mothers' education increases, and
higher levels of education are associated positively with longevity. 54
Aside from methodological shortcomings of
particular studies within this line of research, a
primary weakness is the open-ended nature of
the approach. If education's full contribution is
to be assessed as the basis for policy decisions
on increasing public support then consumptionrelated detractions of education also must be
considered. For instance, some researchers
have argued that a surfeit of college graduates
relative to the supply of available jobs requiring
higher education leads to widespread job dissatisfaction and poorer health for the degree
holders forced to accept jobs below their
training. Such job dissatisfaction, if widespread,
could place a drag on economic growth, they
believe, in addition to the waste of resources in
educating workers for jobs that do not exist 5 5
Furthermore, this approach implies that consumption effects of alternative programs also
must be incorporated into the decisionmaking
process. Such a research agenda appears too
NOVEMBER 1984, E C O N O M I C REVIEW
large to serve as an efficient basis of policy
decisions.
Current Status of Human Capital Theory
Economists have yet to reach a consensus
regarding education's effects on productivity
and growth. In its 1981 study of productivity,
the Congressional Budget Office did not recommend federal investment in education as the
best policy to improve productivity because,
it concluded, the relationship is unclear. 56
Nonetheless, human capital theory is not bankr u p t Despite the strong implications of the
screening hypothesis, its empirical support has
been insufficient to replace human capital
theory. The more extensive empirical challenges
arising from the confounding effects of ability,
family background, and personality traits have
modified the claims of human capital theorists,
but economists have yet to reject the theory as
useless.
One reason for the sustained interest in
human capital theory is the recent shift of focus
back to the original puzzle that human capital
theory sought to explain—productivity and
growth. During the 1970s, most of the research
that challenged investment in education on
the basis of its correlation with ability and
socioeconomic status was set in the broader
policy context of equalizing incomes. Critiques
seriously questioned the effectiveness of investing in education to reduce income inequality.
As Jencks aptly concluded, " I f we want to
redistribute income the most effective strategy
is probably still to redistribute income." 5 7
During the late 1970s and early 1980s, however, national attention shifted to the nation's
waning productivity and macroeconomic growth.
In this policy framework, the self-selection
hypothesis is less damaging. If the paramount
policy goal is growth rather than equity, it
matters less that greater public support of
education aids those already blessed with the
greatest potential for productivity. An example
from a hypothetical developing country is illustrative: such a nation might catalyze much
more growth by investing a given amount of
money to educate the most able quartile of
youth for 12 years each than to spend the same
amount of money to educate all youth for three
years each. Failure to educate the most talented
FEDERAL RESERVE BANK OF ATLANTA
youth would result in a talent loss and lower
aggregate economic output. 5 8
Despite this newfound interest in the contribution of education to economic growth, the
results of a recent effort to revive the growth
accounting approach while incorporating more
sophisticated techniques that have developed
since Denison's pioneering study do not support
the optimism of early human capital theorists.
Dale W. Jorgensen replicated Denison's work
but added an adjustment for relative wage
rates. The result showed education's contribution to the 3.9 percent annual growth rate
as only 10 percent, not 20 percent as Denison
had found for the period 19 3 0-57. 59 Hours
worked was found to be a more significant
source of labor's contribution to growth than
was quality. Physical capital and technological
advances each contributed more to growth
than did labor.
Questions for Future Research
Methodological improvements still will have
an important role in clarifying the social and
private rates of return to education, thereby
improving our understanding of how much
schooling society should have. The use of
simultaneous equation models rather than reduced form equations would help to separate
the effects of supply and demand factors and
19
thus more accurately inform policymakers.
Longitudinal rather than cross-sectional data
sets also would generate more accurate estimates, since the phenomena under study occur
sequentially over a long period. Finally, the use
of more direct measures instead of proxies for
such variables as ability and productivity should
improve specifications of the hypothesized
relationships. 60 Even years of schooling is no
longer an adequate unit measure, since a decline
in standardized test scores for more than a
decade indicates that grade level achievement
is no longer comparable over time.
However, economic research also must move
beyond macro-level questions and investigate
the education-productivity linkage more thoroughly. Evidence suggests that the highest
return is to primary schooling, but elementary
study is already compulsory in the United
States and most advanced nations. Therefore,
quality, not quantity, becomes the critical
issue.61 How should schools at each level
optimally allocate the funds available? To answer
this question policymakers need to know how
education contributes to productivity—and the
relationship is far more complicated than originally conceived.
Which aspects of schooling offer the highest
returns to additional dollars of funding? How
should public support be allocated among
math, music, and extracurricular activities?
Should federal, state, and local governments
invest marginal dollars in advanced teacher
training, libraries, computers, buildings, or gymnasiums? Should high schools focus more on
vocational training, or is this better left to
proprietary post-secondary institutions? The
type of research carried out by Summers and
Wolfe exemplifies the direction suggested.
Researchers must advance such research by
investigating the relationship between cognitive measures of school performance and economic indicators of on-the-job performance. 62
In addition, education outside the school
system needs to be incorporated into human
capital theory.
Economists
must
further
Mincer's work regarding on-the-job training.
Anne Daly has observed the importance of
apprenticeship programs in Germany. 63 In the
United States, study of the substantial amount
of publicly funded training in the military might
alter existing rate of return estimates.
20
Another avenue of needed additional research
is the role of entrepreneurship. Economic
growth connotes more than expansion of
national income. An underdeveloped country
in which oil is discovered typically experiences
rapid increases in aggregate and per capita
income. However, unless this income is invested
wisely, it is possible that no economic development will occur. In the absence of entrepreneurial activity, incomes likely will revert to
initial levels once the resource is depleted. 6 4
Finally, an important but relatively unexplored area is that of interregional disparities. A
widespread notion exists that underinvestment
in human capital, particularly education, has
placed regions such as the South at an economic
disadvantage. In contrast, strong support of
education seems to have helped areas such as
New England to revive quickly from the challenges of global economic competition in the
textile and machine-tool industries, and states
like California to sustain a high level of prosperity. Education, it is argued, provides the
foundation for the advanced technology industries in New England and California but little
systematic research has been carried out to
support this hypothesis. O n the other hand,
labor, especially more highly educated labor, is
a mobile factor of production. Thus, the perception of a linkage between education and
NOVEMBER 1984, E C O N O M I C REVIEW
in this region than in other areas.66 His findings
indicate that regional differences in the number
of years of schooling and rate of return to
schooling account for 60 percent of the variance
in incomes between states. His model is fairly
simple, though, and the independent variables
may have been substantially related, as he
admitted. 6 7
Further research on the regional externalities
of education is needed since the largest share
of education support comes from state and
local governments. State and local efforts to
boost productivity in regional labor markets by
investing more in education may lead to investing
too many resources in schooling in the aggregate.
The reasons are that with advanced education
students migrate to other regions anyway, and
the onset of declining college enrollments
suggests the existence of excess capacity, particularly at the postsecondary level. On the
other hand, if all states were to rely too heavily
on in-migration and reduce sharply their support of education, a macroeconomic underinvestment could result Because of this complicating factor of migration, it is important to
gain a fuller understanding of the role of education in regional economic development in
order to avoid nonoptimal investment in education nationwide.
productivity could encourage regional policymakers to overinvest in education relative to
the amount of capacity existing nationwide.
Some studies of plant location decisions
conclude that a state's reputation for education
is less important than other factors such as
taxes, regulation, transportation, and resources,
including cheap labor. However, such studies
usually focus on plants that have already been
moved to a particular region, ignoring those
companies that chose to locate elsewhere and
growth of companies already located in the
region. In addition to this bias, such studies
have not been integrated with the literature
dealing with economic growth and productivity.
Regional studies of the education-income
linkage that are more closely related to human
capital literature are limited in number and
have shortcomings. Marshall R. Colberg's evidence suggested that the return to secondary
and postsecondary schooling in the South is
greater than in the rest of the country for black
but not white males.65 However, his statistical
analysis is less sophisticated and rigorous than
most described above. More advanced testing
of the regional issue was done by Barry R.
Chiswick, w h o concluded that the scarcity of
skilled labor relative to unskilled labor in the
South renders the return to education greater
NOTES
' B F. K i k e r , Human
Capital
in Retrospect
(Columbia, S o u t h Carolina:
U n i v e r s i t y o f S o u t h C a r o l i n a Press, 1 9 6 8 ) , pp. 2 4 , 1 1 3 .
M a r k B l a u g , " C l a s s i c a l P o l i t i c a l E c o n o m y : A R e e x a m i n a t i o n , " in Essays
on Adam Smith, ed. A n d r e w S S k i n n e r a n d T h o m a s W i l s o n ( L o n d o n :
O x f o r d U n i v e r s i t y P r e s s , 1 9 7 5 ) , pp. 5 7 3 f f .
3
S e e Robert Solow, "Technical C h a n g e a n d t h e A g g r e g a t e Production
F u n c t i o n , " The Review
ot Economics
and Statistics,
vol. 3 9 ( A u g u s t
1 9 5 7 ) , pp. 3 1 2 - 2 0 ; S o l o m o n F a b r i c a n t , Basic Facts on
Productivity
Change, O c c a s i o n a l P a p e r 6 3 ( N e w York: N a t i o n a l B u r e a u of E c o n o m i c
Research, 1959).
2
" S e e E d w a r d F. D e n i s o n , Accounting
tor U.S Economic
Growth,
19291969 ( W a s h i n g t o n : B r o o k i n g s I n s t i t u t i o n , 1 9 7 4 ) .
5
M a c h l u p a l s o h a s c o n t r i b u t e d t o t h e f o u n d a t i o n of t h e e c o n o m i c s of
e d u c a t i o n , b u t h i s i m p o r t a n c e lies m o r e i n t h e a r e a o f p r o v i d i n g a b r o a d
b a c k g r o u n d t h a n of a d v a n c i n g t h e b o r d e r s o f k n o w l e d g e . S e e , e.g.,
Fritz M a c h l u p , Knowledge:
Its Creation,
Distribution,
and
Economic
Significance,
Vol III, The Economics
of Information
and Human
Capital
(Princeton: P r i n c e t o n University Press, 1984).
6
T h e o d o r e W. S c h u l t z , The Economic
Value
C o l u m b i a U n i v e r s i t y P r e s s , 1 9 6 3 ) , p. 3 0 .
FEDERAL RESERVE BANK OF ATLANTA
of Education
( N e w York:
'Ibid., p. 6. W h i l e t h i s m e a s u r e h a s c e r t a i n p r o b l e m s , it h a s p r o v i d e d t h e
f o u n d a t i o n f o r s u b s t a n t i a l a d v a n c e s in t h e o r e t i c a l a n d e m p i r i c a l
r e s e a r c h i n t h i s a s p e c t o f h u m a n c a p i t a l t h e o r y . Its i m p o r t a n c e
b e c o m e s m o r e o b v i o u s b y c o m p a r i n g it w i t h a n o t h e r a s p e c t of t h a t
t h e o r y , h e a l t h c a r e . U n d e r s t a n d i n g of t h e c o n t r i b u t i o n o f h e a l t h t o
e c o n o m i c d e v e l o p m e n t h a s p r o g r e s s e d m u c h l e s s t h a n t h a t of e d u c a t i o n . O n e r e a s o n is t h e l a c k of b a s i c , s t a n d a r d m e a s u r e s of i n p u t s
and outputs.
" D . A F r e n z e l a n d D. J. M c C r e a d y , " E c o n o m i c s o f E d u c a t i o n : T h e
D e v e l o p m e n t o f a S u b - D i s c i p l i n e , " The American
Economist,
vol. 2 6
( S p r i n g 1 9 8 2 ) , pp. 3 8 , 4 1 . F r o m 1 9 6 0 t o 1 9 7 3 t h e n u m b e r of j o u r n a l
articles increased 1 2 0 0 percent; t h e relative share of dissertations o n
this topic e x p a n d e d tenfold from 1957 to 1976.
9
G a r y S. B e c k e r , " I n v e s t m e n t in H u m a n C a p i t a l : A T h e o r e t i c a l A n a l y s i s , "
Journal
of Political
Economy,
vol. 7 0 , S u p p l e m e n t ( O c t o b e r 1 9 6 2 ) , p.
3 9 ; s e e a l s o i d e m , Human
Capital
( N e w York: C o l u m b i a University
Press, 1 9 6 4 ) . F o r e x a m p l e , h e m a i n t a i n e d t h a t h u m a n c a p i t a l t h e o r y
e x p l a i n s t h e s h a p e of t h e a g e - e a r n i n g s profile, w h i c h t e n d s t o r i s e
s h a r p l y a n d t h e n l e v e l off o v e r t i m e . E a r n i n g s a r e l o w in e a r l y life,
according to a human capital approach, because opportunity and
21
d i r e c t c o s t s of e d u c a t i o n a n d t r a i n i n g a r e h i g h e s t d u r i n g t h i s p e r i o d ;
t h e r e a f t e r , e a r n i n g s a c c r u e t o t h i s i n v e s t m e n t in s c h o o l i n g , c a u s i n g a n
i n i t i a l s h a r p rise i n e a r n i n g s f o r a p e r i o d of y e a r s . T h e r e a s o n t h a t m o s t
t r a i n i n g is u n d e r t a k e n b y y o u n g e r r a t h e r t h a n o l d e r p e o p l e is n o t a
f u n c t i o n o f b i o l o g i c a l a g i n g , f a v o r i n g t h e a l e r t n e s s o r r e c e p t i v e n e s s of
y o u t h , b u t r a t h e r t h e g r e a t e r p o t e n t i a l r e t u r n o v e r t i m e if i n v e s t m e n t s
a r e m a d e a t a n e a r l y age.
10
E a r l y m e t h o d o l o g i c a l d i s p u t e s c o n c e r n i n g t h e p r o p e r m e t h o d of
calculating returns, w h e t h e r by internal rate of return or present
d i s c o u n t e d v a l u e , w e r e r e s o l v e d in f a v o r of t h e f o r m e r . S e e E l c h a n a n
Cohn, " I n v e s t m e n t Criteria a n d t h e Ranking of Educational Investm e n t s , " Public Finance, vol. 2 7 , no. 3 ( 1 9 7 2 ) , pp. 3 5 5 - 6 0 , f o r a n e x a m p l e
of t h i s d e b a t e .
" S c h u l t z , Economic
Value of Education,
p. 6 1 .
' 2 J e r r y D. G o o d m a n , " T h e E c o n o m i c R e t u r n s o f E d u c a t i o n : A n A s s e s s m e n t of A l t e r n a t i v e M o d e l s , " Social Science
Quarterly,
vol. 6 0 ( S e p t e m b e r 1 9 7 9 ) , p. 2 7 5 .
,3
G e o r g e P s a c h a r o p o u l o s " R e t u r n s t o E d u c a t i o n : A n U p d a t e d Intern a t i o n a l C o m p a r i s o n , " in Education
and Income,
W o r l d Bank Staff
W o r k i n g P a p e r N o 4 0 2 ( W a s h i n g t o n : W o r l d B a n k , 1 9 8 0 ) , pp. 94ff.; s e e
also, i d e m , " E d u c a t i o n a s a n I n v e s t m e n t , " Finance
&
Development
( S e p t e m b e r 1982), p p 41-42. (He d i d not estimate return rates for
e l e m e n t a r y s c h o o l i n g in a d v a n c e d e c o n o m i e s b e c a u s e of t h e w i d e s p r e a d p r a c t i c e of c o m p u l s o r y s c h o o l i n g a n d child-labor restrictions.)
' " J a c o b Mincer, "Education, Experience, and the Distribution of Earnings
a n d E m p l o y m e n t : A n O v e r v i e w , " i n Education,
Income,
and
Human
Behavior,
ed. T h o m a s F. J u s t e r ( N e w Y o r k : M c G r a w - H i l l , 1 9 7 5 ) , pp. 7 8 7 9 ; s e e a l s o i d e m , Schooling,
Experience,
and Earnings
( N e w York:
N a t i o n a l B u r e a u of E c o n o m i c R e s e a r c h , 1 9 7 4 ) .
15
Richard N e l s o n a n d E d m u n d Phelps, " I n v e s t m e n t in Humans, Techn o l o g i c a l Diffusion, a n d E c o n o m i c Growth," American
Economic
Review:
Papers and Proceedings,
vol. 5 6 ( M a y 1 9 6 6 ) , p p 6 9 - 7 5 .
6
' G e o r g e Fane, " E d u c a t i o n a n d the M a n a g e r i a l Efficiency of Farmers,"
Review of Economics
and Statistics,
vol. 5 7 ( N o v e m b e r 1 9 7 5 ) , p p 4 5 8 59.
" M a r l a i n e E. L o c k h e e d et al., " F a r m e r E d u c a t i o n a n d F a r m E f f i c i e n c y : A
S u r v e y , " Economic
Development
and Cultural
Change, voL 2 9 ( O c t o b e r
1 9 8 0 ) , pp. 6 0 - 6 1 .
,8
Rati Ram, " R o l e of E d u c a t i o n in Production: A Slightly N e w Approach,"
Quarterly
Journal ot Economics,
voL 9 5 ( S e p t e m b e r 1 9 8 0 ) , p p 3 6 5 - 7 3 .
' " A u g u s t C. B o l i n o a n d N o e l D. Uri, " V o c a t i o n a l E d u c a t i o n : A H u m a n
C a p i t a l / P r o d u c t i v i t y N e x u s ? " Journal
ot Behavioral
Economics,
voL 11
( W i n t e r 1982), p p 1 -32.
20
R e s e a r c h by Eva G a l a m b o s of t h e S o u t h e r n Regional E d u c a t i o n Board
(Atlanta, G e o r g i a ) , r e p o r t e d a t a F e d e r a l R e s e r v e B a n k o f A t l a n t a
Symposium on Education and Southern Economic Growth, May
1984, c h a l l e n g e s t h e effectiveness of m a n y vocational e d u c a t i o n
p r o g r a m s b a s e d in h i g h s c h o o l s
2,
C . M. L i n d s a y , " M e a s u r i n g H u m a n C a p i t a l R e t u r n s , " Journal of
Political
Economy,
vol. 7 9 ( D e c e m b e r 1 9 7 1 ) , pp. 1 1 9 5 - 1 2 1 5 .
" R . S Eckaus, " E s t i m a t i o n of t h e R e t u r n s to Education w i t h Hourly
S t a n d a r d i z e d I n c o m e s , " Quarterly
Journal
of Economics,
voL 8 7
( F e b r u a r y 1 9 7 3 ) , p. 1 2 7 .
" A n i t a A S u m m e r s a n d Barbara L Wolfe, " I m p r o v i n g t h e Use of
Empirical Research as a Policy T o o t An Application to Education,"
R e s e a r c h P a p e r N o 4 1 , F e d e r a l R e s e r v e B a n k of P h i l a d e l p h i a J u n e
1979.
" P a u l Wachtel, "The R e t u r n s to I n v e s t m e n t in H i g h e r Education.
A n o t h e r View," i n J u s t e r , Education,
Income,
and Human Behavior,
pp
161-62.
" T h o m a s S K u h n , The Structure
of Scientific
Revolutions
(Chicago:
U n i v e r s i t y of C h i c a g o Press, 1 9 7 0 ) .
" J o h n Hause, "Ability a n d S c h o o l i n g as D e t e r m i n a n t s of L i f e t i m e
E a r n i n g s , o r If Y o u ' r e S o S m a r t , W h y A r e n ' t Y o u R i c h ? " in J u s t e r ,
Education,
Income, and Human Behavior,
pp. 1 3 1 , 1 4 3 , 1 4 8 .
" P a u l T a u b m a n a n d Terence Wales, " E d u c a t i o n as an Investment a n d a
S c r e e n i n g D e v i c e , " in J u s t e r , Education,
Income, and Human
Behavior,
pp. 9 6 , 1 0 3 .
" B F. K i k e r a n d W. P. Liles, " E v i d e n c e of B i a s e s in t h e C o n t r i b u t i o n o f
E d u c a t i o n t o G r o w t h i n E a r n i n g s , " Journal
of Behavioral
Economics,
vol. 7 ( W i n t e r 1 9 7 8 ) , p p 1 0 1 - 1 9 .
" C h r i s t o p h e r J e n c k s e t a l , Who Gets Ahead?
The Determinants
of
Economic
Success in America ( N e w York: B a s i c B o o k s , 1 9 7 9 ) , p p 2 2 3 ,
292.
30
H e r b e r t G i n t i s " E d u c a t i o n , T e c h n o l o g y , a n d t h e C h a r a c t e r i s t i c s of
W o r k e r P r o d u c t i v i t y , " American
Economic
Review:
Papers
and
Proceedings,
v o l 61 (May 1971), p 268.
31
I b i d , p. 2 7 2 .
" S a m u e l B o w l e s a n d H e r b e r t Gintis, " T h e P r o b l e m w i t h H u m a n C a p i t a l
T h e o r y — A M a r x i a n C r i t i q u e , " American
Economic
Review: Papers
and
Proceedings,
voL 6 5 ( M a y 1 9 7 5 ) , p 8 1 ; s e e a l s o i d e m , Schooling
in
Capitalist
America (New York. B a s i c B o o k s , 1 9 7 6 ) .
33
W. L e e H a n s e n , " E c o n o m i c G r o w t h a n d E q u a l O p p o r t u n i t y : C o n f l i c t i n g
o r C o m p l e m e n t a r y G o a l s in H i g h e r E d u c a t i o n " ( M a d i s o n , W i s c o n s i n :
U n i v e r s i t y of W i s c o n s i n , A u g u s t 1 9 8 2 ) .
34
Z v i G r i l i c h e s " S i b l i n g M o d e l s a n d D a t a in E c o n o m i c s : B e g i n n i n g s o f a
S u r v e y , " Journal
of Political
Economy,
vol. 8 7 , no. 5, p a r t 2 ( O c t o b e r
1 9 7 9 ) , pp. S 5 8 - 6 0 . O n e m e t h o d of i n c o r p o r a t i n g u n s p e c i f i e d b a c k g r o u n d m e a s u r e s i n t o a n a l y s e s w a s t h e u s e of c o m p a r a t i v e s a m p l e s of
b r o t h e r s a n d p a i r s of m a l e s m a t c h e d f o r s p e c i f i e d a b i l i t y a n d b a c k g r o u n d f a c t o r s Z v i G r i l i c h e s p o i n t e d o u t t h a t t h e r e s u l t s of s t u d i e s
using sibling d a t a are not only inconsistent but also fraught with
p o t e n t i a l bias, s i n c e t h e y i n t r o d u c e n u m e r o u s u n s p e c i f i e d d y n a m i c s
s u c h a s b i r t h o r d e r a n d l a r g e r f a m i l y size.
" ' K e n n e t h J. A r r o w , " H i g h e r E d u c a t i o n a s a Filter," Journal
Economics,
voL 2 ( J u l y 1 9 7 3 ) , p. 2 1 5 .
36
of
Public
R u s s e l l W. R u m b e r g e r c o n c l u d e d t h a t b l a c k s w e r e m o r e e d u c a t e d
t h a n w h i t e s i n t h e s a m e o c c u p a t i o n a l c a t e g o r i e s R u m b e r g e r , Over
education
in the U.S Labor Market ( N e w York: P r a e g e r , 1 9 8 1 ) , p p 7 3 f f .
K i k e r a n d L i l e s c a l c u l a t e d t h a t a n a d d i t i o n a l y e a r of s c h o o l i n g i n c r e a s e d
e a r n i n g s 3.8 p e r c e n t f o r w h i t e m a l e s b u t o n l y 1.2 p e r c e n t f o r b l a c k
males, holding personality a n d ability variables c o n s t a n t
37
l v a r B e r g , Education
and Jobs: The Great Training
Robbery
(Boston:
Beacon, 1971), p p 50, 59.
R u m b e r g e r , Overeducation,
T a b l e 10, p 8 1 .
39
A n n e M c D o u g a l l Y o u n g , " E d u c a t i o n a l A t t a i n m e n t of W o r k e r s , M a r c h
1 9 8 1 , " Monthly
Labor Review, vol. 1 0 5 (April 1 9 8 2 ) , p. 5 3 .
40
A n n e M c D o u g a l l Young, " T r e n d s in E d u c a t i o n A t t a i n m e n t A m o n g
W o r k e r s i n t h e 1 9 7 0 ' s , " Monthly
Labor Review, voL 1 0 3 ( J u l y 1 9 8 0 ) , p.
45.
41
R. B F r e e m a n , " T h e D e c l i n e in t h e E c o n o m i c R e w a r d s t o C o l l e g e
E d u c a t i o n , " Review
ot Economics
and Statistics,
vol. 5 9 ( F e b r u a r y
1977), p p 2 I f f .
" F i n i s Welch, " T h e Effects of C o h o r t Size o n Earnings: The Baby B o o m
B a b i e s ' F i n a n c i a l B u s t " Journal of Political Economy,
vol. 8 7 , n o 5, p a r t
2 (October 1979), p p S65-97.
43
Arrow, " H i g h e r Education," p p 199-203, 215-16, a r g u e d that the social
r a t e of r e t u r n t o e d u c a t i o n b e c o m e s p o s i t i v e if t h e r e a r e t w o t y p e s o f
labor, o n e like a c o m m o d i t y a n d a n o t h e r c a p a b l e o f b e i n g p e r f o r m e d at
v a r i o u s e f f i c i e n c y l e v e l s O n t h i s a s s u m p t i o n , a n e f f i c i e n c y g a i n is
p o s s i b l e b y n o t h a v i n g t h e first t y p e o f w o r k e r s p e r f o r m t h e s e c o n d
t y p e o f t a s k H o w e v e r , t h e p o s i t i v e n a t u r e of t h i s r e t u r n d e p e n d s o n
h i g h e r institutions' restricting entry a n d u p o n t h e cost of higher
education.
38
44
M i c h a e l A S p e n c e , Market
Signaling:
Informational
Transfer in Hiring
and Related
Screening
Processes
(Cambridge: Harvard University
P r e s s , 1 9 7 4 ) , p. 12.
45
Ibid., p 2 5 .
46
K e n n e t h I. W o l p i n , " E d u c a t i o n a n d S c r e e n i n g , " American
Economic
Review, vol. 6 7 ( D e c e m b e r 1 9 7 7 ) , pp. 9 4 9 - 5 8 .
" ' T a u b m a n a n d W a l e s , " E d u c a t i o n a s a n I n v e s t m e n t " T a b l e 4 - 5 , p. 1 1 5 .
T a u b m a n a n d W a l e s , f o r e x a m p l e , t e s t e d f o r e v i d e n c e of s c r e e n i n g b y
c o m p a r i n g actual o c c u p a t i o n a l distributions by e d u c a t i o n a l level w i t h
t h o s e e x p e c t e d u n d e r f r e e entry. T h e y f o u n d that l e s s - e d u c a t e d
w o r k e r s w e r e m u c h m o r e r e p r e s e n t e d in l o w e r s t a t u s o c c u p a t i o n s
t h a n o n e w o u l d e x p e c t o n t h e basis of preference. For example, 6.8
p e r c e n t of w o r k e r s w e r e in service occupations, w h e r e a s the a u t h o r s
e x p e c t e d 1.4 p e r c e n t t o c h o o s e s u c h o c c u p a t i o n s
" " J o h n G Riley, " T e s t i n g t h e E d u c a t i o n a l S c r e e n i n g H y p o t h e s i s " Journal
of Political
Economy,
vol. 8 7 , no. 5, p a r t 2 ( O c t o b e r 1 9 7 9 ) , p p S 2 3 6 ,
S 2 4 0 - 4 1 . J o h n G. R i l e y p r o d u c e d s e v e r a l s e t s o f e m p i r i c a l f i n d i n g s
t h a t he argued, support the screening hypothesis For example, he
c o n c l u d e d , t h e d i f f e r e n c e b e t w e e n a c t u a l a n d p r e d i c t e d e a r n i n g increases with e x p e r i e n c e This divergence suggests that t h e importance
of t h e e d u c a t i o n signal d e p r e c i a t e s a s e m p l o y e e s d e m o n s t r a t e prod u c t i v i t y d i r e c t l y t o e m p l o y e r s In a d d i t i o n , t h e d a t a s e e m e d t o v a l i d a t e
his a s s u m p t i o n that individuals w h o s e e k s c r e e n e d j o b s are n o t only
uncertain of their o w n potential productivity but are also risk-averse.
They fear t h e y have less ability a n d w o u l d earn less t h a n o t h e r
individuals with higher ability s e e k i n g u n s c r e e n e d j o b s
" L e s t e r C T h u r o w , " M e a s u r i n g t h e E c o n o m i c B e n e f i t s of E d u c a t i o n , " in
Higher Education
and the Labor Market, ed. M a r g a r e t S G o r d o n ( N e w
Y o r k : M c G r a w - Hill, 1 9 7 4 ) , p 3 9 1 .
50
l b i d , p 14.
22 NOVEMBER 1984, E C O N O M I C REVIEW
51
For a g e n e r a l c r i t i q u e of t h e s c r e e n i n g h y p o t h e s i s , s e e R i c h a r d L a y a r d
and George Psacharopoulos, "The Screening Hypothesis a n d the Returns
t o Education," Journal ol Political Economy, voL 8 2 ( D e c e m b e r 1974), p 9 8 5 .
" E d w a r d L a z e a r , " E d u c a t i o n : C o n s u m p t i o n o r P r o d u c t i o n ? " Journal
ol
Political
Economy,
voL 8 5 ( J u n e 1 9 7 7 ) , pp. 5 8 8 - 9 0 , p r e s e n t e d a
t h e o r e t i c a l s p e c i f i c a t i o n o f t h e v i e w of e d u c a t i o n a s c o n s u m p t i o n t h a t
increases an individual's wealth. His empirical f i n d i n g s s u g g e s t that
individuals suboptimize their expenditures o n schooling because, he
speculated, they associate disutility w i t h s c h o o l attendance. Few
economists have replicated Lazear's model.
" L e w i s Solmon, "The Relation between Schooling and Savings Behavior
A n E x a m p l e o f t h e I n d i r e c t E f f e c t s of E d u c a t i o n , " i n J u s t e r ,
Education,
Income, and Human Behavior,
p p 253-94.
44
See, e g , R o b e r t M i c h a e l , " E d u c a t i o n a n d Fertility," in Juster,
Education
Income, and Human Behavior,
pp. 3 3 9 - 6 4 .
" F r i t z M a c h l u p , " I s s u e s i n t h e T h e o r y of H u m a n C a p i t a l : E d u c a t i o n a s
I n v e s t m e n t " Pakistan
Development
Review, vol. 2 1 ( S p r i n g 1 9 8 2 ) , p. 9.
" C o n g r e s s i o n a l B u d g e t Office, "The Productivity Problem: Alternatives
f o r A c t i o n " ( W a s h i n g t o n : U S C o n g r e s s , 1 9 8 1 ) , p. 5 5 .
" J e n c k s e t a l . Who Gets Ahead?, p. 3 1 1 .
" H a n s e n , Economic
Growth and Equal Opportunity,
pp. 1 - 2 .
" D a l e W. J o r g e n s e n , " T h e C o n t r i b u t i o n of E d u c a t i o n t o U S E c o n o m i c
G r o w t h , 1 9 4 8 - 1 9 8 3 , " Discussion
Paper 991, H a r v a r d U n i v e r s i t y ( J u l y
1 9 8 3 ) , pp. 1 -4, 3 6 - 3 7 .
^ M a r k B l a u g " T h e E m p i r i c a l S t a t u s of H u m a n C a p i t a l T h e o r y : A S l i g h t l y
J a u n d i c e d S u r v e y , " Journal ol Economic
Literature,
vol. 1 4 ( S e p t e m b e r
FEDERAL RESERVE BANK OF ATLANTA
1 9 7 6 ) , pp. 8 3 3 - 3 4 , 8 3 9 ; C l a r e n c e J u n g F e d e r a l R e s e r v e B a n k of
Atlanta Symposium, May 1984.
"'Christopher Colclough, "The Impact of Primary Schooling on Economic
D e v e l o p m e n t A R e v i e w of t h e E v i d e n c e , " World Development,
vol. 1 0
( M a r c h 1 9 8 2 ) , p. 1 8 0 .
62
E l c h a n a n C o h n , F e d e r a l R e s e r v e B a n k of A t l a n t a S y m p o s i u m , M a y
1984.
" A n n e Daly, " T h e C o n t r i b u t i o n of E d u c a t i o n t o E c o n o m i c G r o w t h in
B r i t a i n : A N o t e o n t h e E v i d e n c e , National
Institute
Economic
Review
( 1 9 8 2 ) , pp. 4 8 - 5 6 .
64
M a r y J e a n Bowman, " E d u c a t i o n a n d Economic Growth: An Overview,"
i n Education and Income, p. 13.
" S e e M a r s h a l l R. C o l b e r g Human
Capital
in Southern
Development
1939-1963
( C h a p e l Hill, N o r t h C a r o l i n a : U n i v e r s i t y of N o r t h C a r o l i n a
1 9 6 5 ) , T a b l e 8 - 1 , p. 1 0 8 .
" B a r r y R. C h i s w i c k , Income
Inequality:
Regional
Analysis
within
a
Human
Capital
Framework
( N e w York: National Bureau of E c o n o m i c
R e s e a r c h , 1 9 7 4 ) , p. 8.
6
' T w o economists recently d e v e l o p e d a model that specified measures
of e d u c a t i o n a l q u a l i t y a s w e l l a s q u a n t i t y . T h e y f o u n d t h a t d i f f e r e n c e s
i n q u a l i t y of s c h o o l i n g a c c o u n t f o r a s u b s t a n t i a l a m o u n t of r e g i o n a l
income variation that a quantity-only model did n o t However, their
d a t a a r e d r a w n f r o m a s a m p l e in a s i n g l e d e v e l o p i n g c o u n t r y a n d t h u s
m a y n o t be a p p l i c a b l e to U . S c i r c u m s t a n c e s . S e e J e r e B B e h r m a n a n d
N a n c y Birdsall, " T h e Q u a l i t y o f S c h o o l i n g : Q u a n t i t y A l o n e Is M i s l e a d i n g , " American
Economic
Review,
vol. 7 3 ( D e c e m b e r 1 9 8 3 ) , pp.
928-46.
23
Educational Inventory:
Where Does the
Southeast Stand?
Gene Wilson and Gene Sullivan
With its improving educational infrastructure,
the Southeast is about to catch up with
national norms of educational attainment.
Those age groups most likely to enter new
industries and jobs have shown especially
dramatic improvement, enhancing the
competitiveness of the region's work force.
Potential economic development of a region
hinges heavily both on people and natural
resources—but people are its crucial asset As
important as natural resources are, they remain
unproductive until men and w o m e n acquire
sufficient knowledge, skills, and capabilities to
harness them. In fact, a resourceful population
often can compensate for major deficiencies in
other assets in fostering an area's economic
development.
Like other resources, the population can be
developed to enhance its potential contribution to a region's economy. Given the allimportant role of people in economic development, it seems ironic that some regions have
paid so little attention to the process of human
d e v e l o p m e n t which includes education and
training.
Within the United States, the Southeast historically has lagged seriously in improving its
human resources. A number of reasons account
for the neglect of educational development,
but probably the most important relates to the
past perception of the economic payoff to
resources invested in education. In an economy
where for several centuries the masses were
employed in hand labor such as chopping
timber, harvesting tobacco, and picking cotton,
the economic returns to education seemed
slim at best. Most people had few incentives to
take advantage of the formal schooling that
was offered. Thus, school attendance was readily
abandoned when any opportunity for productive employment was available, and especially
when education involved out-of-pocket costs
for cash-scarce households.
For most individuals, those decisions may
have been a rational response to the economy
The authors
Department
24
are members
of the Atlanta
Fed's
Research
NOVEMBER 1984, E C O N O M I C REVIEW
that persisted in the Southeast until the outbreak of World War II. Yet such rational choices
have proven to be short-sighted in light of the
rapid economic changes that have emerged
within the region since that time. The jobs that
accompanied the subsequent industrialization
and urbanization of the Southeast demanded
capabilities acquired through formal education.
Unfortunately, much of the native work force
was ill-prepared to make the transition from
the low-skilled tasks to which many had been
involuntarily restricted or to which they had
unwittingly limited themselves.
Although emphasis on education rose with
postwar awareness of its new importance,
attempts to attract or create industries requiring
skilled employees allegedly have continued to
be hampered by the relatively poor education
in the region. Today, the belief is widespread
that desirable future economic development
depends on elevating the educational level of
the work force. Hence, there is urgent interest
in the education of the Southeast's population
and how it compares with that of other regions.
This article will attempt to inventory the
region's educational assets, generally divided
into t w o categories: the educational infrastructure and the educational attainment of the
population. The latter possibly determines
economic potential and the former may be
important in determining future economic
development.
Have educational conditions changed in the
region in recent decades? If so, how dramatically?
How do the educational systems of southern
states compare with those of other regions? Are
higher educational opportunities readily available? What is the educational level of the
population? These are only a few of the questions that must be answered to understand the
region's potential for economic development.
FEDERAL RESERVE BANK OF ATLANTA
Education
In its broadest sense, education includes any
intentional or inadvertent transfer of knowledge
or skill either verbally, pictorially, in written
form, or via computer. For education to have
occurred, at least one person must have increased his or her human skills. A more restrictive view of education, and the one adopted
here, w o u l d be the purposeful transfer of
knowledge or skills through a designed process,
that is, formal education. This is similar to
manufacturing processes in which inputs are
utilized to produce some output In this instance,
human resources and capital are combined to
turn out individuals with enhanced knowledge
and skill.
The Infrastructure
Human Resources. The most important input
of the educational process is almost certainly
the teacher, who both transfers acquired knowledge to students and directs the learning
process with related materials such as books.
In the past 60 years, the number of teachers in
the Southeast has increased by 312 percent,
and by 146 percent since 1950 alone. While
this surge accompanied an increase in the
student population, the growth rate in teachers
far exceeded that of enrollment (see Table 1)
and also has surpassed the national rate of
growth. The faster relative gain in the Southeast
was at least partly attributable to its low starting
position compared with the rest of the nation.
As might be expected, the Sixth District's
teacher distribution is related directly to the
number of students in different states. Almost
half of the Southeasts elementary and secondary
schoolteachers work in Florida and Georgia.
Mississippi claims the smallest share of teachers,
25
T a b l e 1 . N u m b e r s of T e a c h e r s a n d Pupils, S o u t h e a s t a n d U n i t e d States, 1 9 2 0 - 1 9 8 0
N u m b e r of Public S c h o o l T e a c h e r s
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
Sixth District
United S t a t e s
1960
1970
1980
1920
1930
1940
1950
12,558
6,819
15,921
8,966
11,962
13,277
69,503
679,533
17,130
10,960
19,071
12,173
15,138
18,331
92,803
854,263
19,405
13,189
22,846
14,830
14,773
20,147
105,190
875,477
21,612
16,957
24,380
15,652
15,627
22,202
116,430
913,671
28,810
46,210
37,191
30,026
19,784
29,861
191,882
1,651,310
33,026
62,419
44,007
35,469
22,533
35,450
232,904
2,061,115
41,300
78,300
56,500
42,700
26,300
41,400
286,500
2,194,000
1920
1930
1940
1950
1960
1970
1980
543
243
683
349
531
611
2,960
20,898
562
301
633
377
543
558
2,974
21,347
586
292
612
374
521
540
2,925
18,832
556
353
571
400
447
539
2,866
19,464
609
768
748
542
452
629
3,748
27,602
570
1,016
800
616
389
649
4,040
32,574
522
1,064
759
548
360
600
3,853
28,304
1930
1940
1950
1960
1970
1980
179
225
201
151
115
182
1,053
8,485
236
412
299
227
146
251
1,571
13,300
243
532
336
245
155
268
1,779
13,840
Pupils Enrolled, Elementary
(in thousands)
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
Sixth District
United S t a t e s
Pupils Enrolled, S e c o n d a r y
(in thousands)
1920
58
23
63
42
30
47
263
3,390
61
45
81
58
52
70
367
4,407
100
77
126
99
73
108
583
6,601
124
97
147
84
81
120
653
5,752
1920
1930
1940
1950
1960
1970
1980
601
266
746
391
561
658
3,223
24,288
623
346
713
435
595
628
3,340
25,678
686
369
738
473
594
648
3,508
25,433
680
450
718
484
528
659
3,519
25,216
788
993
949
693
567
811
4,801
36,087
806
1,428
1,099
843
535
900
5,611
45,874
765
1,596
1,095
793
515
868
5,632
52,144
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
Sixth District
United States
Total Pupils Enrolled
(in thousands)
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
Sixth District
United S t a t e s
S o u r c e : Statistical
Abstract
ot the United
26
States,
various years.
NOVEMBER 1984, E C O N O M I C REVIEW
C h a r t 1 . Elementary and Secondary School Enrollment
Sixth-District States
Table 2. Pupil/Teacher Ratios, Sixth-District States
1920 1930 1940 1950 1960 1970 1980
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
United States
47.9
39.0
46.9
43.6
46.9
49.6
46.4
36.4
31.8
37.4
35.8
39.3
34.3
36.0
35.4
28.0
32.3
31.9
40.2
32.2
33.4
31.5
26.5
29.5
30.9
33.8
29.7
30.2
27.4
21.5
25.5
23.1
28.7
27.2
25.0
24.1
22.9
25.0
23.8
23.7
25.4
24.1
18.5
20.4
19.4
18.6
19.5
21.0
19.9
b;
Millions
950
960
11970
1980
^
^
S o u r c e : C a l c u l a t e d f r o m T a b l e 1.
with only 9 percent of the District's total, but
student enrollments also are lowest there.
Thus, in spite of the strong population growth
in Florida and Georgia and much less vigorous
growth in Mississippi, current pupil-teacher
ratios are similar for each District state.
The pupil-teacher ratio is considered a measure of the quality of education. The fewer
students per teacher, presumably the more
individualized the instruction can be. In both
the South and the nation, such ratios have
fallen in recent decades. In Mississippi, for
example, the pupil-teacher ratio fell from 28.7
in 1960 to 19.5 in 1980. During the past 60
years, the Southeast's average ratio fell from
over46 students per teacher to a current level of
20 (see Table 2). In 1980, District states ranged
from a ratio of 18.5 in Alabama to 21 in Tennessee.
Human Capital. While the population of
teachers has continued to increase over the
years, student enrollment trends have begun
to change course (see Chart 1). Enrollment in
secondary schools has started to fall in the
South, just as elementary enrollments begin to
increase after years of decline. Only Florida
maintained its growth in the number of elementary students from 1970 to 1980, largely as
a result of significant in-migration. For that 10year period, District enrollment fell 4.6 percent
in elementary schools while rising 13.2 percent
in secondary schools. For the nation, however,
enrollment during the same period fell 13
percent in elementary schools and rose only 4
percent in secondary schools. (Table 3 shows
that private school enrollments declined in
both number and share of the total from 1964
to 1978.)
FEDERAL RESERVE BANK O F ATLANTA
V
S o u r c e Statistical
Abstract
ot the United
States
C h a r t 2. College Enrollment in Sixth District
Millions
1.4
I
j Enrollment
1.2
1.0
.8
.6
.4
0
1940
1950
1960
1970
1980
Source: S o u t h e a s t e r n Regional Council for Education I m p r o v e m e n t
{Fall 1 9 8 3 ) .
Within the last half-century, the Southeast's
accomplishments in higher education have
more closely resembled its accomplishments at
the elementary and secondary levels. As recently
as 40 years ago, only 119,000 students (less
than one percent of the population) were
enrolled past secondary school; today District
enrollments exceed 1.3 million, or 4 percent of
the population as compared with 5 percent
at the national level (see Chart 2). Reflecting
27
the South's lagging educational development
in earlier years, growth rates in college enrollments accelerated sharply in the 1960s and
continue to exceed rates in most regions of the
countryDuring the 1970s, student enrollment at
southeastern colleges expanded by 59 percent,
whereas the rate of growth was 43 percent
nationwide. Even so, the region's enrollment
(10 percent of the nation's total) remains proportionately smaller than its 13 percent share
of the college age population. College enrollments as proportions of total population are
higher in other regions. Although the region
attracts a number of students from elsewhere,
many of its residents also go outside the South
to attend college. However, in spite of relatively
large gains in recent decades, the Southeast
still has a way to go to reach parity with the rest
of the country.
Physical Capital. A prominent and important
trend has been the general decline in numbers
of schools within the region. Three factors appear
to be responsible: the growing urbanization of
the region, the economies of scale afforded by
larger schools, and the end of racially segregated
school systems, which eliminated many dual
educational facilities.
Alabama, Mississippi, and Louisiana experienced the sharpest decline in number of schools
in recent years. In the most extreme case, the
total number fell 29 percent in Mississippi
from 1969 to 1982. In that same period every
District state experienced school closures
except Florida, whose rapid economic growth
and large population gains led to a 14 percent
increase in schools.
Through the first half of the twentieth century,
southeastern facilities for higher education
were relatively sparse and generally perceived
to be of low quality compared with northern
colleges. In 1942, for example, the Sixth District
counted 188 institutions of higher education,
of which 52 percent were in Georgia and
Tennessee (see Table 4). At that time even
elementary education was thought in some
quarters to be of doubtful benefit, and so
advanced education was generally considered
unnecessary.
Southern state legislatures appeared indifferent toward higher education through the
first half of this century. Beginning in the 1950s,
however, elevating educational levels became
a prime concern as a new generation of political
leaders sought to stimulate southern economic
growth. The number of educational institutions
expanded, often in response to the states'
varying paces of population growth. For example,
by 1962, Florida had added greatly to its
facilities for higher education while the educational emphasis of other southern states
remained relatively unchanged. But from 1962
to 1982, every District state except Mississippi
sharply increased the number of educational
institutions: Alabama by 107 percent; Florida,
63 percent" Georgia, 63 percent; Louisiana, 45
percent; and Tennessee, 70 percent
In summary, the educational infrastructure
of the Southeast has changed significantly in
recent years, converging toward national norms.
The number of institutions of higher education
Table 3. Private School Enrollments
Private School
Enrollments
Percent of Public
(in thousands) School Enrollments
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
Southeast
United States
S o u r c e : Statistical
Abstract
1964
1978
1964
1978
34
99
30
162
22
36
383
6900
25
121
27
115
17
38
343
4058
4.1
8.6
2.9
21.2
3.8
4.2
7.4
17
3.3
8
2.5
14.3
3.5
4.4
6.2
9.8
ot the United
28
States.
Table 4. Number of Institutions of Higher Education
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
Sixth District
S o u r c e : Statistical
Abstract
1942
1952
1962
1972
1982
26
14
50
18
32
48
188
26
18
51
20
38
46
199
29
52
49
22
44
47
243
51
64
61
23
41
62
302
68
85
80
32
42
80
379
ot the United
States
NOVEMBER 1984, E C O N O M I C REVIEW
T a b l e 5 . Results of Scholastic A p t i t u d e Tests
Scores
Numbers Tested
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
Southeast
United States
1971-72
1981-82
1971-72
1981-82
1971-72
1981-82
4,404
21,845
33,243
3,958
1,678
5,200
70,328
1,027,001
2,990
37,879
34,226
2,743
845
4,725
83,408
963,416
419
458
405
456
413
479
438
453
463
426
394
470
479
480
452
426
441
483
429
484
438
508
464
483
501
463
429
505
509
519
488
467
S o u r c e : S o u t h e a s t e r n R e g i o n a l C o u n c i l f o r E d u c a t i o n a l I m p r o v e m e n t , SEIS Data
doubled between 1942 and 1982. Clearly,
numbers of schools alone do not necessarily
indicate the quantity or quality of education.
Yet in an area such as the Southeast, where
accessibility to higher education has been
limited in the past, increasing numbers of
facilities have provided greater opportunities
for the population as a whole to attend college.
The average pupil-teacher ratio in elementary
and secondary schools has been halved from
over 46 students per teacher in 1920 to 20 by
1982. Although the number of public schools
has declined, schools have grown in size and
have reaped certain economies of scale in the
process. Larger, diverse schools adhering more
closely to national standards have become the
rule within the region. Thus, current educational
infrastructure appears to be superior to its
historical counterpart.
Educational Attainment
Available methods for measuring the educational level of the public are controversial. A
lack of uniform testing from one area to another
is a major problem of current measurement
techniques. Scores from tests administered to
students are less than satisfactory because of
differences between areas in the types of tests
used and compositions of groups tested. The
Scholastic Aptitude Test administered to senior
high school students is one of the most standardized tests available. The average scores
FEDERAL RESERVE BANK OF ATLANTA
Math
Verbal
Profiles
(Fall 1 9 8 3 ) .
are not reliable indicators, however, since varying proportions of students take the tests in
each area. Table 5 suggests that score fluctuations from period to period could well be due
to changes in the proportions of the total of
students tested. Even if average scores are
useful indicators of students' educational levels,
a snapshot of such tests reveals little about
the adult population that makes up the majority
of the work force.
Because of its availability for the general
population, the median years of school completed is the educational indicator selected for
use in this analysis. In 1950, only Florida's
residents could claim a median of school years
completed equivalent to the nation's (9.6 years).
Other southeastern states varied from 7.6 years
in Louisiana to 8.4 in Tennessee. By 1980,
however, every state in the Southeast had
reached a median of at least 12.1 years, in
comparison with a national average of 12.5
(see Table 6).
In the past, remarkable educational level
differences have existed between the sexes.
Only in the last 20 years has the southern
male's median years of school completed caught
up with the female's. Typically, the male left
school earlier, as a result of greater work opportunities or perhaps because of a lower opinion
of the value of further education. The loss of a
higher proportion of the more educated males
through migration to other regions also may
29
Table 6. Median School Years Completed
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
United States
S o u r c e : U. S. B u r e a u o f t h e C e n s u s , Census
1960,
1970,
1980.
VoL 1: Characteristics
Table 7. Grade Completed as a Percent of the Population
1950
1980
7.9
9.6
7.8
7.6
8.1
8.4
9.6
12.1
12.4
12.3
12.3
12.1
12.2
12.5
ol Population:
1940,
of the
Population.
9-11
12
13-15
16+
Alabama
Florida
Georgia
Louisiana
Mississippi
North Carolina
South Carolina
Tennessee
100
100
100
100
100
100
100
100
75.6
82.5
75.9
75.6
73.4
75.9
74.7
72.4
56.7
67.2
56.5
58.0
55.1
55.3
54.0
55.4
25.1
32.0
28.2
26.2
26.5
27.6
27.5
23.7
12.6
14.7
15.3
13.4
13.0
13.4
14.2
11.9
New England
Mid-Atlantic
East North
Central
Pacific
100
100
100
84.7
81.8
83.2
70.7
66.0
67.0
34.8
29.9
29.6
19.3
17.1
14.5
100
86.4
74.2
41.6
19.5
Southeast
United States
100
100
76.9
81.6
59.0
66.3
27.9
31.9
13.8
16.3
1950,
have been a factor. Educational disparity persisted until the 1960s, when the average educational level of males reached a par with that of
females. Since that time, formal educational
attainment of the t w o groups has remained
approximately equivalent
A more precise measure of the population's
educational attainment is available from the
1980 Census. For the adult population age 25
or older, Table 7 compares the population of
southeastern states by grades of schooling
completed. The proportions of population at
the various educational levels are similar for
most District states. Again, the exception is
Florida, whose populace has attained consistently higher educational levels. Over twothirds of the state's adult residents have completed high school, in contrast to only 54 to 58
percent for the other states.
In comparing the Southeast with other regions
and the nation, we find smaller proportions of
southeastern residents at each educational
level. For example, 60 percent of southern
adults have completed high school compared
with 66 percent for the nation. One interesting
point is that southern adults now compare
favorably with those of the Mid-Atlantic and
East North Central states in the proportion that
have completed at least three years of college.
Immigration of college-educated individuals
from other regions probably has helped elevate
the South's position in this comparison.
For the region's population above age 25,
distinct gradations of educational attainment
exist The median years of school completed
by older citizens is relatively low vis-a-vis
younger age groups (see Charts 3a and 3b). For
30
8 or
Less
S o u r c e : N a t i o n a l C e n t e r f o r E d u c a t i o n S t a t i s t i c s , Digest
Statistics
1982 to
1983-84
ot
Education
those segments of the population under 45,
the medians in 1980 were similar and were
approximately equivalent to the national level.
This fact is significant for it means that those
individuals most likely to enter new industries
or undertake newly created jobs have achieved
formal educational levels largely comparable
to the national average. In years of formal
schooling, at least, the younger portion of the
southeastern work force approximates that of
other areas of the country.
Related Factors
Legacy of the Past. The educational situation
in the South today reflects historical developments in the region. The plantation culture
common in the nineteenth century fostered a
predominantly rural society. Education was
regarded as a luxury restricted to members of
the upper class, whose sons and daughters
frequently attended schools outside the region;
relatively little support existed for public education for the masses. But in the last half of the
nineteenth century, a growing movement of
educational development swept across the
country, engulfing the South somewhat belatedly. By the turn of the century, the U.S.
NOVEMBER 1984, E C O N O M I C REVIEW
C h a r t 3 a . M e d i a n Years School C o m p l e t e d ,
District Males by A g e G r o u p
T a b l e 8. Literacy Rates* of Adults A g e 2 5 & Over
(in percent)
25 to 29
30 to 34
35 to 39
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
U n i t e d States
1900
1930
65
77
78
60
66
78
89
86
92
90
85
85
92
95
1960
1980
.
98
99
98
98
98
98
99
9 6
97*
96
94
95
97
98
' L i t e r a c y rates s h o w n refer t o t h e basic ability to r e a d a n d write. A l t h o u g h
p e r h a p s m o r e m e a n i n g f u l , f u n c t i o n a l l i t e r a c y r a t e s w e r e n o t u s e d b e c a u s e of
t h e d i f f i c u l t y of d e f i n i n g t h i s t e r m a n d t h e l a c k of h i s t o r i c a l d a t a
S o u r c e : Statistical
1940
1950
1960
1970
C h a r t 3 b . M e d i a n Years School C o m p l e t e d ,
M a l e s 2 5 to 2 9
12
r
United States
—
11
/
/
10
9
X
1940
I
/
District
1
1950
States
1
1960
1
1970
i
1980
S o u r c e : U S. B u r e a u o f t h e C e n s u s , Census ot Population
1940.
1960,1970,
1980 Vol. 1: Characteristics
ot the
Population
1950,
literacy rate was estimated at 89 percent while
in southern states it ranged from a low of 60
percent in Louisiana to 78 percent in Georgia
and Tennessee (see Table 8 ).
Because of this lag, southeastern states have
faced major difficulties in closing the gap between their educational levels and those of the
country as a whole. Although in recent years
the South has more rapidly improved in several
indicators than have other regions, the gains
FEDERAL RESERVE BANK OF ATLANTA
of the United
States
1980
S o u r c e : U. S. B u r e a u of t h e C e n s u s , Census of Population:
1940,
1950.
7960, 1970. 1980 Vol. 1 Characteristics
ot the
Population
13
Abstract
reflect upward movement from a lower base or
starting point. It is likely that a great deal more
effort will be required to maintain these relative
gains in the future. In-migration from regions
with higher educational levels has, no doubt,
been a source of some past improvements, but
such gains will dwindle as the South's educational level approaches equality with other
regions'. At that time, advances will be increasingly dependent upon improvements in
educating the resident population.
Urban-Rural Distribution. A major factor in
the development of the educational infrastructure has been the distribution of population
between the urban and rural sectors (see Chart
4). In the first half of this century, the rural
population substantially exceeded the urban
population (residents in towns with 2,500 or
more people) in every District state except
Florida Not until the 1950s and 1960s did the
proportion of the urban population surpass the
rural share for most states. Mississippi remains
the only southern state with a larger rural than
urban population, and even there the t w o
groups are equalizing rapidly.
Interestingly, rapid educational gains also
accompanied this rural-to-urban population
shift Traditionally in the United States—and
especially in the South—a considerable disparity
has prevailed between educational levels of
urban and rural residents. The levels for the
male population in Alabama, shown in Chart 5,
are illustrative of the urban-rural relationship
for other southern states. Only rather recently
have differences begun to narrow. While median
31
C h a r t 5. M e d i a n Years School Completed,
A l a b a m a Male Population Over A g e 2 5
1940
1950
1960
1970
1980
S o u r c e : U. S. B u r e a u of t h e C e n s u s . Census ot Population:
1940.
1950.
1960, 1970, 1980 Vol 1 Characteristics
ot the
Population.
years of schooling completed by both groups
of males is increasing, the rate of increase in
rural education has been considerably sharper
since 1970. Some of this rural gain may have
occurred because of the speed up in migration
of the less well-educated to the cities as well as
the reverse flow of former urban dwellers into
rural areas surrounding towns and cities. The
educational level of both groups is likely to
converge before the end of the 1980s.
In-migration also has influenced median
educational levels in the South. Because of the
flow of retirees into the Southeast, especially
Florida, the region's population of residents
over 60 years of age exceeds the national
average. Approximately 17 percent of the Southeast's population is over 60 compared with 15
percent nationally. This is a considerable change
since 1950, when only 11 percent of the
region's population was over 60 compared
with 12 percent for the nation.
Median educational levels of older population groups probably have been elevated by
the influx of retirees. The precise impact on
statewide education levels is difficult to ascertain, however, since in-migration is concentrated in certain geographical areas and comprises a diverse mixture of retirees, including
both individuals originally from the South and
nonsoutherners w h o have been educated outside the region. Of course, elderly in-migrants
32
are of far less importance to the South's labor
force than is the increasing flow of younger
workers to the area Unfortunately, information
on the educational characteristics of in-migrants
is not yet available from the 1980 Census. Such
information eventually will shed light on the
South's specific gains from the population
influx.
Future Developments- Over the next several
years, fewer students will be in the educational
system. In 1980, for every District state except
Louisiana-the under-5 age group was smaller than
the 5-9 age bracket Florida for example, counted
8 percent fewer pre-schoolers than the number
in the 5-9 age group, 1 7 percent fewer than in
the 10-14 age group, and nearly one-third
fewer than in the 15-19 age group. For the
entire District, the major distinction is the
difference between the under-10 age group
and the 10-19 age population: the former was
15 percent smaller than the latter at the last
census.
However, population projections of the
National Planning Association indicate that the
0-4 age group will experience a resurgence of
growth until 1990, when a decline will begin
once more. Even with this renewed growth,
numbers are not projected to reach the level of
the current population in the 15-19 age group.
Thus, high school enrollments are expected to
drop from the present volume and to bulge
NOVEMBER 1984, E C O N O M I C REVIEW
again in the 1990s, though still not regaining
1980 levels in either the Southeast or the U.S.
Assuming stability in the proportion of students
who elect to go to college, enrollments in
institutions of higher learning also can be expected to decline as the smaller age groups
progress upwards through the system. Some
evidence does exist however, that enrollments
of foreign and non-traditional students may
partly cushion the decline from the demographic age shift
Summary
Even though the Southeast has yet to catch
up fully with other regions in terms of education,
it has progressed rapidly and improved considerably. Educational attainment of the population as measured by median years of school
completed now indicates that the younger
FEDERAL RESERVE BANK OF ATLANTA
groups (under 45 years) have achieved formal
schooling levels equivalent to the nation's.
Over time, the Southeast seems likely to shed
its traditional position of inferiority in the nation
and among other regions in the formal educational level of its population. Because this
i m p r o v e m e n t has already occurred w i t h i n
younger groups—those most likely to enter
new industries and j o b s — t h e Southeast's work
force is becoming competitive with most other
regions'. W i t h sufficient resources, effort, and
attention devoted to education and with the
attraction of residents with above-average
education from other regions, the Southeast
may look to solid educational achievements in
the future.
(The authors wish to thank
research assistance.)
Joy Lanier
for her
valuable
33
Financing Education
in the Southeast
Bobbie McCrackin and Gene Sullivan
Why does educational financing warrant public
consideration? Education, unlike shoes or bread,
is in part a public good. Clearly, many of
education's benefits accrue only to those individuals obtaining i f however, society as a
whole benefits when its population is educated.
For example, education in a democratic society
helps citizens make more informed social and
political choices. These indirect benefits would
not be financed if they were left solely to the
private sector. Public policy should be concerned with improving the quantity and quality
of education because private investment tends
to be insufficient in cases where benefits accrue
to society at large. Thus, as in the case of such
other public goods as roads and airports, public
revenues are required to encourage sufficient
production of the activity.
Spending on Education
Southeastern educational expenditures have
s u r g e d over t h e past decade, yet have
barely outdistanced inflation. However, lower
d e m a n d as well as financial a n d o t h e r
e c o n o m i c c o n s t r a i n t s s e e m to underlie this
difference. Since t h e call for higher quality
schools is increasing and states have adopted
more flexible financing m e t h o d s the outlook
for c o n v e r g e n c e s e e m s brighter.
The United States will spend an estimated
$127 billion to educate its children in 1 9 8 4 —
7.3 percent of the yeaKs projected GNP. Through
their legislatures, the states will provide the
largest share of these funds ($62 billion), followed
by local sources ($57 billion) and the federal
government (about $8 billion). The Southeast's
share of U.S. educational spending has risen
over the last decade, owing to its faster-thannational population growth and the recent
emphasis on enhancing the quality of education.
States in the Sixth Federal Reserve District
will spend about $13 billion, or 11 percent, of
the nation's estimated total spending on primary and secondary education in 1984. Thir-
The authors
Department
34
are members
of the Atlanta
Fed's
Research
NOVEMBER 1984, E C O N O M I C REVIEW
teen percent of the nation's school age population resides in District states, which suggests
that the Southeast accounts for less than its
proportionate share of the nation's education
expenditures. The region traditionally has lagged
behind the nation in school-related expenditures
and despite its rising share of total outlays,
progress in closing the gap has been slow.
Table 1 shows that although total expenditures
in the Southeast increased almost threefold in
the period from 1971 to 1981, the growth was
only slightly more rapid than the nation's during
the same period. The the Southeast's share of
national educational expenditures moved up
only moderately, from 9.1 percent in 1971 to
10.6 percent by 1981. However, the Southeast's
proportion of the nation's school age population
also rose from around 12 percent initially to
over 13 percent by the end of the ten-year
period.
Because the ratios of students to population
vary between regions, expenditures per pupil
provide a more meaningful comparison than
total expenditures. The Southeast's expenditures per student averaged only 76 percent of
the nation's in 1971; that share remained
below 80 percent through most of the ensuing
decade (see Table 2).
Expenditures per pupil differ widely within
the region. Alabama currently spends significantly less per student than other states, largely
because increases since 1977 have not kept
pace with those in other states in the region
(see Chart 1). Florida, whose spending has
essentially doubled since 1977, spent nearly
twice as much per student in 1982 as Alabama.
W h e n the numbers are adjusted for national
inflation, however, increases in real expenditures
amounted to 22 percent for the Southeast as
compared with 17 percent for the nation. The
FEDERAL RESERVE BANK OF ATLANTA
region's more rapid percentage gain primarily
reflected its lower starting position. Although
the gap in real expenditures was still $200 per
pupil in 1981, as it was in 1971, the real per
capita spending ratio converged somewhat
because real spending increased both nationally
and regionally.
It is possible that southeasterners get more
for a dollar spent on education than residents
elsewhere because of cost-of-living differences.
Unfortunately, direct cost-of-living comparisons
between the region and the nation are not
available. The Consumer Price Index (CPI)
compares living costs at various points in time
to an index of costs at some base period. The
CPI shows changes in prices as a whole and for
a variety of specific consumer goods and services including education (see Chart 2). Although the CPI is available for a number of
SMSAs as well as for the nation, all these
indexes compare costs over time within each
area, not between areas. Even if the index in
Atlanta had consistently risen faster than the
national index, which it has not, it would be
difficult to interpret the significance of this
disparity without knowing the initial relative
price levels in each geographic area. Another
problem would be the implicit assumption
t h a t in the case of the Southeast, Atlanta's
price index (the only one available for a fairly
extensive period of time) is typical of the
region's 40 SMSAs.
Although cost-of-living comparisons between
states are not available, we were able to determine that teachers' salaries, a major component
of educational costs, are 17 percent lower in
the Southeast than in the nation. Nonetheless,
it is impossible to tell whether this difference
reflects cost-of-living or quality differences.
That is, on the basis of this information alone
35
one could infer that southeastern states spend
less for schooling because prices are generally
lower here and therefore school districts, with
proportionately smaller budgets, can purchase
an amount of schooling commensurate with
other regions. On the other hand, the data also
lend themselves to the interpretation that southeastern school budgets are proportionately
smaller because the demand for education is
lower and consequently teachers' salaries are
less than elsewhere. The larger regional differential between teachers' salaries relative to
wages generally suggests that lower demand is
the preponderant factor. Recent research has
indicated that wages in the larger Census Region
South are not lower than in other regions when
comparable jobs are considered. Indeed, Southern wages, even excluding certain high-wage
border areas near Washington, D.C., may be
higher than in most other Census Regions
when comparisons are drawn on a peer group
basis.1
Table 1. Summary of Expenditures for Public
Elementary and Secondary Education,
United States and Southeast, 1971-1981
(millions of dollars)
Year United States Southeast
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
44,424
48,514
51,905
56,970
61,629
70,829
75,014
80,844
86,712
95,962
102,484
South east/United States
4,062
4,561
4,761
5,405
5,912
7,167
7,661
8,150
8,920
9,895
10,889
9.1
9.4
9.2
9.5
9.6
10.1
10.2
10.1
10.3
10.3
10.6
Source: D e p a r t m e n t of Health, Education, a n d Welfare, National C e n t e r
f o r E d u c a t i o n S t a t i s t i c s , Digest of Education
Statistics
(Washi n g t o n : U. S. G o v e r n m e n t P r i n t i n g O f f i c e , 1 9 7 0 - 1 9 8 4 ) .
T a b l e 2. E d u c a t i o n E x p e n d i t u r e s Per Pupil* for United States a n d S o u t h e a s t 1 9 7 1 - 1 9 8 1
(in nominal and 1 9 7 2 dollars)
Nominal
Year
United
States
1971
1,008
1972
Real CPI-AII Items
United
States
Southeast
Southeast/
U n i t e d States
762
818
618
(0.76)
1,091
856
856
672
(0.79)
1973
1,182
888
852
640
(0.75)
1974
1,281
948
823
609
(0.74)
1975
1,413
1,175
859
705
(0.82)
1976
1,699
1,345
972
769
(0.79)
1977
1,816
1,445
973
774
(0.80)
1978
2,002
1,567
984
770
(0.78)
1979
2,210
1,715
958
743
(0.77)
1980
2,494
1,910
962
737
(0.77)
1981
2,701
2,144
957
757
(0.79)
Southeast**
• B a s e d o n average daily attendance.
" T h e s t a t e s p a r t l y o r t o t a l l y i n c l u d e d i n t h e S i x t h F e d e r a l R e s e r v e District.
S o u r c e : D e p a r t m e n t o f H e a l t h , E d u c a t i o n , a n d W e l f a r e , N a t i o n a l C e n t e r f o r E d u c a t i o n S t a t i s t i c s , Digest
G o v e r n m e n t Printing Office, 1970-1984).
36
ot Education
Statistics
(Washington: U.S
NOVEMBER 1984, E C O N O M I C REVIEW
Sources of Education Funds
Funds to support education derive from
three principal sources: local, state, and federal
governments (see Table 3). Property taxes,
which contribute most to the pool of local
education funds, tend to make up larger portions
of school budgets in highly urbanized areas,
such as N e w England, as opposed to more rural
areas such as the Plains states, where the population is widely dispersed and in many localities
sparse. State education revenues flow from state
income, sales, and property taxes, which are
part of each state's general fund. Federal monies
are allocated to the states based on guidelines
written to ensure state compliance with federal
legislation and federal court rulings and come
mainly from the federal income tax. While
state and local funds account for over 90
percent of funding in the nation as a whole,
relative contributions of federal, state, and
local governments to education vary widely
from region to region and within the Southeast.
Education and its financing are functions that
the U.S. Constitution generally leaves to the
states. The cost of all federal education programs for the states, including the highly publicized busing and school lunch programs,
amounts to only about 7 percent of total
educational spending in the country. However,
because the South was an early target of federal
programs to improve educational opportunities
for minority groups, the region derives a sharply
higher share (13 percent) of its education
monies from federal sources. Variations among
southeastern states are higher still, with Mississippi obtaining nearly one-fourth of its funds
from federal sources compared with 7 percent
for Florida (see Table 3). In both the Southeast
and the nation, the share of federal funds has
declined since 1977. Louisiana experienced
the steepest drop in federal funds as the share
of local funds increased dramatically.
State revenues, now the largest funds source,
have accounted for a growing share of education's support at the national level as well as in
both Georgia and Florida, the t w o most populous southeastern states. In all regional states
except Tennessee, the state government source
of funds exceeds 50 percent; in Florida and
Alabama, the figure is greater than 60 percent
While state funding has accounted for an
increased share nationally, the proportion of
local funding has been declining since 1977.
Nationally, states' shares have risen on average
from 40 to 50 percent whereas local shares fell
from 51 to 42 percent (see Table 3). The
Southeast has been an exception to this pattern
of declining local funding because, historically,
it has relied less on local funding and because
Louisiana's unusually sharp increase in local
funding has skewed the regional average. Aided
by rising local funding in Tennessee and Mississippi, Louisiana's substantial jump in the use of
C h a r t 2. Annual Rate of C h a n g e
in t h e C o n s u m e r Price Index
D/0
(All Items, 1973-83)
C h a r t 1. Educational S p e n d i n g Per Elementary and
Secondary School Student
16
3 5 0 0 " Dollars
3000
g
United States
I Atlanta
12
2500
2000
1500
1000
500
0
1 9 7 3 '74 ' 7 5 '76
S o u r c e : N E A R e s e a r c h M e m o , Estimates
and 1982.
ot School
FEDERAL RESERVE BANK OF ATLANTA
Statistics,
1972,1977,
'77 '78
'79
lfl
' 8 0 '81 '82
'83
S o u r c e : U. S. D e p a r t m e n t of L a b o r , B u r e a u o f L a b o r S t a t i s t i c s ,
CP I Detailed Reports.
1973-1983.
37
T a b l e 3 . Relative I m p o r t a n c e of R e v e n u e S o u r c e s for E d u c a t i o n
(in percent)
Federal
1972
United States
1977
__
1982
State
Local
1972
1977
1982
1972
1977
1982
42
9
8
7
40
44
50
51
48
15
14
13
52
56
56
33
30
31
Alabama
19
13
15
57
65
64
23
21
21
Florida
10
10
7
55
52
62
35
38
31
Georgia
14
11
10
49
53
56
38
36
34
Louisiana
14
15
9
55
60
56
31
25
35
Mississippi
27
23
23
49
54
53
24
23
24
Tennessee
16
13
13
43
50
47
40
37
40
Southeast
S o u r c e : N a t i o n a l E d u c a t i o n A s s o c i a t i o n R e s e a r c h M e m o , Estimates
this source offset the shift to state funds in
other regional states.
Methods of Financing Education
Flexibility in methods of financing has helped
some state education planners cope with fluctuating student enrollments and uneven tax
bases among school districts. Rigidity has handicapped some other states. Traditional financing,
whereby a state contributes from its general
fund roughly twice the local assessment from
property taxes, seems to allow the most flexibility in dealing with changing and often conflicting financing needs. Atypical financing
sources frequently have no relation to the
shifting needs of education, and they sometimes
resist adjustment to new demands. A financing
source that provides windfalls to some school
districts and very little support to others may
be as troublesome to education planners as
one that provides insufficient funding overall.
Several states in the region have used innovative methods for financing kindergarten through
grade 12 schooling. Lately, with the demographic shift toward an older population and
with the trend toward fewer children per family,
the region's student population has been declining. In states where funding is based on
average daily attendance, the demographic
38
of School
Statistics,
1972, 1977, a n d 1982.
change has meant that schools are receiving
less funding at a time when pressures to increase
educational quality are growing more intense.
Some state education funding systems have
been flexible enough to adjust to this evolution,
others were overhauled to serve the changing
need, and some still are adapting to the new
realities.
Florida generates 93 percent of its public
school monies internally. Of these, the state's
general fund provides 62 percent and local
sources 31 percent. Florida is fairly typical of
national school funding patterns except in the
area of local funding. By law, a proportion of
receipts from parimutuel wagering is distributed
equally to each of the state's 67 county commissions. (Florida's counties and school districts
cover the same geographical areas.) In 1983,
each county received about $500,000, most of
which went for education. The equal sharing of
these funds, of course, disproportionately benefits districts with small school age populations.
Louisiana generates a much greater proportion
of public school revenue from local sources
than the regional average, primarily because of
a law passed by its legislature before the turn of
the century. The state is divided into a geographical grid of "sections." The law states that
one-sixteenth of the sections should be set
aside as income-producing property to support
NOVEMBER 1984, E C O N O M I C REVIEW
T a b l e 4 . C o n s u m e r Price Index for E d u c a t i o n and
All Items, 1 9 7 0 - 1 9 8 3
(annual p e r c e n t c h a n g e e n d i n g in December)
Year
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
All Items
United States
Atlanta
5.5
34
3.4
8.9
12.2
7.1
4.9
6.8
9.1
13.4
12.3
8.9
3.9
3.5
Personal and
Education
Expenses*
N/A
N/A
N/A
8.2
12.2
6.6
3.5
7.3
7.8
12.3
15.7
9.2
4.9
3.8
9.8
9.2
4.5
5.8
6.6
7.4
6.0
6.5
8.3
8.5
11.9
13.4
12.5
9.8
• I n c l u d e s school b o o k s a n d supplies; personal a n d educational services
( l a r g e l y t u i t i o n tees).
N / A - Data not available.
S o u r c e : U. S. B u r e a u of L a b o r S t a t i s t i c s , CPI Detailed
Report
( T a b l e 5).
local schools. The "16th Section" lands generate
income through oil production, leases for farming, fur trapping, and other sources. Those
sections with oil production capacity provide a
relative bounty of funds to the local school
districts.
To compensate for the differing income production capacities of the " 1 6 t h Section" lands,
Louisiana instituted a minimum foundation
program that uses money from the state's
general fund to assist schools. This program
requires that the millage rate on assessed value
of real property reach a certain level before a
school district receives a full allocation based
on its number of students. In addition, parishes
may increase sales taxes by 2 percentage points
and raise the millage rate on real property up to
70 mills, both at local option.
Although Mississippi also uses the " 1 6 t h
Section" lands concept and a minimum foundation program to finance its public schools,
the state administers its land program someFEDERAL RESERVE BANK O F ATLANTA
what differently from Louisiana Proceeds from
the sale of depletable resources such as oil, gas,
and minerals are placed in a trust Only the
interest on the capital held in this trust may be
spent by local school districts. However, proceeds from the sale of renewable resources
from " 1 6 t h Section" lands may be used by the
local districts.
Mississippi's minimum foundation program
provides each district's share of public school
funding but does not effectively equalize monies
allocated by district or by pupil. In fact, if
equalization depended on substantial tax increases the process could take longer in Mississippi, where a law prohibits tax hikes in
excess of 10 percent.
Georgia supports its public schools with
fairly traditional funding methods. A m o n g
regional states, only Florida's proportion of
education revenues from the federal government is less than Georgia's quite low rate. Both
states appropriate education monies from their
general funds.
In Georgia, the sources of education funds
available to the state and to local governments
are set out strictly in the state's constitution.
This document designates that property taxes
will be virtually the exclusive source of educational funding for the local districts. It
reserves the general fund for use by the state.
Local option sales taxes for educational funding
have been made available by legislation to only
eight of 187 school districts. A few Georgia
cities allocate dollars raised by municipal water
and electricity systems to the local school
district, but these are exceptions to the general
rule. Georgia's education dollars from the general fund are allocated on the basis of average
daily enrollment of students per school district.
Under this allocation scheme, districts with
low property tax bases, which generate scant
local funding, can suffer relative to those with
large and fast-growing tax bases. Of course,
fast-growing districts frequently experience
mushrooming student populations, which can
impose a substantial drain even on an expanding
tax base.
Alabama is unique among southeastern states
in that state funds designated for education,
kindergarten through university level, are held
in the Education Trust Fund, which is separate
from the general fund. Sales and income taxes
are the primary sources of monies for the
39
Education Trust Fund; during the 1983-84 fiscal
year, the state experienced a $50 million surplus out of a $1.4 billion education budget. At
the local level, the counties must assess a
m i n i m u m property tax millage rate before
school districts get a full share of state funds.
Alabama counties assign the revenue from a
variety of taxes for education, including gasoline,
tobacco, and beer and wine taxes.
Tennessee's Career Ladder promotion and
pay incentive program for teachers received
national attention when passed in a special
legislative session in early 1984. The session
passed the enabling legislation and appropriated the funds necessary for the innovative
program. The state's resolve to improve its
kindergarten through high school education
system also can be seen in the 22 percent j u m p
in the education budget from fiscal year 198384 to fiscal 1984-85. Education funding comes
out of the general fund, which is replenished
principally from sales taxes; Tennessee has no
state income tax. For local-level education
funding, counties may raise sales taxes by a
maximum of 50 percent of the state sales tax
rate, now set at 5.5 percent Property taxes
provide 66 percent of local education funding,
w i t h local option sales taxes contributing the
rest.
Financial Burden of
Education in the Southeast
Inflexible, outdated funding systems explain
in part w h y some southeastern states have
failed to close the educational spending gap
vis-a-vis national norms. Several other factors
might explain why disparities in educational
expenditures persist. These include soaring
education costs and a greater financial burden
due to lower personal income levels and a
larger portion of school age children relative to
the population. W e found limited support for
the argument that enrollments are higher, but
other explanations seemed ambiguous or
unconvincing on close examination.
One reason expenditure disparities persist
and convergence has not been more dramatic
is that educational costs have been rising more
rapidly than prices in general (see Table 4). For
example, after 1981 there was some moderation
in education cost increases as well as in the
40
overall rate of inflation, but far less deceleration
in the cost of schooling than in other goods and
services. Indeed, the CPI slowed from a 12
percent increase in 1980 to 3.5 percent in
1983, while the education cost index continued
to rise at nearly double-digit rates. However, one
cannot draw the conclusion that such increases
necessarily reflect education cost increases
spiraling beyond the control of school administrators. They might also represent widespread
decisions to increase public and private resources committed to education. In either
case, the continuing rapid rise in education
costs has been increasingly burdensome for
many states and municipalities. However, the
burden is self-imposed if educational price
increases reflect the public choice to devote
more resources to schooling.
Other plausible reasons for the South's ongoing lag in providing education for its populace
are per capita incomes in the region that are
lower than national averages and larger proportions of school age children relative to the
total population. Several states within the region
have markedly higher student ratios than the
region as a whole (see Table 5). In Mississippi
and Louisiana, school age children equaled
approximately one-third of the adult population
in 1982 as compared with 27 percent for the
whole region and the nation. All the other
states except Florida exceeded the nation's
ratio. Florida's relatively low proportion of children to adults is the reason the region compares
favorably with the nation. In all southeastern
states as well as the nation, the proportion of
school age children has declined by around 10
percent since 1972.
The Southeast has no more school age children
per family than the country as a whole, but this
statistical similarity is due entirely to Florida's
low ratio. In the aggregate the region is equal to
the nation, with an average of 60 school children
per 100 families. However, Mississippi and
Louisiana have higher averages of 70 per 100
families. These numbers are offset by Florida's
larger population and lower average of 50 per
100 families (see Table 5). Both measures
suggest that the burden of financing education
in many southeastern states is greater than in
the nation.
Where personal income is low, elevating
education expenditures to a par with higher
income regions would be burdensome to the
N O V E M B E R 1984, E C O N O M I C REVIEW
T a b l e 5 . S e l e c t e d D e m o g r a p h i c a n d Financial Information, 1 9 8 2
Education Expenditure/
Personal Income,
Excluding Federal
Contributions
(percent)
Education Expenditure/
Personal Income
(percent)
School Age/
Adult Population
(percent)
Average Number of
School Age Children
Per Family
1972
1977
1982
1972
1977
1982
1982
1972
1977
1982
36
37
39
31
39
43
42
36
32
33
34
27
35
38
38
32
27
27
30
22
30
32
33
27
5.7
5.4
4.4
5.1
5.4
6.4
6.0
4.9
5.5
5.2
5.0
4.8
5.3
5.5
5.4
4.9
4.8
4.5
4.7
3.9
4.5
4.6
4.8
4.5
4.4
3.9
4.0
3.6
4.0
4.2
3.7
3.9
0.8
0.8
0.9
0.7
0.9
1.0
1.0
0.8
0.7
0.7
0.7
0.5
0.7
0.8
0.8
0.7
0.6
0.6
0.6
0.5
0.6
0.7
0.7
0.6
United States
Southeast
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
S o u r c e s : C o l u m n 1 - U. S. B u r e a u o f t h e C e n s u s , Current
Population
Reports',
C o l u m n s 2 a n d 3 - N a t i o n a l E d u c a t i o n A s s o c i a t i o n , " E d u c a t i o n E x p e n d i t u r e s E s t i m a t e d t o E q u a l C u r r e n t R e v e n u e s , " Estimates
1972,
1977,
1982;
p e r s o n a l i n c o m e f r o m : U- S. B u r e a u o f t h e C e n s u s , Personal
Income
by
ot School
Statistics,
Region;
C o l u m n 4 - U. S. B u r e a u o f t h e C e n s u s ( u s e s 1 9 8 0 h o u s e h o l d data).
local population. Per capita personal income
levels in most southeastern states have yet to
converge with national norms despite substantial progress since World War II. Florida, the
most notable exception, enjoys near parity
with the nation, but other states remain as
much as 20 percent below the nation.
Table 5 compares each state's spending for
public elementary and secondary schools with
personal income. Using this measure, we found
support for the widely held view that the South
has not made the "tax effort" to finance education that other regions have. Mississippi is the
only southeastern state for which the percentage of personal income devoted to education rivals the national norm. Alabama comes in
a close second, with its percentage only fractionally lower than the national average. However, this measure of educational support is
misleading, since in 1982 almost one-quarter
of Mississippi's educational spending was
derived from federal sources and 15 percent of
Alabama's total came from Washington. Every
other state except Florida was more dependent
on federal funds than the national average of 7
percent (see Table 3). Discounting federal
funding, southeastern expenditures for education as a proportion of personal income are
consistently lower relative to the nation (see
Table 5). Whether this lower effort reflects a
lack of ability and thus a greater burden, or
FEDERAL RESERVE BANK OF ATLANTA
simply unwillingness because of different
"tastes" for education is unclear. That is, we
cannot determine whether these ratios reflect
the lower income level, which typically reduces
purchases of most nonessential goods and
services, or whether they reflect social choices
determined by southeastern states' historical
preferences to consume less education than
other regions.
Table 5 also shows that the proportion of
personal income devoted to education has
been declining both nationally and regionally.
This change is not surprising in view of federal
cutbacks for education spending and declining
school enrollments as the postwar baby-boom
generation matures.
Prospects for Future Financing
As the baby-boom children pass through the
school system and enrollments fall, school
districts could find themselves with more money
to spend on fewer students. In areas where
property tax revenues account for a significant
portion of school funds, this would be most
noticeable. But in areas where funding is proportional to student attendance, which is frequently the case as an increasing share of
financing is obtained from state general funds,
educational financing will decline unless allocation formulas are adjusted. However, declining
41
school enrollments also suggest less pressure
on school systems' capital budgets to expand
physical facilities.
Southeastern schools still have a long way to
go before reaching the national average in
financing for education. School officials can ill
afford to lose funding if they hope to maintain
progress in upgrading the region's educational
quality. The growing belief that education plays a
vital role in economic development seems
likely to strengthen support for increased educational funding among leadership groups
throughout the Southeast The rising numbers
of parents w h o have reached much higher
educational levels than their forebears are
likely to demand even better educational opportunities for their children. The combination of
these potentially influential forces suggests
that ways will be found at least to maintain, if
not increase, the funds provided for public
schooling.
Summary and Conclusions
The Southeast's educational expenditures
lag behind the nation's on both a proportional
and a per pupil basis. Although growth has
been rapid during the past decade, expenditures
have increased only moderately faster than the
rate of inflation. O n a constant dollar basis, the
spending gap between the Southeast and nation
has remained at about $200 per pupil during
the past decade, although the percentage difference narrowed from 26 percent to around
20 percent Comparisons of cost-of-living differentials can be interpreted to suggest that at
least part of the Southeast's lower educational
expenditures reflect social choices to commit
fewer resources to education, rather than entirely reflecting ability to purchase more education for fewer dollars because of its lower
labor and other costs.
42
The financial burden of education is somewhat more severe in most southeastern states
than in the nation as a whole. The major reasons
for the relatively greater burden include a
larger number of students in proportion to the
adult population and lower per capita incomes.
A greater share of federal funds for education
than other states receive helps lessen this
burden in Mississippi and Alabama.
The relative shares of funds for public education from local, state, and federal governments
have been changing. Federal and local financial
support has been declining, relatively speaking,
but local funding has declined less in the
Southeast than nationally. State governments
are now the major source of education funds,
although proportions vary markedly among southeastern states. A variety of methods are used to
generate funds for education, but general sales
and income taxes are playing a growing role in
this process.
If states can devise ways to maintain an
undiminished flow of funds to support education in the face of diminishing school enrollments, opportunities for improving the quality
of education will increase in the years ahead.
However, if funds are cut as enrollments decline,
progress will be difficult, if not impossible, to
attain. Growing public support for education
and the rising educational level of the Southeast's
adult population would seem to indicate that
the future demand for education will be sufficient to give a dramatic boost to the priority of
school funding throughout the region.
(Charlie
Carter and Joel Parker contributed
to this
article.)
' W i l l i a m E. C u l l i s o n , " E q u a l i z i n g R e g i o n a l D i f f e r e n c e s in W a g e s : A S t u d y
of W a g e s a n d M i g r a t i o n in t h e S o u t h a n d O t h e r R e g i o n s , "
Economic
Review ( F e d e r a l R e s e r v e B a n k of R i c h m o n d ) , vol. 7 0 ( M a y - J u n e 1 9 8 4 ) ,
pp. 2 0 - 3 3 .
NOVEMBER 1984, E C O N O M I C REVIEW
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Supply-Side Economics
In the 1980s
Growth Industries
In the 1980s
P r o c e e d i n g s of c o n f e r e n c e s s p o n s o r e d by t h e F e d e r a l R e s e r v e B a n k of Atlanta
The Southeast's
Occupational
Employment
Outlook
William J. Kahley
While regional e m p l o y m e n t is e x p e c t e d t o
a d v a n c e swiftly over t h e next decade, t h e
mix of jobs likely will differ little f r o m t o d a y ' s
Anticipated c h a n g e s in j o b training
r e q u i r e m e n t s s u g g e s t that s o u t h e a s t e r n
states will have to boost their
e d u c a t i o n spending, but n u m e r o u s
e m p l o y m e n t o p p o r t u n i t i e s will be available
e v e n for w o r k e r s w i t h limited education.
44
Headlong growth of new technologies, increased
global economic interdependency, and national
economic recessions have combined in recent
years to heighten concerns about future employment opportunities in numerous blue- and whitecollar occupations. For example, there seems to
be a growing fear that an army of steel-collar
robots will displace welders and other bluecollar workers in our traditional "smokestack"
industries. Numerous white-collar jobs also are
perceived to be in jeopardy as word processors
erase typing pool jobs and as expanding computer graphics capabilities eliminate the need
for drafters. Many believe that a substantial
refocusing of our educational systems is necessary in
order to prepare for these changes in the workplace.
Fear of job loss because of structural economic
change has deep historical roots. In eighteenthcentury England, the Luddites smashed new
textile looms that appeared to threaten their
jobs. Similar fears have troubled American workers
since the spread of railroads in the nineteenth
century and the later proliferation of automobiles and airplanes. For some workers, such
as wagonmakers and blacksmiths, job changes
had to be made. High unemployment, caused
by economic recession or depression, often
speeded up these structural e m p l o y m e n t
adjustments. Fortunately, our historical experience has been that the actual decline of wagonmaking and blacksmithing jobs was more than
offset by the expansion of jobs for these workers
as automobile welders and engine mechanics.
To help gauge the impact of future occupational
employment changes in the fast-growing economies of the Southeast occupational e m p l o y
The author
Department
is a member
of the Atlanta
Fed's
Research
NOVEMBER 1984, E C O N O M I C REVIEW
I
ment projections from public and private sector
sources were gathered and analyzed. No
strong evidence emerged that the broad job
mix will change dramatically over the next 10
years. This finding indicates a likelihood that
regional states' educational systems are adequate
to prepare workers for tomorrow's jobs. However,
the job mix outlook is sufficiently hazy to merit
continued monitoring by government policymakers, educational system planners, and individuals selecting an occupation. We are fortunate
in having a wealth of useful and improving job
mix information that can help us plan for the
future.
Forecasting the Worker Profile
One of life's most important decisions is selecting a career or occupation. I nformation about
career o p p o r t u n i t i e s in f o r t h c o m i n g years is
valuable in helping today's youth prepare for
their future in the workplace. Businesses and
communities also want to plan, and knowledge
about the likely job market structure can assist
their efforts. From the perspective of public
institutions and policymakers, insights about the
likely future worker profile can be crucial. Government policymakers, w h o will be called upon to
help provide retraining programs for displaced
workers, need to know which occupations are
likely to grow or decline. Moreover, the clearer
our picture of the future labor market, the better
our educational system can prepare workers for
tomorrow's jobs.
Envisioning the worker profile of the future
requires forecasting both the supply of available
workers suitable for different jobs and the availability of jobs, including the characteristics or
skills they entail. Relative potential shortages or
surpluses of workers and jobs can then be
analyzed and manpower planning actions taken
to help insure a generally balanced growth of
skills and requirements in the labor market
Unfortunately, our ability to foresee the impact
of future changes in technology and otherfactors
that influence the supply of and demand for
workers and jobs is limited, particularly as our
time horizon is lengthened and as we attempt
more detailed analyses. These uncertainties
necessarily cloud any set of projections, and
warn us to maintain a careful watch for changes
in the labor market outlook. 1
From a regional perspective, some projections
of the future labor market are available that
facilitate a broad understanding of the changing
shape of the southeastern economy over time.
These projections, from state and national statistical agencies and private-sector forecasting services, provide tentative answers to such important
questions as: How fast are jobs expected to grow
in the Southeast compared with the nation?
How will the employment growth influence the
types of jobs that are created? Does the expected
changing occupational pattern suggest an unusual departure from recent historical experience
in manpower planning requirements? Answers
to these questions, although imprecise, can assist
in planning labor supply programs to meet future
employment needs, or in changing labor supplies
to create new employment opportunities in the
region.
BLS National Labor Market Projections
The U.S. Department of Labor's Bureau of
Labor Statistics (BLS) is the major source of
information about national labor market developments. Besides providing historical data,
the BLS prepares biennial projections covering:
(1) the labor force, (2) aggregate economic
performance, (3) industry final demand and total
industry production, (4) industry employment
levels, and (5) occupational employment by
industry. The current BLS projection covers the
national job outlook through 1995. 2
BLS projection procedures for each of the five
areas are separate but related. The BLS system is
an extremely sophisticated and substantial undertaking. Briefly, its procedures include the development of projections concerning:
- the labor force
- gross national product (CNP)
- disaggregation of GNP into major sectors
of demand such as consumption and
investment
- distribution of sectoral demands into detailed industry output
- calculation of total industrial production in
conjunction with a projected input-output
table
- estimation of industry employment through
use of projected industry productivity
- projection of an industr^occupation matrix
for each industry to calculate employment
by occupation.
The BLS makes several employment and occupation projections based on alternative assumptions about fiscal and monetary policy and
other factors that generate alternative economic
scenarios. It utilizes a large-scale macroeconometric model of the U.S. economy, as well as
similarly detailed input-output and industry-occupation matrices and Bureau of the Census
population projections based on trends in birth,
death, and migration rates.
What do these projections foresee as the major
expected developments in the occupational
structure nationally? For one thing, they project
that white-collar jobs, led by the growth of
professional and technical workers, will increase
faster than any other group if aggregate economic
activity and industry demand patterns follow the
bureau's moderate growth path. Faster-thanaverage increases for nonwhite-collar workers
are expected only for service workers and bluecollar craft workers, while other blue-collar jobs
should grow at a below-average pace and farming
occupations will decline. These changes would
boost the share of total employment accounted
for by professional and technical workers as well
as service workers, according to the BLS. On the
other hand, the employment shares of operatives,
laborers, and farm occupations are expected to
decline. ("Operatives" includes a wide range of
46
jobs, from assembling goods in factories to driving
trucks and operating certain types of machinery.)
Some of these changes would continue trends
that have persisted over the past few decades,
but others would represent major departures
from long-term trends. For example, for decades
professional/technical and service jobs have been
growing faster than total employment while
operative and labor jobs have been growing
slower. The BLS believes farm occupations will
decline more slowly than in the past, but that
the drop still will be large. The projected
average growth rate of clerical jobs represents
a slowdown from faster-than-average growth
over the past 20 years.3
These BLS projections of major trends are
likely to prove fairly close to reality. The BLS itself
analyzes its past projections for accuracy. Its 10year-old projections for 1980 were on target for
professional and service occupations, the t w o
fastest growing occupational groups in the 1970s,
and correctly identified these workers and clerical employees as the three fastest-growing groups.
BLS projections also were reasonably accurate
for all but administrative and nonfarm laborer
occupations (which the bureau underestimated)
and operative occupations (which were overestimated). In general, the BLS has in the past been
more successful in identifying employment growth
than employment declines.4 But recent improvements in its occupational outlook program offer
encouragement that the current BLS projections
will be even more reliable than earlier ones.
Regional Labor Market Projections
Technological change, variations in industrial
growth and occupational staffing patterns, and
other factors with a significant impact cause
occupations to expand at different rates in the
Southeast than nationwide. To find out how the
region's broad occupational structure is likely to
change compared with the nation's, we used
long-term forecasts of state employment levels
by industry generated by Data Resources, Incorporated (DRI). Similar projections also are
available from state agencies in the Sixth District.
For each of the six states in the Sixth District
and for the nation, we projected major occupational
groups by applying DRI's projected industry
employment data to the BLS national industry
occupation matrix. For example, the projected
employment in Alabama's apparel industry was
NOVEMBER 1984, E C O N O M I C REVIEW
applied to the corresponding national occupational employment pattern (relative n u m b e r
of operatives, managers, professionals, and so
on). After similar calculations of the expected
occupational staffing of employment in other
Alabama industries, we derived total employment in the state's major occupational groups
from aggregation across all industries for the
projected year. Regional totals are aggregations
across the six states.
The resulting occupational employment projections for Sixth-District states and the nation
indicate patterns of change in the region's broad
occupational structure similar to those projected
to occur nationally between 1982 and 1995. 5
The three fastest growing occupations nationally
and regionally are professional/technical, managers/
officials, and sales workers (Table 1). The three
occupations that will add the most workers both
regionally and nationally are professional/technical, service, and clerical workers. 6
Several important observations emerge from
inspecting these national and regional projections.
One is that the occupational outlook for both
areas in the coming years is similar to what it has
been over the past decade. For example, professional, service, and clerical jobs posted the
fastest growth and added the most jobs in the
1970s. Generally, the continuing shift of jobs out
of farming and slow growth of operative and
labor occupations contrasts sharply with the
quick expansion of white-collar and service oc-
cupations, and represents an important trend
nationally and regionally.
The BLS expects service-producing industries,
including transportation, communications, public
utilities, trade, finance, insurance, real estate,
other services, and government, to account for
nearly three out of four of all the new jobs
nationally between 1982 and 1995. Various
miscellaneous business service industries are
expected to pace employment growth within
the service-producing sector. Medical care, business and professional services, hotels, personal
services, and nonprofit organizations are projected
to account for one-third of all the new jobs
created in the 1982-1995 period, especially
boosting professional, service, and clerical jobs.
These industries and occupations will grow especially fast in the Southeast fueled by continued
population migration to the region and aboveaverage economic growth of the southeastern
economy, including its important tourism industry.
What's more, the Southeast is generally expected to grow at a substantially faster pace than
the nation through 1995. In 1982, the Southeast
accounted for 12.7 percent of all U.S. nonagricultural employment. This share should rise
to 13.2 percent in 1995 as a result of the region's
relatively rapid growth. Sixth-District states are
expected to account for over 1 5 percent of the
new jobs created nationally in the 1982-85
period.
Table 1. Worker Profile Changes Nationally and Regionally, 1982-1995*
Distribution
United States
Southeast
1982
1995
1982
1995
Professional, technical, and related workers
Managers, officials, and proprietors
Net Change
1982-1995
U.S.
S.E.
Percent Change
1982-•1995
SE.
U.S.
16.4
17.1
14.7
15.4
4,408.5
587.6
30
35
8.4
9.0
8.7
9.4
2,582.2
393.1
34
40
254.3
27
34
6.4
6.5
6.6
6.8
1,533.2
Clerical workers
20.4
20.1
20.7
20.4
4,160.0
644.1
23
27
Craft and related workers
11,0
11.2
12.0
12.2
2,636.3
426.0
27
31
Operatives
13.6
12.6
13.7
12.1
1,906.5
217.4
16
14
6.1
5.8
6.9
6.6
998.0
190.2
18
24
16.7
16.8
16.5
17,0
3,732.1
621.6
25
33
Salesworkers
Laborers, except farm
Service workers
• W a g e a n d s a l a r y e m p l o y m e n t in n o n - a g r i c u l t u r a l e s t a b l i s h m e n t s
S o u r c e s : D a t a R e s o u r c e s , I n c o r p o r a t e d a n d t h e F e d e r a l R e s e r v e B a n k of A t l a n t a
FEDERAL RESERVE BANK OF ATLANTA
47
Abov^average growth of jobs and population
has characterized the Southeast in recent decades. Florida's population increase has paced
the region's growth, with the bulk of its gain from
population migration, particularly of retirees. But
all of the District states registered population
growth rates that exceeded the nation's in the
1970s and, according to the Census Bureau,
Mississippi was the only regional state that failed
to gain from migration in the 1975-80 period.
The bureau expects Florida's population to continue to boom, enabling the region's population
to grow twice as fast as the nation's; however, it
anticipates that Alabama and Mississippi will
grow at be low-average rates.
Some significant differences remain between
the region's and the nation's occupational growth
patterns. In terms of relative occupational growth
rankings, services should expand more rapidly
than craft occupations in the region, but not so in
the nation. Moreover, the rankings of absolute
job increases by occupation vary somewhat. In
contrast to the nation, the region's clerical and
service job increases outrank professional job
increases, and sales jobs increase more than
operative occupations. These contrasts are attributable to relative differences in the mix of
industrial growth. The Southeast is growing relatively rapidly in services and trade industries that
employ white-collar workers rather than craft
workers or operatives.7 Although professional and
technical occupations are underrepresented in
this region and are projected to remain low
compared with the nation, the expected languid
growth of operative jobs here may alter the
perception of the region as a producer of jobs in
branch plants of low^wage industries. (The growth
rate of jobs for operatives is the only occupational
category projected to be higher for the nation
than for the region.)
The faster overall growth of employment in the
Southeast versus the nation and the relative
occupational growth differences between the
t w o combine to shift the relative concentration
of occupational employment in the Southeast.
The region reported a higher percentage of its
work force employed in managerial, sales, clerical,
craft, and labor occupations in 1982 than did the
nation as a whole, implying a regional concentration in these occupations. By 1995, the concentration in sales workers should rise slightly,
while that in operative occupations should disappear (Table 2). The region's below average
employment of service workers in 1982 also is
48
T a b l e 2. Regional O c c u p a t i o n a l C o n c e n t r a t i o n s
1 9 8 2 and 1 9 9 5 *
1982 1995
Professional, technical,
and related w o r k e r s
Managers, officials and proprietors
Sales w o r k e r s
Clerical w o r k e r s
Craft a n d related w o r k e r s
Operatives
Laborers, e x c e p t farm
Service w o r k e r s
.90
1.04
1.02
1.02
1.09
1.00
1.14
.99
.90
1.04
1.04
1.02
1.08
.95
1.15
1.02
• C o n c e n t r a t i o n refers t o t h e relative i m p o r t a n c e ot e m p l o y m e n t in an
o c c u p a t i o n a l g r o u p in t h e r e g i o n r e l a t i v e t o t h a t g r o u p s
importance
n a t i o n a l l y A n u m b e r g r e a t e r t h a n o n e i n d i c a t e s t h a t e m p l o y m e n t in a n
o c c u p a t i o n a c c o u n t s for a h i g h e r s h a r e o f r e g i o n a l e m p l o y m e n t t h a n it
d o e s n a t i o n a l l y . T h e c o n c e n t r a t i o n n u m b e r is t h e r a t i o o f t h e s h a r e of
r e g i o n a l e m p l o y m e n t in a p a r t i c u l a r o c c u p a t i o n t o t h a t o c c u p a t i o n ' s s h a r e
of n a t i o n a l e m p l o y m e n t
S o u r c e : F e d e r a l R e s e r v e B a n k of A t l a n t a
expected to reverse by 1995, causing a slight
concentration by that time.
Broad Structural Change within the Region
Changes in the occupational structure of the
entire region mask even greater shifts at the
state level. For example, the Southeast's faster
overall growth of jobs is attributable to aboveaverage growth in Florida, Georgia, and Louisiana
(Table 3). Employment in Florida should grow
two-thirds faster than employment nationally,
and account for nearly half of all the jobs created
in the region in the 1982-1995 period. The net
effects of the shifts in regional states' overall employment growth and industry mix can be summarized by examining changes in their occupational concentration in the 1982-1995 period
(Table 4).
The general decline in the relative importance
of operatives in the Southeast's occupational
mix is caused by reduced operative employment
in such areas as Tennessee's leather industry,
mining in Louisiana, and food processing across
the region. Moreover, the number of operatives
in the regionally important textile and apparel
industries is expected to grow only slowly in the
next several years. These trends contribute to
expectations of a slight overall decline in the
NOVEMBER 1984, E C O N O M I C REVIEW
T a b l e 3. E m p l o y m e n t G r o w t h in t h e S o u t h e a s t e r n States, 1 9 8 2 - 1 9 9 5
Non-Agricultural E m p l o y m e n t
1982
1995
Alabama
Florida
Georgia
Louisiana
Mississippi
Tennessee
Southeast
United States
1,314.9
3,7624
2,201.6
1,6142
793.1
1,688.5
11,3747
89,638.0
Absolute Change
1982-1995
Average
A n n u a l Growth
235.0
1,544.3
654.8
472.4
123.4
294.8
3,324.7
21,800.0
1.4
3.2
2.3
2.2
1.2
1.3
2.2
1.9
1,549.9
5,306.7
2,856.4
2,086.6
916.5
1,983.3
14,699.4
111,400.0
S o u r c e s : D a t a R e s o u r c e s , I n c o r p o r a t e d a n d t h e F e d e r a l R e s e r v e B a n k of A t l a n t a
T a b l e 4 . State O c c u p a t i o n a l Concentrations, 1 9 8 2 and 1 9 9 5
Occupation
Professional, technical, and related workers
Managers, officials, and proprietors
Sales workers
Clerical workers
Craft and related workers
Operatives
Laborers, except farm
Service workers
Alabama
Florida
Georgia
Louisiana Mississippi Tennessee
1982 1995 1982 1995 1982 1995 1982 1995 1982 1995 1982 1995
.87
1.00
.90
.97
1.12
1.23
1.20
.92
.86
.99
.90
.95
1.14
1.26
1.21
.92
.95
1.08
1.14
1.08
1.02
.75
1.07
1.08
.94
1.08
1.14
1.07
1.01
.72
1.06
1.09
.84
1.02
1.02
1.00
1.07
1.15
1.17
.96
.86
1.01
1.07
1.01
1.02
1.08
1.14
1.00
.90
1.06
.98
1.01
1.22
.90
1.19
.98
.88
1.07
.99
.99
1.30
.81
1.25
.99
.86
1.00
.90
.96
1.12
1.23
1.21
.93
.86
1.00
.90
.94
1.11
1.25
1.24
.94
.89
.90
1.01 1.00
.97
.96
.97
.97
1.08 1.07
1.22 1.16
1.12 1.21
.92 ' .95
S o u r c e : F e d e r a l R e s e r v e B a n k of A t l a n t a
importance of manufacturing in the region compared with the nation. O n the other hand, the
small increase in concentration of sales and
service occupations reflects the growing importance of diverse trade and service industries in
serving the region's expanding market. The absolute number of farm workers is declining both
nationally and regionally, as growing mechanization
in agriculture continues to reduce the need for
manual labor.
Despite the region's relative decline in the
importance of operative jobs, both Alabama and
Mississippi are slated to increase their already
high concentration of workers in these occupations.
The reason is that manufacturingjob advances in
these states are the highest in the region compared with overall employment growth, and
operative occupations account for nearly four
FEDERAL RESERVE BANK OF ATLANTA
out of ten manufacturing jobs.(ln addition, some
of the job gains represent recovery from the
severe dropoff in manufacturing activity in these
states during the 1981-1982 recession.)
Another major interstate difference is that
laboring occupations should increase in relative
importance in Louisiana and Tennesee but decline in Georgia Georgia's outlook also is unusual in
that the relative importance of sales and service
occupations is expected to increase substantially
more than in other states, perhaps reflecting
Atlanta's key role as the region's commercial and
distribution center. Nevertheless, Florida should
continue to have the highest concentration of
sales and service workers among Sixth-District
states. Georgia also is expecting a decline in its
relative concentration of craft workers while
Louisiana's concentration, already high, should
49
increase substantially. Increased laborer and craft
employment in Louisiana appears to be associated
primarily with expected expansion of its energy
sector and port-related activity.
Detailed O c c u p a t i o n a l Changes
Employment growth rate differences among
broad occupational groups in the region translate
into even greater variation in the job growth of
detailed occupations, both nationally and regionally. For the nation, detailed outlook information
for approximately 200 occupations is described
in the BLS's Handbook
and other publications.
Analogous outlooks for regional states are provided by State Occupational Information Coordinating Committees (SOICC) in the District. 8
(See Appendix.)
The BLS expects the national economy to
generate about 25.6 million additional jobs between 1982 and 1995, of which nearly half will
be in only 40 of the 1,700 occupations for which
projections were made. Generally, occupations
that will account for the most additional jobs are
already large, each employing more than 250,000
workers in 1982. The 20 occupations with the
largest job growth are shown in Table 5. Laborers,
including farm workers, constitute the only major
occupational group missing from the list of occupations with the largest j o b growth; six of the
listed occupations are for service workers and
four are professional/technical occupations. An
important generalization about the numerically
large occupational increases, also reflected in
this incomplete listing, is that employment in
jobs requiring a college degree or specialized
technical training is likely to increase significantly,
but so are many jobs that require no education or
training beyond the high school level.
Occupations with the largest growth in number
of jobs generally are not the occupations growing
at the quickest rate (Table 5). Electrical and
electronic technicians, computer operators, programmers and systems analysts, and electrical
engineers are the only occupations among the
20 fastest growing that are also among the 40
occupations with the largest j o b growth. The
fastest growing occupations tend to be in the
computer, engineering, or health fields and require postsecondary schooling.
Occupations that are expected to decline
come from all of the major occupational groups
except sales workers. It is anticipated that the 20
50
most rapidly declining occupations will lose
903,000 jobs, with about 60 percent of those
jobs accounted for by private household workers,
farm workers, and farm owners and tenants. The
decrease in college and university faculty jobs
accounts for one out of eight lost jobs in the
twenty most rapidly declining occupations, fully
11 percent of such jobs held in 1982. The
projected decline in college teachingjobs, posts
that require the highest educational attainment,
is attributable to sagging college enrollments
following the education of the baby-boom generation. Several of the other declining occupations
on the list have been affected adversely by
technological change. For example, advances in
communications equipment are lessening the
demand for telephone operators, typesetters,
and compositors.
Many of the jobs that are expected to show the
largest growth nationally also are expected to
provide a large share of regional jobs. Building
custodians—janitors, porters, and cleaners—top
the list of occupations with the most significant
growth both nationally and regionally. Other
occupations with the largest national growth,
such as cashiers, secretaries, office and sales
clerks, waiters, and waitresses, also are among
the occupations with the greatest expected j o b
growth in southeastern states.
Despite a similar overall pattern, the regional
job outlook for particular occupations in some
instances differs significantly from the national
outlook. Among the major differences are the
region's less favorable outlooks for registered
nurses, kindergarten and elementary teachers,
automotive mechanics, computer programmers,
operators and systems analysts, and electrical
engineers and technicians. The region's outlook
is more favorable for fast-food restaurant workers,
typists, and bookkeepers.
The less favorable outlook for registered nurses
and elementary schoolteachers may seem surprising in light of the Southeast's above-average
population growth. For registered nurses, even
Florida, with its growing elderly population in
need of relatively more health care, projects a
lower share of new nursing jobs in this decade
than is projected for the nation in the 1982-1995
period. However, it appears that southeastern
states rely more heavily on licensed practical
nurses (LPNs) than on registered nurses.9 LPNs,
as well as nurses aids, are expected to grow faster
regionally than nationally in the coming years.
NOVEMBER 1984, E C O N O M I C REVIEW
Alabama is the only Sixth-District state that
expects its elementary schoolteachers to account for a higher share of employment growth
than nationally, while Tennessee expects its
number to decline. The Census Bureau expects
the nationwide drop in the elementary school
population to reverse by the mid-1980s, improving
the j o b prospects for kindergarten and elementary schoolteachers, both nationally and regionally.
However, among regional states, the National
Planning Association expects only Florida to
register faster growth of the elementary school
age population than the nation in the 1985-1995
period.
It might seem that the policy implication of
these changes for the region's educational planners is that the lessening of relative population
pressure will abet their efforts to improve the
quality of elementary education in their states.
However, the difference between the regional
and national growth rates of the elementary
school age population is small. Moreover, the
region's secondary school age population will
drop proportionately less than nationally through
the end of this decade, when it will begin again to
expand at about the same rate nationally and
regionally. Also, employment of college teachers
in the Southeast is expected to rise in the 1980s,
while the college and university faculty is projected to decline by 1 5 percent nationally in the
1982-1995 period. These trends suggest an increased relative burden on the region's educational
system.
Some of the region's other major differences in
particular outlooks are in line with expected
relative developments among industries, regionally and nationally. In the region's trade and
services industries, for example, above-average
growth is anticipated, promising above-average
increases in typing and bookkeeping jobs and in
employment at fast-food establishments. The
reasons for projected below-average relative
increases in computer-related jobs are less obvious, however. Part of t h e difference undoubtedly results from the dissimilar time periods
used for the projections. An especially high
employment trend for these occupations would
favor their contribution to overall growth more
for the lengthier and later national projection
period.
Within the region, particular state outlooks for
some jobs diverge dramatically from regionalnational differences. As mentioned, Tennessee
FEDERAL RESERVE BANK OF ATLANTA
expects the number of elementary schoolteachers
to decline in the remaining years of this decade.
The state's employment of carpenters also is
projected to decline in the eighties, in contrast to
relatively large growth elsewhere in the District
and in the nation. The projection for Tennessee
is that construction craft workers will see the
slowest growth rate of any cluster of craft worker
occupations, perhaps because of an anticipated
slowdown in population growth.
In some instances, regional states project employment growth for an occupation for which a
decline is expected nationally. College teachers
offer one example and roustabouts (deck hands
or waterfront laborers) are another. A 33 percent
increase in roustabout employment is looked for
in Louisiana and a 48 percent rise in Mississippi,
whereas nationally the number of roustabouts is
expected to decline 14 percent by 1995. A
possible reason for this divergence is the concentration of shipping at "load centers." Some
examples of relatively large employment growth
in individual states but low growth nationally
include sewing machine operators in Alabama
and welders and flamecutters in Louisiana.
Policy Implications and Conclusions
Changes in regional employment by occupation
may require significant adjustments to the educational system if it is to prepare tomorrow's
workers adequately. Increased claims are made
on the system when continued population and
income growth heighten demand for goods and
services, causing greater need for trained workers.
An additional regional burden may be associated
with the southeastern states' desire to improve
the relative performances of their educational
systems. Finally, differences in the occupational
growth mix between the region and nation may
require spending relatively more or less on education compared with the nation, depending
upon the educational requirements of particular
jobs.
What can be said about these issues based on
the employment changes that have been discussed? The projected faster growth of regional
than national employment in the years ahead
suggests that the Southeast's education expenditure likely will account for a growing share of
national spending on schools. However, expanding
job opportunities in the region also are attracting
51
Table 5. Major National Occupational Changes, 1982-1995
Twenty Occupations with Largest Job Growth
Occupation
Building custodians
Cashiers
Secretaries
General clerks, office
Sales clerks
Nurses registered
Waiters and waitresses
Teachers, kindergarten and
elementary
Truck drivers
Nursing aides and orderlies
Sales representatives technical
Accountants and auditors
Automotive mechanics
Supervisors of blue-collar workers
Kitchen helpers
Guards and doorkeepers
Food preparation and service workers
fast food restaurants
Managers, store
Carpenters
Electrical and electronic technicians
Change in
total employment
(in thousands)
Percent of
total
job growth
Percent
change
779
744
719
696
685
642
562
3.0
2.9
2.8
2.7
2.7
2.5
2.2
27.5
47.4
29.5
29.6
23.5
48.9
33.8
511
425
423
386
344
324
319
305
300
2.0
1.7
1.7
1.5
1.3
1.3
1.2
1.2
1.2
37.4
26.5
34.8
29.3
40.2
38.3
26.6
35.9
47.3
297
292
247
222
1.2
1.1
1.0
.9
36.7
30.1
28.6
60.7
Twenty Fastest Growing Occupations
Occupation
Computer service technicians
Legal assistants
Computer systems analysts
Computer programmers
http://fraser.stlouisfed.org/
n n r p o u t e r
Federal Reserve Bank of St. Louis
o n p r a t n r g
Percent growth in
employment
96.8
94.3
85.3
76.9
I .nrnniiTPr
n n p r a m r c
.
Physical therapy assistants
Electrical engineers
Civil engineering technicians
Peripheral EDP equipment operators
Insurance clerks, medical
Electrical and electronic technicians
Occupational therapists
Surveyor helpers
Credit clerks, banking and insurance
Physical therapists
Employment interviewers
Mechanical engineers
Mechanical engineering technicians
Compression and injection mold machine operators, plastics
biro
65.3
63.9
63.5
62.2
60.7
59.8
58.6
54.1
53.6
52.5
52.1
51.6
50.3
Twenty Most Rapidly Declining Occupations
Occupation
Railroad conductors
Shoemaking machine operatives
Aircraft structure assemblers
Central telephone office operators
Taxi drivers
Postal clerks
Private household workers
Farm laborers
College and university faculty
Roustabouts
Postmasters and mail superintendents
Rotary drill operator helpers
Graduate assistants
Data entry operators
Railroad brake operators
Fallers and buckers
Stenographers
Farm owners and tenants
Typesetters and compositors
Butchers and meatcutters
Source: B u r e a u of L a b o r S t a t i s t i c s
Percent decline
in employment
-32.0
-30.2
-21.0
-20.0
-18.9
-17.9
-16.9
-15.9
-15.0
-14.4
-13.8
-11.6
-11.2
-10.6
-
9.8
8.7
7.4
7.3
7.3
6.3
trained workers from elsewhere, somewhat mitigating the need for training workers locally. 10
Even so, the pattern of local growth of population
and income translates into a need to boost
spending on education relative to the nation.
Both the school age population and personal
income are expected to rise at above-average
rates over the next ten years.
If educational policymakers in the region want
their school systems to catch up with the national
average school performance, even more local
spending per student may be needed. An analysis
of how much additional spending would be
required to upgrade southeastern educational
systems is beyond the scope of this study.
However, the additional burden of increased
spending on education would be eased somewhat if, as expected, personal income in the
region grows at an above-average rate.
To evaluate the impact on educational systems
of expected differences in the occupational
employment growth mix, we calculated a crude
summary index of the amount of education
required per additional expected worker for
regional states and the nation. The index was
constructed by attaching an educational weight,
on a scale of 1 to 5, to each of the 40 largest
occupational increases for the nation. For example,
occupations requiring the least amount of formal
education, such as janitors and trade helpers,
were given a weight of 1. At the other extreme,
those occupations that required post-graduate
training or education, such as physicians, were
given a weight of 5. The expected increases in
the occupations were then multiplied by the
educational weights and summed for regional
states and the nation. 11
Comparison of these per worker indexes for
the states, the region, and the nation suggests
that fewer years of education per new worker
will be needed in the Southeast than nationally.
Within the region, Florida and Georgia workers
will call forthe most education, butintra-regional
differences are slight relative to state index
differences from the national index value. 12
Although fewer years of education per worker
may be required in the Southeast than in the
nation, future growth still is likely to continue the
region's per capita income convergence toward
the national average. To evaluate the impact on
personal income per capita of the region's occupational employment mix, weighted average
hourly wage rates were calculated for southeastern
54
states and the nation. 13 All of the southeastern
states are projected to have lower weighted
average hourly wage rates (per new worker) than
the nation, with the regional average falling 40
cents short of the $5.15 national average However, except for Florida the expected ratio of each
state's wage rate to the nation's is higher than its
1983 ratio of per capita personal income to the
nation's. 14 In 1983, the region's per capita personal income was 88 percent of the nation's,
while its expected average hourly wage rate is 92
percent of the anticipated national average. Thus,
the projections used in this study suggest a
continuation of above-average growth of the
region's average income.
Unfortunately, it is not possible to determine
whether the occupational employment outlook
discussed in this study portends a future surplus
or shortage of workers with particular skills in the
region. Nationally, a decline in the number of
labor force entrants is occurring following absorption of the baby-boom generation. Some
argue that a growing shortage of low-skill labor
will result from this demographic shift. If so, the
employment prospects for numerous unskilled
workers in the region will brighten.
The unknown magnitude of future migration
flows into the region contributes to the difficulty
of foreseeing potential shortages or surpluses of
different types of workers. However, the movement of workers into the region has helped fill
worker shortages in the past, and it is likely that
migration of workers into the region will continue to make up for local shortages of workers in
the years ahead.
Several major conclusions emerge from this
study of changing employment patterns. One is
that, while employment in the region is expected
to grow at an above-average pace, the resulting
pattern of occupational employment is not expected to change substantially in this decade.
Moreover, local changes are expected largely to
mirror national trends in the major occupational
categories. Although comparisons at a detailed
occupational level are less certain, there is some
evidence that these relative changes will not be
overly burdensome for the region's educational
system. This is not to say, however, that an effort
to alter the occupational distribution of regional
workers through increased spending on education
will not prove laborious. If public policymakers
wish to change the region's occupational outlook,
to render it more "high tech," for example, a
NOVEMBER 1984, E C O N O M I C REVIEW
skills to help individualsadjustto near-term shifts
in labor markets make good sense. Meanwhile,
additional study concerning the costs and benefits of alternative long-range policies, now in
progress in regional states, also seem justified.
substantial additional investment in education
may be required. Moreover, it appears that
national trends are quite strong, suggesting that
educational policy changes made today will
have little influence in the years immediately
ahead.
All in all, our findings suggest that manpower
planning policies focusing on providing basic
(David Avery provided extensive and valuable assistance in
making the necessary computer calculations ol the figures in
this article.)
NOTES
' T l i e r e is a n i m p o r t a n t d i s t i n c t i o n b e t w e e n f o r e c a s t s a n d p r o j e c t i o n s . A n
e m p l o y m e n t p r o j e c t i o n is a n u m e r i c a l s t a t e m e n t a b o u t f u t u r e g r o w t h ,
w o r k e d o u t u n d e r a s p e c i f i c s e t of a s s u m p t i o n s c o n c e r n i n g t r i e f a c t o r s
t h a t a f f e c t e m p l o y m e n t . A f o r e c a s t is s i m i l a r t o a p r o j e c t i o n , b u t i m p l i e s
t h a t t h e a u t h o r or u s e r b e l i e v e s t h a t a p a r t i c u l a r p r o j e c t i o n i n d i c a t e s t h e
m o s t l i k e l y g r o w t h . T h u s all f o r e c a s t s a r e p r o j e c t i o n s , b u t not all
projections are forecasts
' B L S ' s o u t l o o k is d i s c u s s e d in f i v e a r t i c l e s in its Monthly Labor
Review
( N o v e m b e r 1 9 8 3 ) . A m a j o r p r o d u c t of B L S r e s e a r c h o n e m p l o y m e n t in
o c c u p a t i o n s t h a i is e x t r e m e l y v a l u a b l e for u s e in v o c a t i o n a l g u i d a n c e i n
its Occupational
Outlook
Handbook.
T h e b i e n n i a l Handbook
presents
detailed current information and job prospects covering about 2 0 0
o c c u p a t i o n s . F o r t h e s e o c c u p a t i o n s , t h e Handbook
discusses job duties,
w o r k i n g c o n d i t i o n s , l e v e l a n d p l a c e s of e m p l o y m e n t , e d u c a t i o n a n d
training requirements, a d v a n c e m e n t possibilities, job outlook, earnings,
o t h e r o c c u p a t i o n s t h a t r e q u i r e s i m i l a r a p t i t u d e s , i n t e r e s t s , or t r a i n i n g , a n d
s o u r c e s of a d d i t i o n a l i n f o r m a t i o n .
' B e g i n n i n g w i t h s t a t i s t i c s f r o m t h e 1 9 8 0 C e n s u s , t h e g o v e r n m e n t is u s i n g
a w h o l e n e w s y s t e m f o r c l a s s i f y i n g o c c u p a t i o n s U n f o r t u n a t e l y , it is
extremely difficult to analyze occupational structure c h a n g e s b e c a u s e
o c c u p a t i o n s h a v e b e e n g r o u p e d m u c h d i f f e r e n t l y t h a n in t h e past. For a
g o o d d i s c u s s i o n o f t h e c h a n g e s , s e e M. F R i c h e , " T h e B l u e - C o l l a r B l u e s .
American
Demographics,
vol. 5 ( N o v e m b e r 1 9 8 3 ) , pp. 2 0 - 2 3 .
" S e e M. L C a r e y a n d K. K a s u n i c , " E v a l u a t i n g t h e P r o j e c t i o n s of O c c u p a t i o n a l E m p l o y m e n t , Monthly
Labor Review, vol. 1 0 5 ( J u l y 1 9 8 2 ) , pp.
2 2 - 3 0 for a d e t a i l e d d i s c u s s i o n of t h e a c c u r a c y of B L S p r o j e c t i o n s
a
lt m i g h t b e a r g u e d t h a t b y a p p l y i n g the national industry o c c u p a t i o n a l
m a t r i x t o p r o j e c t e d s t a t e i n d u s t r y e m p l o y m e n t , w e a r e f o r c i n g cl l a n g e s in
t h e r e g i o n ' s o c c u p a t i o n a l m i x t o c o n f o r m t o t h e p a t t e r n of c h a n g e t h a t
o c c u r s n a t i o n a l l y T o a n e x t e n t , of c o u r s e , t h i s is true. B u t t h e r e g i o n ' s
o c c u p a t i o n a l m i x d e p e n d s o n its i n d u s t r y e m p l o y m e n t m i x a s w e l l a s its
i n d u s t r y s t a f f i n g p a t t e r n s , a n d tl ie r e g i o n s i n d u s t r y m i x i n 1 9 8 2 a n d 1 9 9 5
differs substantially from t h e nation's
U n f o r t u n a t e l y , it is n o t p o s s i b l e t o c a l c u l a t e t h e s e p a r a t e i m p a c t s o f
t h e s e t w o d e t e r m i n a n t s of o c c u p a t i o n a l p a t t e r n s f r o m a v a i l a b l e d a t a
H o w e v e r , w e h a v e d e t e r m i n e d t h a t , in 1 9 8 2 , d i f f e r e n c e s i n t h e
regional-national i n d u s t r y mix c a u s e d t h e r e g i o n to have 2 0 0 , 0 0 0 a n d
professional and technical workers, and 1 7 5 , 0 0 0 more craft w o r k e r s
a n d l a b o r e r s t h a n it w o u l d h a v e h a d w i t h t h e s a m e i n d u s t r y m i x a s t h e
n a t i o n . W i t h t h e s a m e i n d u s t r y m i x a s t h e n a t i o n in 1 9 9 5 , t h e r e g i o n
w o u l d have 2 7 0 , 0 0 0 m o r e professional a n d technical w o r k e r s 145,000
more o p e r a t i v e s a n d 2 2 0 , 0 0 0 fewer craft w o r k e r s a n d laborers T h u s
t h e i n d u s t r y - m i x e f f e c t is a n i m p o r t a n t f a c t o r in d e t e r m i n i n g t h e
r e g i o n ' s o c c u p a t i o n a l e m p l o y m e n t p a t t e r n . S e e a l s o n o t e 7.
" T h e c o m p a r i s o n s m a d e h e r e a r e b e t w e e n D R I p r o j e c t i o n s of t h e n a t i o n a l
a n d r e g i o n a l w o r k f o r c e s . If w e c o m p a r e t h e D R I n a t i o n a l p r o j e c t i o n s t o
t h e B L S n a t i o n a l p r o j e c t i o n s s l i g h t d i f f e r e n c e s a r e i n d i c a t e d . D R I is l e s s
o p t i m i s t i c a b o u t c l e r i c a l , o p e r a t i v e , a n d f a r m o c c u p a t i o n s t h a n B L S a n d is
m o r e o p t i m i s t i c a b o u t t h e g r o w t h of m a n a g e r s a n d o f f i c i a l s A s a c o n s e q u e n c e , t h e r e l a t i v e g r o w t l i r a n k i n g s of tl ie t w o p r o j e c t i o n s a r e s o m e w l iat
FEDERAL RESERVE BANK O F ATLANTA
d i f f e r e n t . H o w e v e r , t h e y a r e g e n e r a l l y in a g r e e m e n t a n d t h e i r r a n k i n g s of
a b s o l u t e j o b c h a n g e s are identical.
' I t is i m p o r t a n t t o e m p h a s i z e t h a t o u r o c c u p a t i o n a l p r o j e c t i o n s u t i l i z e a
n a t i o n a l i n d u s t r y - o c c u p a t i o n matrix. If i n d i v i d u a l s t a t e w i d e m a t r i c e s w e r e
u s e d , ti ie r e s u l t i n g o c c u p a t i o n a l c h a n g e s c o u l d v a r y f r o m tl l o s e r e p o r t e d
b e c a u s e of d i f f e r e n c e s in n a t i o n a l a n d s t a t e i n d u s t r y s t a f f i n g p a t t e r n s
F o r o u r p u r p o s e , h o w e v e r , t h e n a t i o n a l m a t r i x is p r e f e r r e d b e c a u s e t h e
B L S a d j u s t e d t h e c e l l s in t h e p r o j e c t e d m a t r i x t o a c c o u n t f o r e x p e c t e d
c h a n g e s in industry staffing p a t t e r n s d u e to t e c h n o l o g i c a l c h a n g e ,
p r o d u c t mix s h i f t s a n d oti ler f a c t o r s tl iat i n f l u e n c e tl ie i n d u s t r y - o c c u p a t i o n
mix. W e e x p e c t t h a t t h e s e c h a n g e s w i l l h e l p m o v e i n d u s t r y s t a f f i n g
patterns in the region t o w a r d national staffing patterns.
" F o r B L S p u b l i c a t i o n s , s e e n o t e 2. A N a t i o n a l O c c u p a t i o n a l I n f o r m a t i o n
C o o r d i n a t i n g C o m m i t t e e ( N O I C C ) w a s c r e a t e d b y C o n g r e s s a s a p a r t of
t h e E d u c a t i o n a l A m e n d m e n t s Act of 1 9 7 6 a n d m o d i f i e d b y a d d i t i o n a l
l e g i s l a t i o n in s u b s e q u e n t y e a r s E a c l i s t a t e is r e q u i r e d t o I iave a n S O I C C
c o m p o s e d of f o u r s t a t e a g e n c i e s . Typically, a s t a t e ' s B o a r d of E d u c a t i o n .
E m p l o y m e n t Security Agency, J o b Training Coordinating Council, and
V o c a t i o n a l S e r v i c e s a g e n c y c o n s t i t u t e its S O I C C G o a l s o f a s t a t e S O I C C
i n c l u d e : d e v e l o p m e n t a n d u t i l z a t i o n of a n o c c u p a t i o n a l i n f o r m a t i o n
s y s t e m ; i m p r o v e d c o m m u n i c a t i o n a n d c o o r d i n a t i o n ; p r o v i s i o n of c a r e e r
information to youth and adults seeking career changes; and training
those w h o use occupational information.
' S e e B H. M c C r a c k i n , " D y n a m i c s of G r o w t h a n d C h a n g e i n t h e H e a l t h C a r e I n d u s t r y , " Economic
Review(Federal
R e s e r v e B a n k of Atlanta), vol.
6 7 ( O c t o b e r 1 9 8 4 ) , pp. 3 2 - 4 2
,0
S e e W. J. K a h l e y , " M i g r a t i o n : C h a n g i n g F a c e s of t h e S o u t h ,
Economic
Review ( F e d e r a l R e s e r v e B a n k of Atlanta), vol. 6 7 ( J u n e 1 9 8 2 ) , pp. 3 2 - 4 2 ,
f o r a d i s c u s s i o n of t h e i m p a c t s of m i g r a t i o n o n t h e r e g i o n .
" T h e e d u c a t i o n a l w e i g h t s w e r e d e r i v e d f r o m t h e d i s c u s s i o n of t h e
e d u c a t i o n a l r e q u i r e m e n t s of different o c c u p a t i o n s in B L S s
Occupational
Outlook
Handbook.
T h e w e i g h t i n g s c a l e is a s f o l l o w s : 1 = p r i m a r y
education, 2 = secondary education, 3 = post-secondary or technical, 4 =
college education, 5 = graduate education.
" T h e i n d e x e s a r e c r u d e a n d o n l y s u g g e s t i v e as a s u m m a r y measure. That
is b e c a u s e w e c a l c u l a t e d t h e i n d e x o n t h e b a s i s of o c c u p a t i o n a l
e d u c a t i o n r e q u i r e m e n t s for t h e 4 0 fastest growing o c c u p a t i o n s for t h e
n a t i o n , a n d t h e t i m e p e r i o d s for tl ie s t a t e a n d n a t i o n a l p r o j e c t i o n s a r e n o t
t h e s a m e . R e s u l t s of t h e i n d e x are, h o w e v e r , c o n s i s t e n t w i t h t h e r e l a t i v e
g r o w t h p a t t e r n s of s e v e r a l o c c u p a t i o n s d i s c u s s e d e a r l i e r
l3
The w e i g h t e d average hourly w a g e w a s calculated by multiplying the
a m o u n t of j o b g r o w t l i e x p e c t e d f o r e a c l i of t h e 4 0 o c c u p a t i o n s s i l o w i n g
t h e largest g r o w t h in the years a h e a d by t h e associated o c c u p a t i o n a l
w a g e r a t e s in F l o r i d a in 1 9 8 2 , s u m m i n g t h e m , a n d t h e n d i v i d i n g b y t h e
total job g r o w t h for t h e s e o c c u p a t i o n s
' " O n e f a c t o r t h a t h e l p s e x p l a i n F l o r i d a ' s e x c e p t i o n is t h e i m p o r t a n c e of
r e t i r e e s t h e r e . In F l o r i d a t h e p e r c a p i t a p e r s o n a l i n c o m e of r e t i r e e s is
higher t h a n for t h e entire state population. Thus, including their aboveaverage state incomes w o u l d raise Florida s e x p e c t e d per capita income
b a s e d o n w o r k e r w a g e r a t e s , b r i n g i n g it c l o s e r t o t h e n a t i o n a l n o r m .
55
Appendix
State O c c u p a t i o n a l E m p l o y m e n t
Projections, 1980-1990
O c c u p a t i o n a l e m p l o y m e n t projections are available
from e a c h Sixth-District state's SOICC for t h e 1 9 8 0 1 9 9 0 period. The table below summarizes the industry
e m p l o y m e n t changes, by major o c c u p a t i o n a l category,
that each state e x p e c t s in this decade. All of the states
also prepare detailed o c c u p a t i o n a l o u t l o o k s that are
available to the public.
Despite several major differences b e t w e e n t h e s e
state projections and the B L S and DRI projections of
o c c u p a t i o n a l employment, the state projections resemble the others in that professional/technical, clerical,
and service o c c u p a t i o n s are e x p e c t e d to provide t h e
most jobs in the c o m i n g years (see Table below).
O n e obvious factor in t h e differences b e t w e e n t h e
state and DRI projections is the time period over w h i c h
t h e y are made. The state projections cover t h e 1980-
1 9 9 0 period c o m p a r e d with DRI's 1 9 8 2 - 1 9 9 5 projection
period. A n o t h e r major difference b e t w e e n t h e t w o is
that the state projections use industry-occupation matrices
based o n actual historical industry staffing patterns for
the individual s t a t e s W e applied t h e B L S p r o j e c t e d
national industry staffing pattern to DRI's industry employment projections for e a c h state to calculate state
o c c u p a t i o n a l d i s t r i b u t i o n s A third major difference bet w e e n the projections is that the e c o n o m i c and technological a s s u m p t i o n s underlying t h e m may differ substantially.
The a c c u r a c y of o c c u p a t i o n a l projections obviously
d e p e n d s u p o n t h e a c c u r a c y of t h e a s s o c i a t e d assumptions of industry employment growth. In this instance
d i f f e r e n c e s in a s s u m p t i o n s r e n d e r t h e s t a t e s ' projections of overall e m p l o y m e n t g r o w t h relatively optimistic c o m p a r e d w i t h D R I ' s Relative to e m p l o y m e n t
E m p l o y m e n t by Major O c c u p a t i o n a l Category
Alabama
1980
1990
O c c u p a t i o n a l Distribution
Professional, technical, and related w o r k e r s
M a n a g e r s officials and proprietors
1980
Florida
1990
16.6
17.3
16.3
16.;
7.3
7.3
9.1
9.
5.6
5.6
7.3
Clerical w o r k e r s
17.4
17.8
21.6
Craft and related w o r k e r s
13.7
13.0
11.3
10.S
Operatives
18.8
18.2
10.9
10.2
Sales w o r k e r s
Laborers, e x c e p t farm
Service w o r k e r s
7.8
7.6
6.5
6.2
12.8
13.7
17.1
18.!
1.6
3.5
1.4
E m p l o y m e n t (in millions)
Percent C h a n g e
6,
22." 1
17
5.£
49
S o u r c e s : S t a t e D e p a r t m e n t of L a b o r a n d t h e F e d e r a l R e s e r v e B a n k of A t l a n t a .
Alabama
Chief, Research and Statistics
D e p a r t m e n t of Industrial Relations
Industrial Relations Building, Room 4 2 7
6 4 9 M o n r o e St., Montgomery, A L 3 6 1 3 0
(205) 8 3 2 - 5 2 6 3
Director, A l a b a m a O c c u p a t i o n a l
Information C o o r d i n a t i n g C o m m i t t e e
First S o u t h e r n T o w e r s Suite 4 0 2
1 0 0 C o m m e r c e Street
Montgomery, AL 3 6 1 3 0
(205) 8 3 2 - 5 7 3 7
56
Florida
Director, Research and Analysis, Division
of Labor and E m p l o y m e n t Security
Coldwell Building, Tallahassee, FL 3 2 3 0 1
(904) 4 8 8 - 1 0 4 8
Director, Florida O c c u p a t i o n a l Information
Coordinating C o m m i t t e e
124 W. J e f f e r s o n Street
Tallahassee, FL 3 2 3 0 1
(904) 2 2 4 - 3 6 6 0
Georgia
Director, Labor Information Systems
D e p a r t m e n t of Labor
2 5 4 W a s h i n g t o n Street, S. W.
A t l a n t a GA 3 0 3 3 4
(404) 6 5 6 - 3 1 7 7
Executive Director, Georgia Occupatior
Information C o o r d i n a t i n g C o m m i t t e e
5 0 1 Pulliam Street, S. W„ Room 3 3 9
Atlanta GA 3 0 3 1 2
(404) 6 5 6 - 3 1 1 7
NOVEMBER 1984, E C O N O M I C REVIEW
''
growth rates in t h e 1 9 7 0 - 1 9 8 0 period, Georgia is the
only state w h o s e projection for this d e c a d e is lower
than the e m p l o y m e n t g r o w t h rate projected by DRI.
Among states, Florida and Louisiana appear to be the
most optimistic: their p r o j e c t e d 1 9 8 0 - 1 9 9 0 employment
growth is closest to that registered in t h e 1970s, a
period w h e n m a t u r i n g baby b o o m e r s p u s h e d employment g r o w t h to a historical peak. (Of course, o n e also
could argue that DRI's projections are m o r e pessimistic
than the states'. In DRI's view, t h e nation's e m p l o y m e n t
growth in this d e c a d e will be closer to its 1 9 7 0 s rate
than will be e m p l o y m e n t g r o w t h in the region.)
C o m p a r e d with DRI's projections, t h o s e broad occupational g r o u p s the s t a t e s collectively expect to g r o w
the fastest are operative, clerical, a n d service j o b s In
f a c t the states project that operative jobs will increase
at nearly twice the a n n u a l rate projected by DRI, w h i l e
Georgia
1990
1980
Louisiana
1990
1980
JI980
1990
they e x p e c t clerical a n d service jobs to grow more t h a n
6 0 percent faster t h a n d o e s DRI. Florida and Louisiana
account for the bulk of the job increases in the fasterg r o w t h scenario p r o j e c t e d by t h e s t a t e s
A l t h o u g h the states e x p e c t operative e m p l o y m e n t to
grow more rapidly t h a n d o e s DRI, operatives' share of
the region's e m p l o y m e n t is s e e n to decline over the
decade. The relatively q u i c k g r o w t h a n t i c i p a t e d by t h e
states for clerical jobs leads to a slight increase in
clerical e m p l o y m e n t s share, while the very rapid service
w o r k e r g r o w t h c a u s e s that category's share to soar. In
effect, regional states e x p e c t to capture a larger share
of the service w o r k e r group, w h i c h is g r o w i n g at an
above-average p a c e nationally.
State s o u r c e s of additional labor market and c a r e e r
information in t h e Southeast are given below.
Tennessee
1990
1980
Southeast
1990
1980
14.7
15.2
15.9
15.8
14.8
15.2
14.4
14.4
15.6
15.8
8.0
8.2
8.0
7.9
9.6
9.7
9.4
9.5
8.6
8.7
6.4
6.1
6.2
6.4
6.2
5.3
5.6
6.4
6.5
6.4
19.7
20.1
18.5
18.4
14.9
15.6
17.4
17.8
19.1
19.6
12.4
11.9
11.6
11.5
13.6
13.5
12.6
12.3
13.3
12.9
15.7
14.7
14.5
13.8
18.1
17.4
18.7
18.0
14.9
13.8
7.0
7.9
7.5
13.9
15.1
16.3
2.2
11.4
10.1
9.4
8.5
8.3
8.5
8.0
7.2
14.1
14.6
14.6
16.2
16.2
16.1
13.1
2.6
1.6
1.0
1.9
2.2
20
2.2
38
.ouisiana
Dhief, Research and Statistics
department of Labor, P. O. Box 4 4 0 9 4
Capital Station, Baton Rouge, LA 7 0 8 0 4
]504) 3 4 2 - 3 1 4 1
)irector, Louisiana State O c c u p a t i o n a l
onformation C o o r d i n a t i n g C o m m i t t e e
000 Science Highway
Jaton Rouge, LA 7 0 8 0 2
.504) 3 4 2 - 5 1 4 9
19
15
Mississippi
Chief, Research and Statistics
Employment Security Commission
P. O. Box 1 699, Jackson, M S 3 9 2 0 5
(601) 9 6 1 - 7 4 2 4
SOICC Director
Vocational Technical Education
P. O. Box 7 7 1
Jackson, M S 3 9 2 0 5
(601) 3 5 9 - 3 4 1 2
14.8
30
Tennessee
Chief, Research a n d Statistics
D e p a r t m e n t of E m p l o y m e n t Security
5 1 9 Cordell Hull Building
4 3 6 Sixth Avenue, N o r t h
Nashville, TN 3 7 2 1 9
(615) 7 4 1 - 2 2 8 4
Director, T e n n e s s e e O c c u p a t i o n a l
Information C o o r d i n a t i n g C o m m i t t e e
5 1 2 Cordell Hull Building
4 3 6 Sixth Avenue, N o r t h
Nashville, TN 3 7 2 1 9
(615) 7 4 1 - 6 4 5 1
57
FEDERAL RESERVE BANK OF ATLANTA
SELECTED BIBLIOGRAPHY:
REPORTS ON EDUCATION
Commission-Sponsored and Other Recent Studies
Adler, M o r t i m e r J. The Paideia Proposal.
N e w York: M a c M i l l a n P u b l i s h i n g
Company, 1982.
Boyer, E r n e s t L High School. N e w York: H a r p e r & R o w , 1 9 8 3 .
B u s i n e s s - H i g h e r E d u c a t i o n F o r u m . America's
Competitive
Challenge:
The
Need tor a National
Response
W a s h i n g t o n . D C., 1 9 8 3
G o o d l a d , J o h n I. A Place Called School: Prospects
tor the Future. St. L o u i s :
McGraw-Hill, 1983.
N a t i o n a l S c i e n c e B o a r d C o m m i s s i o n o n P r e c o l l e g e E d u c a t i o n in M a t h e m a t i c s , S c i e n c e a n d T e c h n o l o g y . Educating
Americans
tor the 21st
Century. W a s h i n g t o n , D. C.: N a t i o n a l S c i e n c e F o u n d a t i o n , 1 9 8 3
Sizer, T h e o d o r e R. Horace's
Compromise:
The Dilemma of the
American
High School. B o s t o n : H o u g h t o n M i f f l i n C o m p a n y , 1 9 8 4
S o u t h e r n R e g i o n a l E d u c a t i o n B o a r d . Meeting the Needs tor Quality in the
South. A t l a n t a : S.R.E.B., 1 9 8 3 .
T a s k F o r c e o n E d u c a t i o n for E c o n o m i c G r o w t h . Action tor
Excellence
Denver, Colorado: Education C o m m i s s i o n of t h e States, 1983.
Task Force o n Federal E l e m e n t a r y a n d S e c o n d a r y Education Policy
Making the Grade
N e w York: T h e T w e n t i e t h C e n t u r y F u n d , 1 9 8 3 .
T h e N a t i o n a l C o m m i s s i o n o n E x c e l l e n c e in E d u c a t i o n . A Nation at Risk: The
Imperative
tor Education
Retorm. W a s h i n g t o n , D C. U. S. G o v e r n m e n t
Printing Office, 1983.
Summaries, Analyses, and
Responses
E d u c a t i o n C o m m i s s i o n of t h e S t a t e s A Summary
ot Major Reports
on
Education
Denver, 1983.
G r i e s e m e r . J. L y n n a n d C o r n e l i u s B u t l e r Education
Under Study:
An
Analysis
ot Recent
Ma/or
Reports
on Education
S e c o n d Edition.
Massachusetts: Northeast Regional Exchange, November 1983.
Peterson, Paul E " D i d t h e E d u c a t i o n C o m m i s s i o n s S a y A n y t h i n g ? "
Brookings
Review, vol. 2 ( W i n t e r 1 9 8 3 ) , pp. 3 - 1 1
S o u t h e r n G r o w t h P o l i c i e s B o a r d a n d S o u t h e a s t e r n R e g i o n a l C o u n c i l for
E d u c a t i o n a l I m p r o v e m e n t Discussion
ot "A Nation at Risk. " R e s e a r c h
Triangle Park North Carolina 1983.
U. S. D e p a r t m e n t of E d u c a t i o n . The Nation Responds
Recent Ettorts to
Improve
Education.
W a s h i n g t o n , D C.: U S G o v e r n m e n t P r i n t i n g
Office, M a y 1 9 8 4
58 N O V E M B E R 1984, E C O N O M I C REVIEW
i
FINANCE
i r i f i f
$ millions
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
&
T i r a e
Commercial Bank Deposits
Demand
NOW
Savings
Time
Credit Union Deposits
Share Drafts
Savings 3c Time
AUG
1984
JUL
1984
AUG
1983
1,380,285 1,278,239
305,958 314,145 302,296
90,674 88,727 80,677
355,986 358,985 344,083
670,766 659,099 584,147
53,366 52,992 61,029
5,762
5,526
5,448
47,445 47^262 49,885
158/738 157,576 144,606
35,892 36,320 35,353
11,624 11,417 10,325
40,855 40,802 38,025
74,127 73,113 64,261
6,203
6,202
5,859
559
541
480
5,507
5,493
4,982
16,507 16,455 15,162
3,759
3,712
3,687
1,035
1,021
915
3,297
3,322
3,152
8,939
8,851
7,898
971
974
904
99
97
84
851
843
775
55,909 55,623 50,344
12,610 12,792 12,449
4,794
4,724
4,305
19,210 19,195 17,278
20,511 20,161 17,243
2,729
2,721
2,547
279
272
240
2,307
2,295
1,997
24,372 24,103 20,798
7,190
7,356
6,779
1,537
1,506
1,366
5,653
5,499
4,684
11,080 10,993
9,018
1,305
1,303
1,329
88
82
70
1,192
L217
1,213
26,134 25,881 24,872
5,837
5,633
5,689
1,367
1,527
1,502
5,533
5,357
5,511
13,946 13,687 12,817
213
196
211
24
23
23
209
207
191
12,195 12,147 11,503
2,361
2,343
2,388
849
837
793
2,355
2,402
2,450
6,947
6,880
6,152
*
*
*
•
*
»
ANN.
%
CHG.
9
1
12
+ 3
+ 15
- 13
+ 6
- 5
+ 10
+ 2
+ 13
+ 7
+ 15
+ 6
+ 16
+ 11
+ 9
+ 2
+ 13
+ 5
+ 13
+ 7
+ 18
+ 10
+
+
+
AUG
1984
Savings 3c Loans**
Total Deposits
NOW
Savings
Time
Mortgages Outstanding
Mortgage Commitments
Savings 3c Loans
Total Deposits
NOW
Savings
Time
Mortgages Outstanding
Mortgage Commitments
Savings 3c Loans**
Total Deposits
NOW
Savings
Time
Mortgages Outstanding
Mortgage Commitments
Savings 3c Loans**
Total Deposits
NOW
Savings
Time
Mortgages Outstanding
Mortgage Commitments
Savings 3c Loans
Total Deposits
NOW
Savings
Time
Mortgages Outstanding
Mortgage Commitments
JUL
1984
AUG
1983
682,453 674,283 603,973
20,582 19,726 17,634
166,929 170,786 186,131
497,490 485,829 403,469
JUL
JUN
JUL
572,336 563,375 494,930
47,383 47,754 33,099
90,159
3,257
21,022
66,317
JUL
71,799
5,544
89,229
3,084
21,307
65,182
JUN
70,986
5,424
N.A.
N.A.
N.A.
N.A.
JUL
65,600
4,700
ANN.
%
CHG.
+
+
+
+
+
13
17
10
23
16
43
+ 9
+ 18
Demand
5,517
5,436
5,080 + 9
NOW
169
158
138 + 22
Savings
880
877
886 - 1
Time
4,506
4,441
4,119 + 9
Credit Union Deposits
JUN
JUL
JUL
Share Drafts
4,190
4,165
3,669 + 14
Savings 3c Time
288
222
216 + 33
+
Commercial Bank Deposits
11
+ 1
Demand
57,948 57,272 54,540 + 6
+ 11
NOW
2,283
2,155
2,076 + 10
+ 11
Savings
14,460 14,687 16,728 - 14
+ 19
Time
41,282 40,425 36,179 + 14
+ 7
Credit Union Deposits
JUL
JUN
JUL
+ 16
Share Drafts
42,426 41,759 38,991 + 9
+ 16
Savings 3c Time
3,560
3,386
3.240 + 10
+ 17
"Commercial Bank Deposits
+ 6
Demand
8,064
8,013
7,751 + 4
+ 13
NOW
283
266
216 + 31
+ 21
Savings
1,794
1,787
1,808 - 1
+ 23
Time
6,117
6,075
5,885 + 4
2
Credit Union Deposits
JUL
JUN
JUL
+ 26
Share Drafts
8,908
8,798
8,075 + 10
+
2
553
489
Savings 3c Time
472 + 17
+ 5
Savings 3c Loans**
Commercial Bank Deposits
- 3
Total Deposits
Demand
9,605
9,539
8,351 + 15
+ 12
NOW
NOW
244
236
173 + 41
+ 3
Savings
Savings
2,218
2,275
2,218 - 8
+ 9
Time
Time
7,273
7,150
5,865 + 24
+ 9
Credit Union Deposits
JUL
JUN
JUL
+ 4
Mortgages Outstanding
Share Drafts
8,857
8,766
7,143 + 24
+
9
Mortgage Commitments
Savings 3c Time
600
724
511 + 17
+ 6
Savings 3c Loans
"Commercial Bank Deposits
- 1
Total Deposits
Demand
2,029
2,031
N.A.
+ 7
NOW
NOW
81
78
N.A.
4
Savings
Savings
388
388
N.A.
+ 13
Time
Time
1,590
1,596
N.A.
Credit Union Deposits
JUL
JUN
JUL
Share Drafts
Mortgages Outstanding
2,004
2,059
2,003
+ 0
*
•
*
Mortgage Commitments
Savings 3c Time
190
223
46 +313
"Commercial Bank Deposits
23,621 23,367 21,927 + 8
Savings 3c Loans**
Demand
4,339
4,428
4,213 + 3
Total Deposits
6,996
6,938
N.A.
1,827
NOW
1,882
1,579 + 19
NOW
197
191
N.A.
4,829
Savings
4,851
5,104 - 5
Savings
1,282
1,293
N.A.
+
14
Time
12,704 12,541 11,133
Time
5,549
5,495
N.A.
985
993
883 + 12
Credit Union Deposits
JUL
JUN
JUL
67
Share Drafts
69
63 + 10
Mortgages Outstanding
5,414
5,439
5,719 - 5
923
935
827 + 12
Savings 3c Time
Mortgage Commitments
352
380
215 + 64
Notes: All deposit data are extracted from the Federal Reserve Report of Transaction Accounts, other Deposits and Vault Cash (FR2900),
and are reported for the average of the week ending the 1st Wednesday of the month. This data, reported by institutions with
over $15 million in deposits as of December 31, 1979, represents 95% of deposits in the six state area. The major differences between
this report and the "call report" are size, the treatment of interbank deposits, and the treatment of float. The data generated from
the Report of Transaction Accounts is for banks over $15 million in deposits as of December 31, 1979. The total deposit data generated
from the Report of Transaction Accounts eliminates interbank deposits by reporting the net of deposits "due to" and "due from" other
depository institutions. The Report of Transaction Accounts subtracts cash items in process of collection from demand deposits, while
the call report does not. Savings and loan mortgage data are from the Federal Home Loan Bank Board Selected Balance Sheet Data.
The Southeast data represent the total of the six states. Subcategories were chosen on a selective basis and do not add to total.
* =FRASER
fewer than four institutions reporting.
Digitized for
** = S3cL deposits subject to revisions due to reporting changes.
http://fraser.stlouisfed.org/
N.A. = not comparable with previous data at this time.
59
Federal Reserve Bank of St. Louis
CONSTRUCTION
AUG
1984
JUL
1984
AUG
1983
ANN
%
CHG
$ Mil.
59,147
8,013
14,315
8,945
1,897
867
58,587
7,730
14,014
8,883
1,865
891
47,986
5,108
11,929
6,179
1,861
882
+
+
+
+
+
-
23
57
20
45
2
2
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
Mil.
9,060
890
2,067
1,781
450
114
8,972
897
2,015
1,741
474
116
7,454
645
1,774
1,129
443
168
+
+
+
+
+
22
38
17
58
2
32
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
Nonresidential Building Permits - $ Mil
755
Total Nonresidential
185
Industrial Bldgs.
97
Offices
127
Stores
16
Hospitals
5
Schools
736
184
80
111
13
6
425
29
55
78
29
9
+ 78
+ 538
+ 76
+ 63
- 45
- 44
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
Mil.
4,449
428
987
1,012
186
46
4,362
428
933
995
218
45
3,743
337
838
621
287
52
+
+
+
+
19
27
18
63
35
12
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
$ Mil.
1,623
151
525
245
'62
14
1,608
168
517
236
62
17
1,186
163
342
124
25
27
+ 37
- 7
+ 54
+ 98
+ 148
- 48
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
1,178
30
283
208
154
41
1,184
29
307
204
148
41
1,162
54
402
123
54
63
+ 1
- 44
- 30
+ 69
+ 185
- 35
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
Nonresidential Building Permits - $ Mil
233
Total Nonresidential
15
Industrial Bldgs.
28
Offices
49
Stores
12
Hospitals
Schools
2
246
14
27
51
13
1
186
6
16
36
18
8
+ 25
+ 150
+ 75
+ 36
- 33
- 75
Residential Building Permits
Value - $ Mil.
Residential Permits - Thous.
Single-family units
Multi-family units
Total Building Permits
Value - $ Mil.
JUL
1984
AUG
1984
ANN
%
CHG
AUG
1983
12-month Cumulative Rate
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Nonresidential Building Permits Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Nonresidential Building Permits Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Nonresidential Building Permits
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
Total Nonresidential
Industrial Bldgs.
Offices
Stores
Hospitals
Schools
-
-
-
74,573
74,834
912.5
760.0
920.1
764.1
+ 11
+ 21
133,720
133,421
108,864
+ 23
14,145
188.7
179.3
23,204
14,195
190.7
180.6
23,166
11,026
+
28
169.7
136.3
+
+
11
32
18,406
+
26
472
478
386
+ 22
8.1
8.2
8.2
8.2
7.7
7.0
+
1,227
1,214
812
+ 51
8,242
8,300
6,334
+
+
5
17
30
103.7
98.5
104.4
99.7
89.0
76.2
+ 17
+ 29
12,692
12,662
10,077
+ 26
2,769
42.9
28.7
2,733
43.4
27.7
2,172
+ 27
39.0
22.3
+
+
10
29
4,393
4,341
3,358
+
31
1,151
1,170
976
+ 18
15.0
17.0
15.5
17.5
16.6
13.7
- 10
+ 24
2,328
2,353
2,138
+ 9
396
383
260
+ 52
5.6
6.5
5.5
6.1
4.5
3.0
+ 24
+ 117
628
629
445
+ 41
Residential Building Permits
1,115
1,131
Value - $ Mil.
822
836
752 + 9
Total Nonresidential
Residential Permits - Thous.
81
74
56 + 45
Industrial Bldgs.
13.4
13.7
Single-family units
147
151
121 + 21
Offices
20.4
21.4
147 - 5
Multi-family units
140
144
Stores
Total
Building
Permits
20
20
30
33
Hospitals
1,936
1,967
Value - $ Mil.
6
6
9 - 33
Schools
NOTES:
Data supplied by the U. S. Bureau of the Census, Housing Units Authorized By Building Permits and Public Contracts, C-40.
Nonresidential data excludes the cost of construction for publicly owned buildings. The southeast data represent the total of
the six states. The annual percent change calculation is based on the most recent month over prior year. Publication of F.
Dodge construction contracts has been discontinued.
http://fraser.stlouisfed.org/
60
Federal Reserve Bank of St. Louis
+ 22
60,878
825.7
630.2
898
+ 24
12.9
14.1
+
+
1,576
4
4b
+ 23
W.
NOVEMBER 1984, E C O N O M I C REVIEW
GENERAL
LATEST CURR. PREV.
DATA PERIOD PERIOD
Personal Income
($bil. - SAAR)
1Q
Taxable Sales - $bil.
Plane Pass. Arr. 000's
Petroleum Prod, (thous.) SEP
Consumer Price Index
1967=100
SEP
Kilowatt Hours - mils.
YEAR
AGO
ANN.
%
CHG.
2,910.0
N.A.
N.A.
8,819.7
2,824.2
N.A.
N.A.
8,781.2
2,647.2
N.A.
N.A.
8,680.1
+ 2
314.5
202.1
313.0
189.1
301.8
193.6
+4
+ 4
350.6
N.A.
4,730.7
1,480.0
341.9
N.A.
4,669.3
1,482.5
318.8
N.A.
4,310.1
1,400.0
+10
+10
+ 6
N.A.
29.5
N.A.
31.2
N.A.
32.4
- 9
38.0
N.A.
120.0
52.0
N.A.
4.6
37.7
N.A.
122.8
52.0
N.A.
4.2
35.2
N.A.
116.6
52.0
N.A.
4.0
+ 3
0
132.4
81.5
2,352.9
39.0
SEPT
167.9
9.5
128.8
80.7
2,198.7
40.0
118.7
71.4
2,083.3
57.0
+12
+14
+13
-32
167.0
8.6
162.9
9.3
+ 3
+ 2
62.8
N.A.
1,710.5
N.A.
61.0
N.A.
1,788.8
N.A.
56.7
N.A.
1,641.8
N.A.
+11
JUL
315.9
5.5
314.0
5.2
303.9
5.5
Personal Income
1Q
($bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. Arr. 000's JUL
Petroleum Prod, (thous.) SEP
Consumer Price Index
1967 = 100
Kilowatt Hours - mils.
48.5
N.A.
341.1
1,299.0
N.A.
5.8
47.3
N.A.
345.5
1,300.0
N.A.
5.2
45.6
N.A.
276.1
1,207.0
N.A.
5.3
Personal Income
($bil. - SAAR)
1Q
Taxable Sales - $ bil.
Plane Pass. Arr. 000's JUL
Petroleum Prod, (thous.) SEP
Consumer Price Index
1967 = 100
Kilowatt Hours - mils.
22.3
N.A.
36.9
90.0
N.A.
2.5
21.8
N.A.
37.3
90.5
N.A.
2.2
20.2
N.A.
37.5
84.0
N.A.
2.3
1Q
JUL
SEP
46.6
N.A.
169.3
N.A.
45.3
N.A.
176.2
N.A.
42.4
N.A.
154.8
N.A.
JUL
N.A.
6.2
N.A.
5.8
N.A.
6.0
Personal Income
($bil. - SAAR)
1Q
Taxable Sales - $ bil.
Plane Pass. Arr. 000's JUL
Petroleum Prod, (thous.) SEP
Consumer Price Index
1967=100
Kilowatt Hours - mils.
Personal Income
($bil. - SAAR)
1Q
Taxable Sales - $ bil.
Plane Pass. Arr. 000's JUL
Petroleum Prod, (thous.) SEP
Consumer Price Index
1967=100
Kilowatt Hours - mils.
Personal Income
($bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. Arr. 000's
Petroleum Prod, (thous.)
Consumer Price Index Nov. 1977 = 100
Kilowatt Hours - mils.
1Q
SEP
JUL
SEP
Miami
Personal Income
($bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. Arr. 000's
Petroleum Prod, (thous.)
Consumer Price Index 1967 = 100
Kilowatt Hours - mils.
1Q
JUL
Atlanta
Personal Income
($bil. - SAAR)
Taxable Sales - $ bil.
Plane Pass. Arr. 000's
Petroleum Prod, (thous.)
Consumer Price Index
1967 = 100
Kilowatt Hours - mils.
JUL
AUG
AUG
JUN
SEPT
+10
+ 8
+15
+ 4
AUG
+ 6
+24
+ 8
+ 9
+10
- 2
+ 7
+ 9
+10
+ 9
+ 3
SEPT
1984
SEPT
1983
AUG
1984
ANN.
%
CHG.
Agriculture
Prices Rec'd by Farmers
139
Index (1977=100)
Broiler Placements (thous.) 80,932
57.80
Calf Prices ($ per cwt.)
32.1
Broiler Prices (t per lb.)
Soybean Prices ($ per bu.)
6.03
Broiler Feed Cost ($ per ton) 221
143
84,353
59.10
30.6
6.50
225
136
77,027
56.10
33.8
8.28
-27
Agriculture
Prices Rec'd by Farmers
138
Index (1977=100)
Broiler Placements (thous.) 31,357
54.19
Calf Prices ($ per cwt.)
31.7
Broiler Prices (<t per lb.)
Soybean Prices ($ per bu.)
6.16
Broiler Feed Cost ($ per ton) 220
143
31,059
56.10
28.9
6.59
224
122
29,386
52.35
31.0
8.43
229
+13
+ 7
+ 4
+ 2
-27
- 4
Agriculture
Farm Cash Receipts - $ mil.
982
(Dates: JUN, JUN)
Broiler Placements (thous.) 10,656
54.50
Calf Prices ($ per cwt.)
31.0
Broiler Prices ($ per lb.)
6.25
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton) 210
10,720
55.00
28.0
6.53
220
936
10,011
52.20
29.5
8.45
240
+ 5
+ 6
+4
+ 5
-26
-13
2,786
1,866
59.00
31.0
6.25
240
1,852
59.60
29.0
6.53
245
2,891
1,882
55.90
30.0
8.45
250
- 4
Agriculture
Farm Cash Receipts - $ mil.
1,379
(Dates: JUN, JUN)
Broiler Placements (thous.) 12,576
49.70
Calf Prices ($ per cwt.)
31.0
Broiler Prices (« per lb.)
Soybean Prices ($ per bu.)
6.25
Broiler Feed C o s t J $ per ton) 255
13,130
51.50
28.0
6.55
245
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUN, JUN)
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (« per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
240
-
-
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUN, JUN)
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices (* per lb J
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ Der ton)
576
N.A.
56.00
33.0
6.09
260
N.A.
56.30
31.0
6.79
265
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUN, JUN)
Broiler Placements (thousJ
Calf Prices ($ per cwt.)
Broiler Prices (« per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
832
6,259
52.80
34.0
6.07
159
6,358
57.30
31.5
6.47
178
Agriculture
Farm Cash Receipts - $ mil.
(Dates: JUN, JUN)
Broiler Placements (thous.)
Calf Prices ($ per cwt.)
Broiler Prices ($ per lb.)
Soybean Prices ($ per bu.)
Broiler Feed Cost ($ per ton)
754
N.A.
52.80
30.5
6.24
200
N.A.
55.30
29.5
6.59
200
-
-
-
+ 2
+ 5
+ 3
-
5
+
1
6
+ 3
-26
- 4
1,297
11,719
48.60
30.5
7.82
220
+ 6
+ 7
+ 2
+ 2
-20
+16
568
N.A.
54.40
34.0
8.22
280
+1
923
6,024
52.60
33.5
8.64
210
-10
+4
+ 0
+ 1
-30
-24
800
N.A.
50.30
32.0
8.74
215
+ 5
- 5
-29
- 7
+ 3
- 3
-26
- 7
- 6
Personal Income data supplied by U. S. Department of Commerce. Taxable Sales are reported as a 12-month cumulative total. Plane
Pnsseneer Arrivals are collected from 26 airports. Petroleum Production data supplied by U. S. Bureau of Mines. Consumer Pnce
index data supplied by Bureau of Labor Statistics. Agriculture data supplied by U. S. Department of Agriculture. Farm Cash
Receipts data are reported as cumulative for the calendar year through the month shown. Broiler placements are an average weekly
rate? The Southeast data represent the total of the six states. N.A. = not available. The annual percent change calculation «s based
on most recent data over prior year. R = revised.
http://fraser.stlouisfed.org/
FEDERAL RESERVE BANK OF ATLANTA
Federal Reserve Bank of St. Louis
61
EMPLOYMENT
ANN.
AUG
1984
JUL
1984
AUG
1983
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
115,076
106,694
8,382
7.5
N.A.
N.A.
40.3
368
116,198
107,484
8,714
7.5
N.A.
N.A.
40.3
370
113,578
103,167
10,411
9.5
N.A.
N.A.
40.2
353
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
15,033
13,855
1,179
8.1
N.A.
N.A.
41.0
329
15,037
13,788
1,249
8.1
N.A.
N.A.
40.7
326
14,781
13,354
1,428
9.7
N.A.
N.A.
40.6
310
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfe. Avg. Wklv. Earn. - $
1,785
1,590
195
11.2
N.A.
N.A.
41.2
332
5,166
4,846
320
6.3
N.A.
N.A.
40.7
313
1,797
1,585
213
11.2
N.A.
N.A.
40.8
329
5,162
4,811
351
7.0
N.A.
N.A.
40.9
313
1,771
1,546
225
12.9
N.A.
N.A.
40.9
310
5,084
4,666
418
8.4
N.A.
N.A.
40.4
295
+ 1
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
I g . Avg.
A v g . Wkly. Earn. - $
Mfg.
i v i l i a n Labor
Le
Civilian
Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
Civilian Labor Force - thous.
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
« Le Force - thous.
Civilian
i v i l i a n Labor
Total Employed - thous.
Total Unemployed - thous.
Unemployment Rate - % SA
Insured Unemployment - thous.
Insured Unempl. Rate - %
Mfg. Avg. Wkly. Hours
Mfg. Avg. Wkly. Earn. - $
2,821
2,655
166
6.1
N.A.
NA.
41.3
313
1,964
1,782
183
9.4
N.A.
N.A.
41.5
420
2,819
2,638
181
6.3
N.A.
N.A.
40.8
308
1,955
1,771
184
9.1
N.A.
N.A.
41.4
420
2,732
2,535
198
7.4
N.A.
N.A.
41.2
290
1,928
1,703
225
+ 3
+ 5
1,085
964
121
11.3
N.A.
NA.
40.7
281
1,080
962
118
10.3
N.A.
N.A.
39.9
274
2,224
1,066
936
130
12.4
N.A.
N.A.
40.5
270
+ 2
2,200
+ 1
Notes:
2,212
2,018
194
9.4
N.A.
NA.
40.7
314
2,021
202
8.6
N.A.
N.A.
40.5
315
11.8
N.A.
N.A.
39.5
389
1,968
232
11.2
N.A.
N.A.
40.8
307
AUG
1984
%
CHG.
+ 1
+ 3
-19
+ 0
+ 4
+ 4
-17
+ 3
-13
+ 2
+ 4
-23
-16
+ 0
+ 5
-19
+ 5
+ 3
- 7
+ 3
-16
- 0
+ 2
JUL
1984
ANN.
%
CHG.
AUG
1983
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., & Real Est.
Trans. Com. 6c Pub. Util.
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., <3c Real Est.
Trans. Com. <5c Pub. Util.
94,486
19,862
4,671
21,998
15,079
20,877
5,773
5,200
12,040
2,285
749
2,955
2,077
2,437
706
705
94,236
19,658
4,615
21,901
15,218
20,872
5,758
5,193
89,842
18,715
4,269
21,035
14,964
19,943
5,574
4,382
11,491
2,187
677
2,797
2,054
2,336
672
644
+ 5
+6
+9
+ 5
+ 1
+ 5
+4
+19
+ 5
+4
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., & Real Est.
Trans. Com. óc Pub. Util.
lonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., 3c Real Est.
Trans. Com. & Pub. Util.
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., & Real Est.
Trans. Com. & Pub. Util.
Nonfarm
Jonlarm EmploymentEr
thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., 6c Real Est.
Trans. Com. <5c Pub. Util.
1,353
351
67
285
282
219
62
72
4,084
499
311
1,105
609
1,009
311
230
2,427
541
142
603
417
431
130
155
1,569
183
112
375
311
309
84
117
1,348
345
67
282
288
219
62
72
4,079
495
311
1,105
612
1,007
309
230
2,408
532
140
599
417
428
129
154
1,573
+2
+ 2
+6
+4
- 1
- 0
+3
+11
+7
+7
+14
+6
+4
+ 5
+8
+11
+7
+ 5
+21
+9
- 1
+7
+6
+11
114
377
312
340
84
1,324
345
63
273
285
220
60
65
3,829
465
272
1,039
584
961
289
208
2,275
513
117
553
422
401
123
140
1,553
179
117
372
308
304
84
116
112
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., <5c Real Est.
Trans. Com. <5c Pub. Util.
Nonfarm Employment- thous.
Manufacturing
Construction
Trade
Government
Services
Fin., Ins., <5c Real Est.
Trans. Com. <5c Pub. Util.
793
211
34
171
171
124
35
39
1,814
500
83
416
287
345
84
92
795
210
33
170
173
126
35
39
1,818
495
84
414
293
345
85
93
782
208
35
166
171
122
34
37
1,728
477
73
394
284
328
82
82
+ 1
+1
-3
+ 3
0
+2
+3
+5
+ 5
+5
+14
+6
+ 1
+5
+2
+12
12,021
2,259
749
2,947
2,095
2,435
704
704
182
+ 11
+ 6
+ 1
+4
+ 5
+ 9
+ 2
- 4
+ 1
+ 1
+ 2
0
+4
All labor force data are from Bureau of Labor Statistics reports supplied by state agencies.
Only the unemployment rate data are seasonally adjusted.
The Southeast data represent the total of the six states.
The annual percent change calculation is based on the most recent data over prior year.
http://fraser.stlouisfed.org/
62
Federal Reserve Bank of St. Louis
N O V E M B E R 1984, E C O N O M I C REVIEW
Bulk Rate
U.S. Postage
PAID
Atlanta, Ga.
Permit 292
@FedFRASER