It is surely at the heart of a knowledge-based economy that is not set up to respond swiftly to changes in business demands for new and old skills. This is especially true when these changes are not marginal in nature.

Even when a specific skill set is in demand, and a change in curriculum occurs to meet this, there is significant lag time involved in producing a pipeline of graduates who have acquired these skills.

Separately, reflect for a moment on the fact that it is only very recently that the U.S. Department of Education made detailed earnings information for college graduates publicly available. Until this change, prospective students could not compare the cost of attending a college with the benefits of doing so.

Where there is a lack of information regarding the return on this investment that colleges offer, there is a weakened connection with how we make sure workplaces get the skills they need. It is critical that this changes in the future.

As was mentioned by Stephen, I am indeed half Aussie. My father, Leslie Fisher, was a Queenslander. In 1910, at the age of five years and two months, he was arrested for begging on the streets in Maryborough and sentenced in the court there to seven years in the Westbrook Reformatory.[1]

According to an article earlier this year in Toowoomba’s daily, The Chronicle, Westbrook was “the most feared reformatory in Australia.” The guards there meted out “vicious beatings.”[2] Thankfully, my father’s sentence was commuted after one month; “the little boy … is of tender years and not a fit subject,” wrote the Police Magistrate. My father was released to an orphanage, then shuttled among a series of harsh foster homes before making his way back to the streets and a remarkable career that took him from Toowoomba to Brisbane to South Africa, Mexico, China and the United States and, ultimately, to … the great republic of Texas!

My dad lived to the ripe old age of 90. He was a tough old bird. And Aussie to the bone. For most of his life, he smoked three packs of cigarettes a day and drank a great deal of Scotch. He admitted to this one evening and a friend said, “Hold on. My father was a smoker and also drank a lot of Scotch. But he died at 60. What gives?” To which my father replied, “Well, he just didn’t do it long enough.”[3]

The Westbrook prison is no more; indeed, the property on which it stood was sold in May of this year. But the courthouse in Maryborough where my father was sentenced still stands. On Wednesday, I will visit it to remind myself of where I come from. And to thank my lucky stars that I am the son of a gutsy Australian who managed in one generation to secure his family’s rise from homeless to Harvard, from begging for food to riches, from being a ward of the state to becoming a principal in the policymaking of the most important central bank in the world.

If we're going to address wages and in particular inequality in wages, we've got to do that, I would say on the supply side; that is, by addressing the skills gaps that exist among different groups of people in our society.

The United States has nearly the highest spending per pupil in the world.  Yet there is a great deal of dissatisfaction with the results, particularly in the dismal outcomes generated by many of our urban schools.  We must spend the money more wisely and achieve a substantially greater return on our investment.

Education is essential for citizens to participate in a responsive democracy, and it has meant growth and progress for Americans. Historically, gains in educational achievement have gone hand-in-hand with the adoption of new technologies and improvements in our standard of living. And in our increasingly complex society, education is essential to making wise saving, investment, and occupational decisions that determine our life's financial prospects and economic well being.

As monetary policy makers, we are constantly tracking productivity growth because it is a key determinant of our standard of living. And an important factor driving productivity growth is worker quality, which includes the education and the experience of the workforce.

The gaps in wages and unemployment rates between the skilled and less-skilled workers in the U.S. economy have widened dramatically since the late 1970s. Currently, unemployment is only about 2.5 percent among those with a college degree, but it's over 8 percent for high school dropouts. Furthermore, research shows that each additional year of education tends to raise incomes by about 10 percent. And these returns are not merely private. Researchers are finding that education raises the productivity of other workers, lowers crime, and raises public involvement in the policy process. Some believe that these social benefits alone may exceed the 10 percent per year private return.

We know some of the ways in which we can build a higher quality teacher workforce. It will require a system that starts with more selective hiring, includes a lengthy apprenticeship with comprehensive evaluation, and follows up with regular, rigorous personnel evaluations with pay-for-performance rewards. In addition, we should have higher pay for teachers in subject areas where it is more difficult to find qualified instructors, such as math and science.

As both an employer and an economist, it is clear to me that the relationship between education, productivity, and economic growth has never been more closely linked. While states and regions once prospered based on an abundance of physical capital and natural resources, today the quality of a region's human capital is paramount.

Universities have been unable to maintain the implicit "social compact" that once defined the relationship between universities and the public. This compact was based on a belief that education was largely a public good and, as such, government support was warranted. This notion has eroded over time. Today, many argue that higher education is a private good whose benefits primarily accrue to the student who is able to use his or her higher education to achieve a more satisfying quality of life and often significantly higher wages...Therefore, it should be primarily financed by the individual. I believe for universities to flourish, they need to revisit this "social compact" and make a clearer case for the public good content of education. In order to do this, universities will need to be more transparent in their operations so that the public can have a better sense of what the value of the institution is to society. 

In a global economy that grows more competitive every day, the words "education" and "opportunity" are becoming increasingly synonymous. For the individual, a high-quality education is a decisive stepping-stone to increased earning power. For the region, creating a civic culture that supports education is the most promising pathway to creating a base for innovation.

The emergence of new players in the world economy has increased the competitive pressures facing US firms--both exporters and those that compete with imports.  To address this issue, we must insure that we remain competitive in those sectors in which we have a comparative advantage.  I would suggest that those sectors involve capital-intensive technologies and skilled labor.  In this regard, a strong general and advanced education system is important.  In addition, incentives for R&D (but not industrial policy) may also play an important role in enhancing our comparitive advantage.

We are getting a bivariate income distribution...For a democratic society, this is not healthful, to say the least...I believe this is an education problem that requires us to get the balance of skills coming out of our schools to match the skills that our physical facilities require.

[A] critical long-run economic challenge facing the United States is the need to ensure that our workforce is equipped with the requisite skills to compete effectively in an environment of rapid technological progress and global competition...Demand for the least-skilled workers in the United States and other developed countries is diminishing, placing downward pressure on their wages.  These workers will need to acquire the skills required to compete effectively for the new jobs that our economy will create.

[We strengthen international exports in manufacturing] by essentially being competitive in that we develop skills that create goods and services which customers in the rest of the world want.