Current State

The current state of America’s economy is truly unique. Technological innovation is booming and wealth is increasing. Innovation is driving transformation across businesses and industries by increasing output, driving globalization, and decreasing many of the costs associated with production and management. However, the economic benefits being realized are not evenly distributed (Executive Office of the President, 2016; Warschauer, 2003). In fact, the United States is experiencing unprecedented levels of income and wealth inequality, and these disparities are manifesting at all levels of American society.

History of Economic Change in the U.S.

Three Industrial Revolutions

Warschauer, 2003; Araya, 2014 ; Cutter, Litan, & Stangler, 2016

First Industrial Revolution

Beginning: Late 18th Century
Key Technologies: printing press, steam engine, machinery
Archetypical Workplace: workshop
Organization: master-apprentice-serf

The United States’ early economy was largely an agrarian one. The First Industrial Revolution had two defining features: the shift from hand tools to machines and innovations in transportation. On one hand, machines increased output and on the other, new modes of transportation made it easier to transport these goods (Warschauer, 2003).

Second Industrial Revolution

Beginning: Late 19th Century
Key Technologies: electricity, internal combustion, telegraph, telephone
Archetypical Workplace: factory
Organization: large vertical hierarchies

During the Second Industrial Revolution, the advent of large-scale factory production dramatically increased the productivity of low-skilled workers compared to their higher-skilled counterparts. This unskill-biased technical change caused many high-skilled worker to lose their jobs. However, the rise in employment levels of low-skilled workers increased average living standards and decreased income inequality (Executive Office of the President, 2016; Warschauer, 2003).

Third Industrial Revolution

Beginning: Mid-to-Late 20th Century
Key Technologies: transistor, personal computers, telecommunications, internet
Archetypical Workplace: office
Organization: horizontal networks

The current industrial revolution marks a new era of global capitalism and is often referred to as postindustrialism or informationalism (Warschauer, 2003). Unlike the previous revolution, new technologies have raised the productivity of higher-skilled workers compared to lower-skilled workers (skill-biased technical change). In many industries, automation has replaced jobs that are routine and predictable. As the existence of these jobs declines and the demand for more skilled workers increases, inequality continues to rise (Executive Office of the President, 2016).

If this trend continues, our nation may see an unprecedented level of economic inequality. In fact, scholars like Brynjolfsson and McAfee (as cited in Executive Office of the President, 2016) predict a new economic shift. A more extreme example of skill-biased technological change, superstar-biased technological change would cause an extremely small percentage of the population to reap most of the new economy’s benefits.

Pitfalls of U.S. Economic & Political Policy

Our economy’s current situation was a long time coming and reflects many of the disparities entrenched in American society. One of the most crucial manifestations is in the ability of citizens to accrue human capital--the knowledge and skills that enable individuals to meet the demands of adulthood (Braun, 2016; Cutter, Litan, & Stangler, 2016; O’Day & Smith, 2016). Human capital varies greatly with income, and children with more capital often have access to a larger number of opportunities and resources. College degrees are an example of human capital, as they improve long-term opportunities for job success (Lerman, 2016). They also represent one of the most important possessions in today’s skill-biased economy, so why do most Americans lack college degrees?

Throughout history, the benefits of education tend to remain consistent with the Theory of Human Capital Investment, which postulates that increases in labor returns associated with a skill, credential, or degree should lead to higher pursuit of--and investments in--that skill. This was observed with the United States’ high school movement until the wage returns associated with having a high school diploma disappeared. Similarly, college degrees are associated with higher returns in today’s economy. However, this return has not diminished since the late 20th century onset of the economic push for workers with higher education experience. Instead, the associated premiums have stabilized (Araya, 2014; Holzer, 2016).

This stabilization has occurred because the American workforce has not seen a large enough increase in the number of college educated workers (Holzer, 2016). However, when analyzed in the context of income data, this stagnation becomes even more of an enigma. As illustrated by Figure 5.4 (Braun, 2016), there are stark differences in the wages of college educated workers and those with a high school diploma (or less). In fact, wage gaps between the two have almost doubled (Holzer, 2016).

With college graduates earning so much more, how do we explain the disparities in educational attainment? First, we must examine class in the United States. Throughout the nation, over 16 million children live in poverty and suffer from a lack of quality resources (O’Day & Smith, 2016). Their socioeconomic status is detrimental to their future outcomes, because poverty and other associated factors (i.e. residential segregation, low levels of parent education, limited access to support systems, and lack of quality preschool programs) all negatively affect educational attainment. These factors and their increasing influence are of grave concern in today’s digital economy.

Ultimately, the U.S. has failed to adequately address these underlying issues. Policies that reduce unionization, fail to increase the minimum wage, fail to address the rising cost of college, and favor part-time work undergird rapidly rising inequality. To say rising income inequality is an inevitable part of technological change is inaccurate. A number of advanced countries have seen similar economic changes, but the U.S. has witnessed the greatest increase in income inequality and consistently maintains the highest levels of income inequality). The difference lies in other countries’ policies and expenditures. In fact, research shows that the United States spends far less on active labor market programs (i.e. training and assistance) than most developed countries and that amount continues to decline (Executive Office of the President, 2016; Warschauer, 2003).

Without the human capital, technological resources, and financial means, many poor individuals are unable to gain the knowledge and technical skills needed to remain relevant members of today’s workforce. This begs the question: how do we prepare citizens for work in a digital economy if they do not have adequate and equitable access to technology and education?


Economic innovation has presented us with an incredibly complex problem to solve. The very technologies driving economic change are not accessible to the citizens who need it most. As a result, they are unable to adequately train and prepare for the changes and problems this wave of technology will usher in.

The Digital Divide: Fuel for the Fire

Access to and proficiency with the Internet and technology are crucial for social and economic mobility. However, a great deal of Americans lack the physical access, knowledge, and strategic skills necessary to thrive in the 21st century economy. Most often, this digital divide and other achievement gaps begin in elementary school and continue to grow until adulthood (Conceicao & Martin, 2016). By the time students are old enough to enter the workforce, they will be at a significant disadvantage. Ultimately, this will lead to higher unemployment rates and worker underutilization.

Our understanding of disparities in technology access have changed over the years and can be broadly characterized by three paradigms.

Digital Divide
(Kolenski, Nelson-Weaver, & Diamond, 2013; McShay, 2010)

Focus: Physical access to computers and the Internet (socioeconomic status is a good predictor of access). Largely boils down to information “haves” and “have-nots”.

Ideal Outcome: Everyone has access to computers and the Internet. This increases educational opportunity and outcomes.

Digital Inclusion
(Kolenski et al., 2013)

Focus: Individuals that are digitally literate and have access are more likely to be economically secure. Initiatives should aim to give people the knowledge to meaningfully and effectively engage with technology.

Ideal Outcome: Everyone has access and is technologically literate. Individuals are empowered by these skills and use the Internet effectively to find information and services.

Digital Solidarity
(Kolenski et al., 2013)

Focus: Steps beyond the digital divide and digital inclusion and argues that access is tied to larger issues (i.e. education, resource availability, poverty). People should obtain specific social, economic, political, and educational benefits from their access to technology and the knowledge it affords them.

Ideal Outcome: Individuals are able to use their knowledge and access to technology improve their quality of life.

An Education System Ill-Equipped to Handle Rapid Economic Change

Initially, the American public education system was created and expanded to meet the needs of an industrial economy (Araya, 2014; Cutter, Litan, & Stangler, 2016). This expansion had measurable benefits in our workforce and economy, and many of the original structural elements (i.e. age-based grades, classroom based model, single-teacher instruction, predetermined and pre-sequenced curriculum, etc.) and skills (i.e. numeracy, literacy) remain in place today (Araya, 2014; Waks, 2014; Executive Office of the President, 2016). However, this structure is inadequate for our shifting economy. Artificial intelligence is changing the nature of work, and it should be met with a change in the way we educate our citizens.

A focus on competence-based skills is no longer sufficient. To prepare students for the workforce and provide them with social and economic mobility, 21st century skills and literacies should be integrated into school curriculum (Jordan, 2010).

21st Century Skills
Global Awareness
Financial, Economic, Business and Entrepreneurial Literacy
Civic Literacy
Health Literacy
Environmental Literacy
Ability to Conduct Effective Research (Develop Hypotheses, Formulate Search Queries, Assess Information Credibility)
21st Century Literacies
Global Awareness
Financial, Economic, Business and Entrepreneurial Literacy
Civic Literacy
Health Literacy
Environmental Literacy
Information, Media, & Technology Literacy
21st Century Skills 21st Century Literacies
Knowledge Application Data & Information Analysis Global Awareness
Complex Problem Solving Critical Thinking & Problem Solving Financial, Economic, Business and Entrepreneurial Literacy
Situation Analysis Creativity & Innovation Civic Literacy
Technological Fluency Interpersonal Skills Health Literacy
Communication Skills Independent Learning Environmental Literacy
Ability to Conduct Effective Research (Develop Hypotheses, Formulate Search Queries, Assess Information Credibility) Information, Media, & Technology Literacy

(Executive Office of the President National Science and Technology Council Committee on Technology, 2016; Framework for 21st Century Learning, 2007; Hernandez et al., 2014; O’Day & Smith, 2016; Warschauer, 2003)

Job Polarization and Increasing Inequality

The increasing need for technical skills is paralleled by the erosion of the middle class. Without the appropriate training and education, an increasing number of workers will be pushed into low-income jobs or out of the workforce. As wealth disparities continue to increase, systems of poverty and inequity will become further entrenched into our society and form a cycle that is almost impossible for younger generations to escape.


Solving workforce readiness issues and income inequality will require an intricate web of reforms and programs. To successfully address these problems, we must first analyze and improve underlying systemic contributors. Some of these contributors are the state of the education system, lack of alternative training programs, and disparities in resource availability.

Overhaul of the American Education System

In response to a growing industrial economy, the United States invested in the improvement and expansion of public education. This expansion increased the workforce population, enhanced labor productivity, and fueled widespread economic growth (Chaudry, 2016). Today we face a different type of economic disruption and our rigid approaches to schooling are in need of a dramatic transformation. For education to yield the widespread economic benefits we hope to see, we must increase its funding, alter its structure, integrate new technologies, and update standards-based curriculum models. An education system prepared to deal with our 21st century economy will be flexible, innovative, and improve human capital development and economic growth. High school graduates should be well equipped to enter the workforce, alternative training programs, colleges and universities.

Suggested Changes & Predicted Outcomes:

Change: Restructure curriculums to include more project-based instruction and meaningful technology use (Kolenski et al., 2013).

Outcomes: Students become more independent learners, engage in more higher-order thinking, collaboration, and self-discovery.

Change: Abandon the rigid daily schedules that characterize schools across the nation and encourage team-teaching (Warschauer, 2003; Kolenski et al., 2013).

Outcomes: Students receive a more holistic, interdisciplinary education that focuses on 21st century skills like knowledge application, complex problem solving, communication, research skills, data & information analysis, and interpersonal skills.

Change: Reduce our reliance on accountability frameworks, which encourage teaching to the test and ignore many of inequitable education’s underlying factors. Increase teacher quality by shifting our sole focus on content knowledge to a dual-focus that also places emphasis on pedagogical knowledge (Jordan, 2010).

Outcomes: Teachers are fully equipped to recognize and respond to the challenges of teaching diverse learner populations. Student outcomes improve.

Change: Transition from the use of physical textbooks to the use of digital textbooks (Hernandez et al., 2014).

Outcomes: Curricula and content are more flexible and reflect new developments in subject matter. Students are able to maintain and improve their 21st century literacies in a rapidly changing world.

Change: Make use of open-source software, which is free to use (Waks, 2014). Increase technology funding for schools in low-income districts. Create district-level funds and funding systems to maintain software and technology, which quickly evolve. Provide substantial professional-development and training on how to use technology and effectively integrate it into lessons. Implement teams that provide schools with ongoing software and system support (Kolenski et al., 2013).

Outcomes: Nationwide improvement in equitable access to technology. Small and under-resourced schools are able to update their outdated infrastructure and hardware. Technology implementations do not focus on the remediation or practice of skills. Instead, they are employed to promote higher-order thinking and the development of 21st century skills and literacies.

Alternative Training Programs

College is expensive, and ultimately, it’s not the right path for everyone. To ensure a more well-rounded workforce, the U.S. government should implement and promote alternative programs for workforce readiness.

Suggested Changes & Predicted Outcomes:

Change: Increase the quantity and quality of apprenticeships.

Outcomes: Apprenticeships alleviate many of the costs associated with traditional degree programs (Holzer, 2016). As apprentices, students work at a company, earn a salary, receive job based training, and complete more traditional academic coursework (Lerman, 2016). This structure allows students to balance work and school while acquiring relevant occupational qualifications.

Change: Increase the availability and accreditation of distance learning programs.

Outcomes: Schools are able to serve larger student populations. The flexibility and convenience of online learning allows students to meet responsibilities that may hinder their pursuit of a traditional schooling experience (i.e. jobs, family, childcare, transportation, etc.; Kolenski et al., 2013).

Policy Implementations

Suggested Changes & Predicted Outcomes:

Change: Increase funding of early childhood education (pre-K).

Outcomes: As noted by Chaudry (2016), “We must and can change course. Strategic investments in young children could increase educational attainment, labor force participation, labor productivity, and educational and economic equality…”

Change: Address the skyrocketing costs associated with higher education.

Outcomes: More students pursue post-secondary education--increasing workforce readiness and participation. Students graduate with a lower debt burden and experience more economic mobility.

Change: Improve labor laws and policies.

Outcomes: Workers have more bargaining power. The minimum wage is increased, and consequently, income inequality decreases. Citizens are more financially stable and rely less on safety net programs.

Change: Strengthen social safety nets (i.e. unemployment insurance, SNAP, healthcare, etc.; Executive Office of the President, 2016).

Outcomes: We are better equipped to assist dislocated workers and prepare them with the skills and resources to retrain and re-enter the economy.

Change: Partner with companies and community institutions to improve resource accessibility (Braun, 2016).

Outcomes: Partnerships and programs improve college-readiness, provide internships/apprenticeships, and provide community access to technological and informational resources. The underemployed, unemployed, and senior-citizens are able to receive training and information as they attempt to navigate the new economy.

Change: Sponsor digital tools that increase information access.

Outcomes: Citizens are able to explore occupations, industries, relevant skills, and education requirements as they attempt to find work. These tools should also provide resources about training and certification programs, colleges and universities, and job transition assistance.


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