More interesting stuff from Mankiw’s blog (this time in the form of a response written by Bob Frank):
My point is not that people don’t care about money. On the contrary, when the pay in one occupation goes down relative to others, fewer people enter that occupation. Public school teachers, whose starting salaries were more than 20 percent higher than those of the average college graduate in the 1960s, now earn below-average starting salaries. So we are not surprised that fewer qualified people now enter teaching.
This really is just common sense isn’t it? When salaries for teachers are stagnant or declining and salaries for hedge fund managers go ballistic doesn’t it make sense that relatively fewer people will aspire to be teachers and more will aspire to be hedge fund managers? I went to business school @ UCLA and it’s pretty funny to watch the parade of people into what the hot industry is…late 90s = tech startups, early 00s = real estate, recently = private equity and hedge funds…
But what’s sad is not just that less people are aspiring to become teachers but that when you look at the smartest and most ambitious people the proportion who want to become teachers is even smaller (this is a bit anecdotal on my part but my guess is that it would hold true empirically as well). So what you end up with is a general shortage of teachers and a severe shortage of highly motivated, hyper-intelligent teachers.
And it’s not just about the money. A lot of people I know wouldn’t teach not just because teaching here in a city like Los Angeles is one of the best ways to ensure you’ll almost never be able to afford to buy a house but rather because teachers are afforded such low status in our society (watch this awesome Sir Ken Robinson video for a humorous riff on this). We live in a society that, for better or for worse, puts private equity/hedge fund managers and real estate developers on a pedestal. Teachers fare far worse in the appreciation hierarchy.
So can this change? Absolutely, but only radically so. Incentives like merit pay for teachers won’t help much if at all. We need a rethinking of the system from the ground up. And if we don’t do that soon enough what we’re going to find is people dropping out of the traditional educational system in droves (some evidence is appearing that this is already happening. You have to think long and hard about who’s creating value in the system and who’s not (hint: it’s pretty easy to look at the value chain and see where value is being created and where’s it not). Then you do the darnedest to move money in the directions where value creation is occurring and yank it away from where it’s not.
Same thing is happening in the music industry right now. Next up…education.