Myth of the Knowledge Economy

Thomas Vogl

Narratives are powerful instruments in policymaking.

They can simplify complex circumstances and make them readily amenable to policymaking. Through simplifications, narratives can result in omissions, misrepresentation and unforeseen negative outcomes. However, this does not take away from their capacity to set assumptions that underwrite the decision making process.

A pervasive narrative when discussing economic development and growth in Canada is that of the ‘knowledge economy.’ This story tells us that we are entering a post-industrial age where resource exploitation and manufacturing are no longer sustainable economic drivers in developed nations, and the only way to compete is by means of high-skilled services and technological innovation. One of the main mechanisms to attain this is by improving educational attainment.

The narrative of the knowledge economy does not, however, elevate all sectors, even when the proportion of workers in them with an education is increasing. While on the face of it, the narrative of the knowledge economy is good – we have skilled workers who make a good living and produce globally valuable goods and services – it is not bringing everyone up together, and in some cases millions are being left behind.

Through examining three sectors in particular:

  • Accommodation and Food Services
  • Public Administration
  • Forestry, Fishing, Mining, Oil and Gas

We will be able to see three divergent trends in the relationship between the number of educated workers in these sectors and real average earnings. With these trends I would like to pose a challenge to the dominant narrative of the knowledge economy and make an alternative prescription.

I cannot stress enough that narratives are simplifications that overlook the complexity of a phenomenon. The narrative of the knowledge economy is just such a simplification: it allows us to more easily pursue human capital development policy, but it can lead to inequality and differing valuations of jobs based on level of education or skill.

One challenge to the narrative is that some people are unable to access human capital building initiatives: they may lack the foresight, grades, time or ability to succeed. A major problem is that there is a gap between the relative educational attainments of children from advantaged versus disadvantaged backgrounds. This fact, coupled with current notions of fairness, may lead some to declare that those who invest in human capital are more deserving than those who do not. The very language of ‘high-skilled’ and ‘low-skilled, found even in the HRSDC’s 2006 National Occupational Classification document, could be seen to preserve this inequality.

Figure 1

As we can see in Figure 1, drawn from data available at Statistics Canada, over the 1995 to 2009 period, average real earnings in Accommodation and Food Services have remained low and stagnant. Even if this is partly due to the non-reporting of ‘tips,’ it is unlikely that the increase in earnings would be increasing at the same rate as the proportion of educated workers, but instead in a stepped fashion as the average tipping norms change.

We can also see that from 2000 forward, earnings in Forestry, Fishing, Mining, Oil and Gas have increased more than in Public Administration despite a lower proportion of workers with as least some post secondary education (see Figure 2).

Figure 2

We can observe in Figure 2 that even though the proportion of workers with at least some post secondary education in all three industries is increasing, their earnings levels differ. Until recently the proportion of post secondary educated workers in Forestry, Fishing, Mining, Oil and Gas and Accommodation and Food Services has been fairly similar. Despite a comparable proportion of workers with some post secondary education in the aforementioned industries, earnings levels diverge.

Though Public Administration has a very high proportion of post secondary educated workers (88 per cent in 2009), its average earnings are now lower than Forestry, Fishing, Mining, Oil and Gas. Together figures 1 & 2 show that despite an increasing proportion of individuals in Accommodation and Food Services with at least some post secondary education, earnings have remained relatively stagnant.

One factor that could be influencing these proportions is the presence of recent immigrants with unrecognized foreign post secondary credentials or professional licensing working in this service sector. This may lead the proportion of educated people in industries such as Forestry, Fishing, Mining, Oil and Gas or Accommodation and Food Services to be higher than it otherwise would be.

Forestry, Fishing, Mining, Oil and Gas has a comparable proportion of educated workers relative to Accommodation and Food Services. What this indicates is that some sectors can realize earnings increases without a coincident increase in post secondary educated worker density. On the other hand a gain in post secondary education does not guarantee that an industry will have increased average earnings, as there are a significant number of individuals in Accommodation and Food Services with some post secondary that continue to have stagnant earnings. Public Administration shows the greatest association between education and earnings; however, even this highly educated industry has lower earnings than Forestry, Fishing, Mining, Oil and Gas.

While the current literature promotes demand side policies for people unable to access post secondary education, it appears demand side policies will also be crucial for earnings improvements among those with some post secondary education. Despite the increase in the proportion of post secondary educated workers in some sectors, earnings remain disproportionately low.

While the knowledge economy narrative offers the promise of secure high earnings work to those who upgrade their level of skill, this is disingenuous on three fronts: 1. People who upskill do not find jobs in the sectors that they are trained to work in and must resort to working in other sectors, or 2. Certain sectors of the knowledge economy provide socially valuable work but are not captured under its prerogative and are thus not privy to its benefits 3. At least some of the resource based industries that the knowledge economy decries are alive and well in Canada and they require less education but offer higher earnings than some more knowledge intensive work.

My prescriptions run as follows and encompass three recommendations: first, create more jobs for high educated workers, it seems like we have the bodies; second, improve the condition of work in socially valuable jobs that are not currently captured under the narrative of the knowledge economy; third, recognize the fact that a major component of our economy is resource based and learn to harness it to pursue economic diversification goals.

 

Thomas Vogl is a second-year student in the Master of Public Policy program at the School of Public Policy and Governance, University of Toronto. A Vancouver BC native, he graduated from UBC in 2010 with a BA (Hon) in Philosophy and a Minor in French. Since starting the program he has been involved in student politics, editing and blogging with the Public Policy and Governance Review and consulting with the Public Good Initiative.


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