Brown, P.  and Lauder, H.  (2006) ‘Globalization, knowledge and the myth of the magnet economy’, in Globalization, Societies and Education, 4 (1): 25-57.

There is a common view that we are entering a global knowledge economy, and that success will depend on a suitable education system,  both to provide the necessary skills and to encourage ‘social harmony' (Department for Education and Skills, 2003, p 2).  [functionalist theories of stratification again? -- see Davis and Moore] This is in line with the old predictions about the post industrial society, which will feature knowledge as the wealth creator, and a new role for knowledge workers.  A global economy will develop, and this will benefit everyone, replacing  territorial disputes with economic rivalry based on knowledge.  Education institutions play a major role, leading to pressure in the UK to encourage a shift towards skills needed to succeed in the global market for labour.  Fordist production is no longer the route to national wealth.

Growing wage inequality has been seen as evidence of this global market at work.  Income inequality in turn is seen as a problem which can be solved by changes in the education system.  There will be a ‘global market’  (27), where low skilled jobs are exported to low wage economies while highly skilled jobs generate income in the more developed countries.  Thus countries such as the UK, France and the USA can become ‘magnet economies, attracting a disproportionate share of these high skilled high wage jobs’ (28).  Such economies attract foreign workers to overcome any short term skill shortages.  Domestically, education systems become more focused on credentials, knowledge and skills: education systems raise the standards of everyone, and open higher education in particular to those capable of acquiring global skills.  There is no problem with investing in private education.  High wage jobs are seen as open to talent.

However, the reality is rather different.  First, multinational companies are developing new strategies to acquire skilled labour which affect the auction for jobs.  Secondly, there is no universal law connecting education, jobs and rewards, which means there is no guarantee that the educational strategy will deliver highly skilled jobs.  Thirdly, knowledge workers have not gained increased power, and have suffered instead from new trends in ‘technological innovation to be followed by standardisation’ (29).  Fourthly, placing the emphasis on individual competence ignores broader patterning, such as the changes in what counts as a graduate job, or ‘new forms of social closure’ (30).

A global market has been exploited by the developing countries.  China, for example, has rapidly expanded its higher education system, and in 2001 had ‘six times as many university students as the UK and almost as many as the USA’ (30).  India is following a similar path.  Allowing for problems with the statistics, ‘higher education numbers in China, India and Russia have almost doubled…  [and now offer]…  almost double the combined total for the USA and the UK’ (31).

Multinational companies have also changed their strategies, using the huge investment that they can command.  The electronics industry is one example.  Companies now operate across national boundaries, partly to offload corporate risk.  They have developed electronic networks.  Foreign students sent to places like the USA are being encouraged to return home.  India has developed its own electronics engineering companies, with expansion in education and training.  Indian professionals present a considerable cost advantage to companies employing them, for example ‘Indian programmers are around 14 times cheaper than those in the United States’ (33).  Indian entrepreneurs are also present in large numbers in Silicon Valley [implying that either they will physically return home or that they return investment and educational capital to India?].  A Dutch auction might be developing, with companies reducing costs and increasing concessions in exchange for investment in particular countries.

It is clear that the less developed countries are also competing for highly skilled work, and this can reduce the bargaining power of knowledge workers [those who do not want to migrate particularly?].  Companies can reduce costs by hiring workers from low waged economies.  There is less evidence that the developing economies are actually generating high skilled jobs.  ‘”Guest” workers typically do the same jobs for fewer rewards and inferior contracts of employment ‘(33).

So far, we have focused on the electronics industry, which may be atypical. However a large number of other knowledge intensive industries are similar in their low requirements for skilled workers [the examples given are Google and eBay].  Similarly, globalization can be exaggerated, and much research and development tends to remain in the home country of multinationals.  Thus domestic markets are still an important factor in the employability of managers and professionals.  Nevertheless, the general problems with generating highly skilled magnet economies remains.

Knowledge intensive industries tend to occupy enclaves amidst areas of low skill and inequality—Bangalore and Silicon Valley are examples.  Global networks seem more important than local ones, which can be simply switched off.  Overall, developing mass higher education to service the minority of workers who will enter employment in knowledge intensive industries, seems a limited strategy.  It also depends on a permanent shortage of supply of relevant skills: ‘Once there is an oversupply, the competition shifts to a global auction based on quality and price’ (35 original emphasis).  Thus such a policy risks ‘substantial wastage of talent... as graduates accept sub-graduate work’ (35).

The underlying assumption of the magnet economy is that human capital produces growth and higher wages.  This equation between high skill and high income justifies inequality: it makes the system look like a meritocracy and also promises widened opportunity if only education and training can be increased.  The increased dividend to graduates also justifies charging them fees in the UK.

However, the rate of return to graduates are controversial.  OECD data (36), shows a greater premium for graduation in the UK and USA, compared to Japan, while men achieve greater returns than women.  It is worth noting that this is based on average figures.  Any gap between graduates and non-graduates could be caused by declining incomes for non-graduates.  Past returns maybe no good as an accurate guide to the future—we need trend data rather than snapshots.

Alternative calculations are cited pp. 36 and 37.  These look at differences within the graduate population in the USA as well as differences with non graduates, and provide trend data.  The conclusion is that not all graduates have enjoyed a growth in real incomes since 1973— female graduates have been left out, except for those in the higher earner sectors.  There has been very little additional premium since the 1970s, although the gap with non graduates remains.  Even here there is some overlap, since non graduates in the highest earning categories do better than graduates with the median income.  There is therefore ‘the degree of substitution between graduate and non graduate jobs which manifests itself in many graduates being over qualified’ (38), and the UK is probably not very different.

A social mobility study is cited for the UK, Brynin (2002).  This shows that the first jobs taken by young people exhibit some downward mobility compared to their fathers’, and that subsequent rises in mobility are not as great [but see lots of other studies on social mobility here].  There is enough evidence to challenge the view that service class jobs would increase to compensate for the decline in manufacturing [that does seem to be agreed].  This study is supported by other studies of particular sectors (cited page 38) suggesting that between a third and 40% of graduates are in non graduate jobs in 2002.  Female graduates earn less in each of the categories than males, except where they share in the substantial growth of income for the top earners: the highest earners earn twice the median level for graduates of the same sex.  Thus there are forces producing inequality even inside the graduate market.  The same picture appears when considering ethnicity, especially in U.S. data [see the study of social mobility in England and Wales here].

It could still be that these income inequalities show the enterprising graduates can market themselves globally.  However, we would then expect to find such polarisation in all the advanced economies, but this is not so—highly unequal economies are found in the USA and the UK, but not in Japan.  This could be just the result of a time lag, but ‘the existing evidence points to the fact that there are significant societal differences in the way labour markets, employment and rewards are organised and distributed’ (40).  In other words, there are factors producing excess inequality in the U.S. and UK that cannot be explained by the emergence of a global market alone.  Neoclassical economics is also responsible, with its policies of ‘flexible labour markets and competitive individualism’ (40).  It is not just that people with lower skills cannot operate with the new technologies, and thus do not earn as much, nor are labour rigidities responsible [citing a study page 40].

Indeed, it looks as if the higher earners are pursuing policies of ‘”wealth extraction” rather than the development of sustainable forms of “wealth creation”’ (40).  It also seems likely that those in business and law are able to gain greater return to their degree: in the USA ‘the wages of computer specialists and engineers actually fell relative to high school graduates’ (40, original emphasis).

It looks as if investing in human capital was responsible for increased income, but it is now losing its capacity to provide competitive advantage: higher education has expanded nationally and globally.  The old benefits seem to have arisen in specific conditions in the past ‘where access to higher education was limited to a few’ (41), and when skilled workers from developing countries were less available.  Thus, credentialisation is expanding, but the overall value of a credential is falling, except for a few.  In these circumstances, acquiring a degree should best be seen as a defensive measure, ‘a necessary investment to have any chance of getting a decent job’ (41).

The whole knowledge economy thesis depends on the view that knowledge or intellectual capital becomes a major way of creating wealth.  However, this depends on several circumstances, such as the speed of change; the emergence of regular new issues which require expert analysis; that people continue to retain intellectual capital as their own property.  In particular, the thesis ignores the possibility of routinisation of knowledge, which clearly has an uneven impact on different sectors.  Knowledge can be ‘captured in computer software, work manuals or written procedures’ (42).  The profit motive still drives this process [a strong hint of the deskilling thesis, of course].  Standardisation is as important as innovation as a competitive strategy.  As well as enabling employers to retain control, it also permits globalization.

Knowledge work can be understood in terms of Bernstein’s distinction between strong and weak classification and frames [a famous old discussion of different kinds of curriculum in schools, originally based on Durkheim!] Standardisation produces both stronger classifications and stronger frames, reducing worker autonomy and increasing routine.

The distinction between autonomy and discretion on the one hand, and routine on the other enables further comment on matters such as the position of graduates in non graduate work.  Graduates bring a bonus to non graduate work, so to speak.  This is useful, given that middle management jobs have been stripped out, leaving a communication gap between senior managers and workers.  More people now have to cope with greater complexity [so this is a kind of middle management de-standardisation?], and this is where graduates are supposedly better.  However, there is no need for the famous autonomy allegedly introduced by university education—graduates simply explain and mediate [a bit like open university tutors!].  This attracts lower wages than exercising autonomy, since employers do not require the full graduate skill set [this makes it also sound extremely rational].

Studies are cited to show a decrease in level of discretion required among managers and other professionals, including those in education [this seems to be based on self reported data].  An example is provided by retail banking—electronic banking leads to a decline in middle management and its typical roles which included discretionary judgements about loans.  The system has been standardised, and judgments made by a computer program.  All that managers now do is public relations, and lower paid employees increasingly do that.  This sort of work now does not actually now require high levels of education, although university graduates continue to be employed for their communication skills and their ‘behavioural competence’ [the old ideologies about working in teams?]. Micro management is increasing in terms of regulating processes as well as outcomes—‘through the use of software programs that monitor emails and telephone conversations, along with the use of electronic manuals that prescribe many aspects of the job that can be easily updated to meet changing circumstances’ (44).

These strategies are not uniform, either across the globe, or within companies [indeed, they have been resisted quite successfully in education, and might even have led to upskilling, the old debate suggests --see Lawn, M. and Ozga, J. (1988) The Educational Worker? A reassessment of teachers, in Ozga, J. (ed) Schoolwork Approaches to the Labour Process of Teaching, Milton Keynes: Open University Press].  Some work remains essentially creative and individual.  However, ‘knowledge without power’ is becoming important in the labour market.  [At last...], the value of communication and knowledge seems to depend as much on institutionalised assumptions and beliefs as rational practice.  In particular, clients need to be convinced that larger fees are legitimate, and personal relations are crucial here: ‘Management consultants, for instance, not only have to be convincing to colleagues but to clients and customers.  They must define and epitomise valued knowledge’ (45). This means an emphasis on ‘appearance, speech, deportment and social confidence’ (45).

For graduates aiming to enter employment in a major multinational, therefore, it is not enough just to be technically good.  They need to come from a world class university [and to have lots of cultural capital].  For this sector, ‘the knowledge economy is close to reality’ (46).  [except that technical knowledge itself is not at stake].  Competition is increasing severely.  For others, increasing economic vulnerability is their fate.

Politicians and employers alike want to raise the technical and social skills of graduates.  This has become focused almost entirely on the policy of raising standards and extending access to university, however.  Yet competition for valuable credentials and good jobs remains as tough as ever.  Focusing on individual employability in human capital rather than on creating jobs ‘is a political sleight of hand that shifts the responsibility for employment firmly on to the shoulders of individuals rather than the state’ (46).  The new emphasis on broad employability skills serves only to help employers select among large numbers of applicants, and shows up the view that it is technical credentials that are crucial [a view supported by Williams, D., Brown, P. and Hesketh, A. (2006) How to Get the Best Graduate Job: Insider Strategies for Success in the Graduate Job Market. London: Pearson Education Limited.]  This leaves applicants relatively powerless to contest decisions [and may reintroduce class ethnic or gender bias, Brown and Lauder feel, page 46] because getting the job is no longer just a matter of being able to do it.

In this way just raising standards of skill will not provide a solution to inequality.  Competitiveness and social conflict has intensified.  There are even significant strands inside occupations.  Overall, we have seen 'the creation of a winner-takes-all market' (47).  Excessive competition misallocates the talented and congests markets.  There is no point in individuals struggling to gain qualifications if everyone is doing the same.  The result will be an 'opportunity trap that is forcing people to spend more time, effort and money trying to access the education, certificates and jobs they want, with fewer guarantees that their aspirations will be realised' (46, original emphasis).

Focusing on raising standards simply ignores the effects of existing inequalities of wealth and culture.  These can obviously affect access to high quality educational experiences.  There is already conflict among the middle classes as a result, and an increasing elitism: 'the children from middle class backgrounds that failed to gain access to [elite] universities will be left to fight over the scraps' (47).  There is a growing global hierarchy of universities, with elite American and European universities at the top.  These universities favour those from rich backgrounds.  Social mobility evidence is cited in support (48).  [But we learned above, that even these elite universities are unlikely to be able to deliver high earning jobs, when Chinese and Indian universities really get going].  Thus international elites have probably benefited most in the development of a global knowledge economy.  Those members insisting on operating in what are still seen as largely meritocratic systems will be seen as holding back their children [surely not, they are already superbly adapted to bending the rules in allegedly meritocratic systems, having it both ways as a result].  However, if things get worse, social elites may be able to shop globally.  Centre left policies which simply insist on expanding higher education places will be totally inadequate.

Overall, the ‘magnet economy’ claims to be able to solve issues of inequality and conflict by investing in education and human capital, but such a model is not supported by the evidence.  There is already evidence of people being over qualified for their jobs.  The demand for skills is at best uneven across occupations and industries.  Employers are able to demand soft social skills—'drive, commitment and business awareness…  Social confidence and emotional intelligence…  Able to work without close supervision…  Willing to embrace change rather than resist it' (48).  These are non technical requirements [to put it mildly].

There is no simple linear connection between levels of skills and technological evolution.  The demand for technical skills may have reached its limit.  Standardisation is increasing, as a requirement to export work to developing countries.  Developing countries already have good supplies of highly skilled workers and low wages.  One estimate suggests that companies in the USA can save $30,000,000,000 by exporting work.  There simply are not enough good quality jobs available, and no signs of meritocratic employment practices.  It is no good looking to the global market, because China and India are competing effectively there already.

The value of the credential is facing diminishing returns, both at home and abroad.  Investing in human capital will not reduce inequality, of income, or of any other kind.  Indeed, the operation of the market will widen the differences between the very richest and the rest.  The development of a global market has made things worse, and put a premium on accessing internationally recognized universities, further favouring elites at the expense of the middle classes.  The full deployment of all kinds of capitals, including cultural and social capital, are needed to gain access, and competition increasingly goes on at a global scale.

There is now a crisis in 'the management of expectations' [come back Hopper, all is forgiven].  Discontent is increasing as more and more people find that their degree fails to deliver the good standard of living, and as companies increasingly find themselves with over qualified employees.  Middle class groups in particular will witness a declining return for their efforts, and there are signs that they are becoming increasingly disenchanted with the promises of higher education.  There is little sign that this will produce a left wing politics, however.  It is more likely to lead to national protectionism.

Overall, the magnet economy model is too simple, and a new grasp of complexity is required.