Changing technologies and globalisation have put a premium on completing a college education in order to get and keep higher-paying jobs, Federal Reserve Chair Janet Yellen said this week.
“The drivers of this increasing demand for those with college and graduate degrees are likely to continue to be important,” Yellen said in prepared remarks to a University of Baltimore commencement ceremony at which she was due to receive an honorary degree.
She did not mention monetary policy in her speech, which was solely focussed on the world of work, but did note those graduating were entering the strongest jobs market in nearly a decade.
The U.S. unemployment rate, at 4.6 percent, is at its lowest level since 2007 and policymakers felt the economy sufficiently robust last week to raise interest rates for only the second time in a decade.
In her speech, Yellen said that technology had allowed low-skilled jobs to be replaced by automation while globalisation had also caused jobs that require less education to move overseas.
Yellen also said that while there were indications wage growth was picking up, productivity growth had been “disappointing.” Low productivity growth and wages that have been slow to rise have vexed the U.S. central bank.
President-elect Donald Trump has said he will cut taxes and boost innovation, both of which the Fed has said could have a positive effect on the economy.
In part on Trump’s promises on tax cuts, spending and deregulation the Fed also upgraded its forecast for the number of rate hikes next year to three from two.
However, Yellen and other policymakers have been quick to emphasise that longer-term policy changes that improve education, training and workforce development are required to raise productivity.
Yellen reiterated this in her speech to the students, noting that college graduates annual earnings last year were, on average, 70 percent higher than those with a high school diploma.
“Economists are not certain about many things. But we are quite certain that a college diploma or an advanced degree is a key to economic success,” Yellen said.