The value added to our GDP from physical material input and manual labor has grown very slowly over the decades.1 By far, the greatest contribution during the past half century to our average annual real GDP increase of 3-1/4 percent has been the ideas embodied in both our human and physical capital.
Technological advance is continually altering the shape, nature, and complexity of our economic processes. This rising complexity has required the labor force to be more and more technically oriented. Years of schooling, a rough proxy for skills, averaged nine and one-quarter years in 1950. A half century later schooling averaged more than twelve years.