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How our mining boom is making us dumber

Australia is blessed with a large stockpile of high quality commodities that are in high demand from our big and growing neighbor China. The ‘mining boom’ has helped to make Australia virtually untouchable as the rest of the developed world languishes with mountains of debt and high unemployment.

Not everybody however, believes that the mining boom is all good for the Australian economy. The managing editor of the Wall Street Journal, Michael Casey, believes the focus on mining has distorted Australia’s education system and will leave the nation dumber as a result.

In his recently released book, The Unfair Trade: How Our Broken Global Financial System Destroys the Middle Class, Casey argues that “the disparity in salaries (between mining and other industries) creates distorting incentives in career preferences as workers are drawn to the resources sector.”

“Throughout the 2000s, there was a chronic shortage of teachers in Western Australia that was only resolved after the 2008-9 financial crisis slowed the rate of resignations and after the government shipped in foreign graduates. But other sectors kept losing bodies.”

“Western Australian manufacturers lost 17,300 jobs in two and half years ending in August 2010, while the mining industry added 16,900. Perth's five universities are full, but largely with Asian students who will take their acquired knowledge home with them. Meanwhile, local students are drawn to fields tied to the resources boom—mining engineering, geology, surveying—while other programs of study, including medicine and science, are less popular.”

“At some point, there will be a glut of geologists in the city. Perth is getting richer in aggregate, but it might also be getting dumber,” concludes Casey.

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In 2011, mining related jobs dominated the list of the highest paying jobs in Australia. While it is not dumb to chase high salaries, the hollowing out of other Australian industries is a far reaching problem that is attracting plenty of attention.

The Reserve Bank of Australia has repeatedly made reference to Australia’s multi-speed economy and in its recent Global Report HSBC noted that when it came to Australia, “the apparent blessing of abundant natural resources can, in fact, be a ‘curse’, leading to slower economic growth.”

The HSBC report pointed out that “Australia now seems more tied to China than it ever was to the US”. That is to say, if China encounters economic problems down the track there could be a lot of unemployed mining engineers and managers looking for work in an Australian economy that has grown too focused on commodities.

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