One of the most reliable sources of economic growth—college-educated workers—may be tapped out

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Politicians may disagree, but the data suggest our best days are behind us. US GDP grew by a modest 1.2% last quarter, a far cry from the vigorous 3% annual pace that brought prosperity and security for decades.

One major structural reason why growth is slowing is that the labor force is shrinking, due to an aging society and disgruntled workers giving up looking for jobs. In the past, you could compensate for fewer workers by improving their quality—that is, sending more people to college. But according to new research (pdf), higher education may no longer provide the same bang for the buck, economically speaking.

Three main things determine how much an economy grows: capital (new machines, computers, and the like); labor (both in terms of the number of workers and the quality of their skills); and technology (which can boost output from existing capital and labor). Adding to the supply of any of these things increases growth, but only up to a point.

In an economy where everyone uses typewriters, if workers are suddenly given computers the economy will grow much faster. The same is true if everyone shifts from working on small farms to getting jobs in big factories. Putting lots of people and machines to work explains a good deal of China’s recent record of rapid growth.

Educating workers also tends to make them more valuable, enhancing the existing factors of production. The economic boom in the post-war US was in large part due to more people going to college.

But at a certain point, there are diminishing returns to growth from adding another machine or worker. A worker won’t become twice as productive with two computers instead of one, for example. Harvard economist Dale Jorgenson believes we’re at that point of diminishing returns for educated workers—adding more to the workforce won’t boost growth in a meaningful way anymore.

Jorgenson’s latest research, written with Mun Ho and Jon Samuels, claims the main problem for the American economy is, simply, that too few people are working. Indeed, US labor force participation has yet to recover from the global financial crisis:

Most of the young people who have dropped out of the labor market are uneducated. Jorgenson says getting these people to work is crucial to reviving growth, pushing up the pace of GDP expansion to around 2.5% per year. But how? Between the spread of automation and globalization, there are fewer and fewer jobs for less-educated workers.

One solution is education. During the recession, many of the jobless went back to school got degrees. Today, 36% of 25-to-54 year olds have at least a four-year degree, up from 30% a decade ago. By Jorgenson’s estimates, given the current state of technology and invested capital, turning the unskilled into skilled workers won’t do much for growth because the US economy already has all the educated workers it needs. A better way to revive growth, Jorgenson argues, is to get low-skilled people who have given up looking for jobs to return to the workforce.

Populists argue forcing employers pay low-skilled workers higher wages would do it. It would encourage more people to enter the labor force and boost spending in communities that need it. But economists are skeptical, fearing that large increases in the minimum wage will decrease demand for marginal workers, which would hardly help increase the labor force participation rate.

Jorgenson tells Quartz it would be more effective to boost firm investment—more R&D, more machines and IT—which is still below pre-crisis levels. He thinks this can be done by tweaking regulations to favor investment and tax consumption. More investment will mean more growth, increasing the value of labor and creating demand for all kinds of workers, including low-skilled ones. Even if machines replace some workers, the positive impact on growth will create new markets that generate more jobs for everyone.

By Jorgenson’s estimate, more capital was the single biggest driver of economic growth in the post-war era, accounting for about 50% of growth over that period (the increase in labor quality accounts for 30%). He thinks it will be in the future, too.

That may be. But giving breaks to corporations to invest while raising taxes on what consumers buy will probably not fly in an increasingly populist economic climate. And if education is not the easy answer to boosting growth, reducing inequality, and addressing a host of other economic ills, it raises uncomfortable questions about long-held economic beliefs.