Educating Workers Is No. 1 Priority

Business and Uncle Sam are working hard to ensure that the USA stays competitive.

By the staff of The Kiplinger Letter

December 31, 2008

The U.S. is struggling to keep its competitive edge in the global marketplace because America's public education system is failing to produce an adequate number of skilled workers.

The good news is that business and government are tackling the challenge. Across the country, companies are actively working to improve workforce education. They're sponsoring mentoring programs and internships, funding community colleges and more.

"Businesses will be taking a much more involved role in post-secondary enrollment, community colleges, college financing, the whole thing," says Bob Jones, president and founder of Education Workforce Policy, a policy consulting firm.

A variety of private foundations are pitching in as well, such as the Bill & Melinda Gates Foundation and Teach For America.

"There's a lot of new energy being brought in, particularly from the social entrepreneurial sector," says Andrew Rotherham, cofounder and codirector of Education Sector, an independent national education policy think tank. And President-elect Barack Obama has promised that, as president, he'll push programs aimed at cutting the dropout rate and making college more affordable.

In the last century, U.S. workers were the world's best educated, but that's no longer the case. Over the past three decades or so, South Korea, Japan, Norway, Canada, Switzerland and others have overtaken the U.S. in the portion of people who enter the workforce with a high school diploma or its local equivalent. New Zealand, Hungary and other countries are on the verge of doing so.

"It is an outmoded system, and it is not doing what we need it to do now, either from an equity standpoint, or in terms of the nation's long-term economic competitiveness," says Rotherham.

In math, science and literacy, foreign students are outpacing Americans. The U.S. falls in the middle or bottom of the pack in the three continuing studies that compare young people's academic achievement in a variety of countries, though one recent report showed significant gains in U.S. math scores since 2003.

Because more jobs require higher education, the trend is especially troubling. By 2016, nearly 80% of all U.S. jobs will require more than a high school diploma, but 70 million Americans between ages 25 and 40 haven't gone past grade 12. In fact, the U.S. is the only industrialized nation where the generation entering the workforce is less educated than the one leaving it, though Germany is getting close to that point.

It's too early to tell if government and business efforts to turn the tide will work. But it's clear that if the U.S. doesn't do something drastic, corporate America will suffer.

Another trouble spot for U.S. competitiveness: The aging population. The U.S. is still in better shape than most of its industrial peers. In Japan, the labor force has begun to shrink as older workers retire and fewer young people are available to replace them. Europe's labor force peaked this year and will slide next.

U.S. demographics going forward spell multiple problems: Higher costs from more firms chasing fewer employees; the loss of valuable skills, and a growing financial burden on the working age population to support retirees -- privately and through government social programs.

Immigrants are the U.S.' saving grace. They tend to be younger than the general population and to have more children than U.S.-born residents. That'll help buy the U.S. a bit more than a decade -- till 2020 or so -- before the growth of the U.S. workforce follows that of Germany, Italy and others on a downward path.

Meanwhile, the labor forces of some rising economic powers continue to grow. Among them: China, India, Indonesia, Vietnam, Thailand, Brazil and Mexico.

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