Readying Future Workers To Move From Challenge to Challenge

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The Nov. 28 issue of Fortune contains an article of extraordinary significance for anyone concerned with the prospects for education in this country. Entitled "The Mass Market Is Splitting Apart," it tells us that "economic forces are propelling one family after another toward the high or low end of the income spectrum." The article supports predictions made earlier this year by writers such as Henry Levin and Russell W. Rumberger of Stanford University and The New Republic's contributing editor, Bob Kuttner. All three have argued that the future high-technology economy will create a need for a few highly skilled, well-paid workers, and for many low-skilled, poorly paid workers.

Fortune, of course, concentrated on the business implications of these trends, telling its readers that business and industry had better adjust to the disappearance of the middle class. Educators may take away a different message from these writers' arguments--the idea that only a small elite need be educated and trained for a high-technology economy; the rest will need precious little to prepare them for the jobs they are likely to hold. If you accept these premises, the case for better education for all cannot be argued on economic grounds.

But if this country accepts the view that the disappearance of the middle class is inevitable, it is only a matter of time before our national income slides steeply and irreversibly. The way we interpret the economic transformation now taking place, and the way we view the role of education in that transformation, will determine whether our future as a nation is bright or dismal.

As we analyze the situation we face, it is important to understand why many observers predict the need for very few highly skilled, well-paid workers. The Fortune article points out that manufacturing's share of total employment declined precipitously during the past decade, while nearly nine of 10 new jobs created were in service industries such as health, financial, business, and restaurant services. Most blue-collar jobs in the dying industries paid very well, but most jobs in the rising service industries do not. The manufacturing sector will continue to decline, the Fortune article says, and the service industries will continue to grow--hence the growing disparity in incomes and the decline in size of the middle class.

Although all this sounds plausible--as do more sophisticated versions of the same argument written by other authors--it is very misleading. To understand what is really going on, it is important to realize that manufacturing is not synonymous with mass production. In forms of manufacturing not tied to mass production, we have the possibility of a healthy future.

For many decades, the force that powered the American economy was mass production. Now, however, the most advanced mass-production equipment can be located anywhere in the world. Where it is located will no longer depend on the cost of shipping the product to customers, because shipping cost as a percentage of final cost has fallen very low, thanks to great improvements in transportation technology. Nor will the base of mass production depend on the location of corporate headquarters. Modern communications technology makes it possible to control operations on the other side of the world almost as easily as operations next door. Instead, location will depend on the availability of low-cost, low-skilled labor, the propensity of the labor force to go on strike or demand control over job assignments, and tax rates. The United States no longer offers a comparative advantage in any of these respects, nor does it wish to, because competing on these grounds would mean accepting the same lower level of national income as the countries with which we would be competing as mass producers. The consequence is that we cannot expect in the future to engage in much mass production of goods--at least not mass production that relies on mature manufacturing technologies and conventional materials.

For all practical purposes, mass production based on mature technologies is dead in this country. But that does not mean, as some suggest, that the only future left to us lies in services. There is no future in "services" if we take the term only to mean the kind of services provided by people with low skills. We will always need counter people at fast-food outlets, but it is absurd to suppose that people performing such services will power our economy in the years ahead.

Furthermore, the service-sector jobs are themselves vulnerable to the same technologies that are devastating blue-collar workers.

Among the service jobs that the Bureau of Labor Statistics expects to be in the greatest supply in the years ahead are those for retail clerks, stockhandlers, and clerks of other types. As one example of the effect of new technologies on these workers, consider what will occur as banks continue to install terminals in consumers' homes. These terminals, functioning as key elements in increasingly sophisticated telecommunications systems reaching into the home, will be used by the consumer to purchase goods and services, primarily because the cost to the consumer will be far below current retail prices. That change will cut the number of jobs in the distribution system that serves retail stores, the number of retail clerks and stockhandlers who work in them, and the jobs associated with check handling and credit processing.

This is but one among many examples I might have chosen of the jobs now employing hundreds of thousands, perhaps millions, that can and will be eliminated by technology in the service sector. Does this mean that, instead of having a small number of highly skilled, well-paid workers and a vast army of low-skilled, poorly paid workers, we will have a small number of highly skilled, well-paid workers and a vast army of unemployed? If we continue with current economic and education policies, that is entirely possible. But that calamity is avoidable.

This country's economy has a future in both services and manufacturing, but only if the people involved in those activities bring with them a lot of education and training. The United States can succeed admirably in the international marketplace if we recognize that our future lies in being the premier producer of specialty and custom products--products that represent the state-of-the-art in their field; products based on new materials and new technologies.

For example, mass-produced goods that incorporate new materials (say, ceramics for automobile engines, or conductive polymers for new car batteries) could make the cars and batteries much cheaper to run over the life of the product. Suppose such a product is available only from the U.S. Labor costs might be higher here, but the new material makes the product so attractive that it justifies higher labor costs. Of course, as the technology for producing and using the new materials matures, other mass producers will incorporate it into their products, at a cost below ours, and our advantages will evaporate. So we will have to have still another new material in the wings to regain the advantage. It is not enough to get on the leading edge of development; we must stay on the leading edge.

As another example, suppose that you are making a product (say, an advanced telephone-switching system) whose attractiveness to purchasers will depend on incorporating intelligence into the product. Then suppose there is a new semiconductor chip on the market that will do exactly what you need to make the system demonstrate the level of intelligence you require. You may find that you have to pay nearly twice the price charged by other manufacturers for related chips--because the chip you want is available from only one producer--but you buy from that producer because the chip's price constitutes only a small part of your product's final cost, and using it enables you to manufacture a very attractive item. Again, the maker of that chip is in good shape now, but not for long, because another firm is sure to be working on a more advanced chip.

We also have a great future in services, if the services we offer involve expertise that cannot be found anywhere else.

Suppose that your country is building a large hydroelectric project. You look for a very experienced project-management firm to handle the overall design and coordinate construction. Although you evaluate many firms, you may end up hiring one of the highest bidders because you are convinced that the firm's experience and skill will, in the long run, save you more money than you could have saved by hiring another firm that paid its staff lower salaries (and gave you a lower estimate).

The point of these examples is that if we are going to compete in significant future manufacturing and service, we need an economy based on high levels of expertise.

But we cannot have an economy based on high levels of expertise if we do not have a labor force that is expert--not only expert, but broadly enough educated to move easily from challenge to challenge, from one area of expertise to another. We need a labor force that is creative, knowledgeable, and flexible.

Currently, we talk about our education problems as if the challenge is to raise the levels of basic skills of our students. But workers in the near future who have only the basic skills will not have enough education to make it worthwhile to pay them the wage rates that now prevail in the U.S. Those who are already in the workforce, and those entering it, will need far better education and training than they have now if we are to succeed.

Much has been made, and rightly so, of the plight of the unemployed automobile workers who once manned the assembly lines. We should recognize that their $12-per-hour salaries were based on the long-term ability of both management and labor to raise the prices and wages of their products because of the virtual monopoly both enjoyed in the domestic auto business. This is a monopoly neither management nor labor will enjoy again.

Those automobile assembly-line workers brought to their jobs about three weeks of training beyond high school. They are now finding it very difficult--often impossible--to get jobs paying half their former salaries in the electronics industry, because, even with a few months of additional training, they lack the knowledge and skills they need to do entry-level work in the industry. The days are gone when three weeks of training beyond high school will get you $35,000 per year in your middle years. From here on, you will have to justify such salaries or wages in terms of what you know and can do--in short, by how much value you can add to the goods or services you help produce.

We have gotten to the point at which our objectives for the economy can be achieved only if we make major changes in education policy. Similarly, we are at the point at which major investments in education make sense only if we choose particular economic policies. It is now very important to think about our education and economic policies in tandem. If we do not, we will have to decide how to share among ourselves a swiftly declining national income.

Vol. 03, Issue 14, Page 24, 20

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