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Bracey's Applesauce.

Mr. Packer, a professional economist, takes issue with Gerald Bracey's view that the condition of public education has little to do with the state of the nation's economy.

CLEARLY, Gerald Bracey knows the field of education, both in theory and in practice. But in "The Eighth Bracey Report on the Condition of Public Education" (October), his grasp of economics is a little shaky especially when he concludes that education is irrelevant to economic performance. Before laying out my differences with his views, let me list several areas where we agree. He and I agree that:

* America's education system is not getting worse and is most likely improving.

* Educational quality cannot be defined solely by student performance on standardized tests. Therefore, international comparisons of test data are far from convincing proof of the superiority or inferiority of any country's education system.

* More money, well spent, can improve education. But a surefire formula for spending education money well is elusive.

* The disparity in educational outcomes and employment incomes among groups of Americans is one of the most important problems this country faces today and in the next generation. Unless changes are made, the gap will grow between the career prospects of those who receive a good education and those who receive a mediocre one.

* The question of why our economy is doing so well if our education system is doing so poorly is both relevant and unanswered by education's critics.

* Education should not be transformed into vocational training.

* Economic performance is not the sole, or necessarily the most important, rationale for public education.

Bracey might disagree, however, with the following belief of mine: Today's education system does not meet our nation's needs, even if the system is better than it ever was and as good as any other nation's system. Because I am a professional economist, I will restrict my discussion to the economic sphere, even though I could argue that many graduates of our system do not meet education's two other goals citizenship and personal fulfillment. I will explain my differences with Bracey's economics and show how education is related to the individual's and the nation's economic performance.

Productivity Growth: Does It Matter?

Let me begin by addressing the issue of productivity, perhaps the most important determinant of economic well-being. Bracey argues that productivity growth over the last 25 years is okay if you ignore the years when productivity declined (1974) or was essentially unchanged (1977-83 and 1987-89). This is Bracey's interpretation of the data, not mine. So we are to ignore trends when productivity growth is absent and look only at consecutive years of productivity increases. This is like arguing that workers' pay raises are okay except in the years when they don't get any or when they receive pay cuts. Money isn't everything, but financial security and well-being do count.

This is not an idle analogy. Workers' raises in the last 25 years have been smaller than those in the previous 25 years. To quote Bracey, "Entry-level wages for male high school graduates fell 28% in real dollars from 1973 to 1997. College graduates didn't get hit as hard, although they did lose ground." According to the Bureau of Labor Statistics (BLS), average weekly earnings for all workers (male and female) in the private sector measured in 1982 dollars were $278 in 1964. Earnings grew to a high of $317 in 1973 and fell thereafter to $252 in 1996, before recovering to $266 in 1998 (all data for January of each year). Thus average wages in 1998 were still less than they were in 1964 and 16% less than at their 1973 peak. Productivity growth may not be the only determinant of average wage increases, but it is surely one of the most important. (If inflation has been overstated in recent years, as some suggest, then both productivity and earnings growth were slightly better than the official BLS data indicate.)

Bracey's error may have arisen from looking at a chart of productivity growth instead of examining a table of actual numbers. Looking at business "output per hour," the common measure of labor productivity and the one used in the chart he refers to, Bracey would have seen that productivity growth always falters in recessions. But the lost ground is made up in the subsequent recovery. For example, productivity growth was only 0.1 in 1956 and jumped to 3.0 in 1957. The growth was only 0.4 in 1969 but jumped to 4.3 in 1971. Most competent economists look at productivity only as a trend line drawn through common points in the business cycle, usually business cycle peaks. The point of all of this is to show that looking at uninterrupted productivity trends is the right way to judge the nation's economic health. Leaving out the bad years, as Bracey does, makes no sense.

Productivity Growth: Is Faster Better?

The Eighth Bracey Report refers to Workforce 2000, a book I wrote with William Johnston in 1987.1 Bracey dismisses our view that productivity growth is less than desirable, asking, "For whom? Surely not Alan Greenspan?" Almost surely, the answer is Alan Greenspan and any other informed economic observer. Look at the following statement from the Washington Post after the Bureau of Labor Statistics announced that productivity had grown at an annual rate of 2.3% in the third quarter of 1998 (later revised to 3.0%). The headline read: "Productivity Gains Are Holding Off a Major Slump."

The ability of companies to boost productivity beyond wage increases, economists said, provides further room for the Federal Reserve Board to cut interest rates if needed to maintain U.S. economic growth.2

The New York Times of the same day (November 11) quoted another economist as saying, "We can get another percentage point of economic growth without inflation." Not necessarily by coincidence, the Fed reduced interest rates on 17 November 1998. Of course, continuing relief will require that productivity growth stay at the higher level; it was only 0.3 percent in the second quarter of this year and 1.8% over the last four quarters.3 This improvement over earlier performance has led to better wage increases (adjusted for inflation) and improvement at the bottom rungs of employment.

Perhaps Bracey is confusing productivity growth with economic growth. The chairman of the Federal Reserve does have an economic growth target of 2.5% annually. But Alan Greenspan does not pluck this target from thin air. In order to steer between the rocks of inflation and the shoals of recession, he seeks to have the economy grow as fast as the nation's potential growth rate. He estimates potential growth by adding predicted growth in the labor force to predicted growth in productivity. Both are a little over 1%, so he arrives at a potential growth of about 2.5%.

Predicting the growth of the labor force is straightforward, but productivity growth is more mysterious. The sources of productivity growth are improved education, more capital stock, and better technology. Despite the fact that each of the three is apparently growing rapidly, productivity is not. (In the 1950s and 1960s, productivity grew two to three times more rapidly than it has in the last 25 years.) Much of the investment has been for computers, leading some to question whether information technology is as valuable economically as the industry thinks it is (or if the data are accurate). Others, including me, conclude that education is not doing all it should to support growth in both productivity and the economy.

Education Contributes to Growing Productivity, Higher Wages, and a Sound Economy

At one point Bracey questions whether education is important to the economy, saying, "What has all this economy stuff got to do with the condition of public education in these United States? Precious little, and that's the point." He then goes on to point out that, despite relatively low scores on the Third International Mathematics and Science Study, the U.S. economy is doing wonderfully well compared to almost any other country. Of course, he has just spent pages telling us that the TIMSS scores are not valid indicators of school quality, but that is beside the point.

Every study that I am familiar with (all the way back to Adam Smith) indicates a relationship between education and economic success. These studies include comparisons among countries and comparisons within single countries over time. But, like all complex processes, the relationship is more complicated than a one-to-one correspondence between a single input and the desired outcome. For example, Bracey argues that spending more money would improve schools and learning. But he would not argue that other factors including what goes on outside of the school building are unimportant. Workforce 2000 which was a fairly good predictor of what has occurred in the years since its publication in 1987 called for improved education. But that was only one of six recommendations. Most economists believe that education has to be accompanied by "appropriate" macroeconomic (fiscal and monetary) policies and "appropriate" microeconomic (regulations and labor market) policies. Some add an entrepreneurial culture.

In any event, there is widespread agreement that education is necessary but not sufficient for economic success. The evidence proving the connection between education and economic success is stronger, by far, than that proving the connection between spending on education and enhanced learning (although I believe that both relationships exist). Of course, the fact that there is a relationship does not guarantee that more money always means a better education or that more education always produces faster economic growth. Indeed, data in recent years challenge the evidence for both relationships.

The following is from an article in the Washington Post:

Older workers without a high school degree are retiring, replaced by younger, better-educated workers. In the past six years, the population of college graduates aged 25 and over increased by about 7.5 million, or 20% well above the 7% growth in the total adult population. Meanwhile, the population of high school dropouts declined by nearly 3 million.4

This increase in the proportion of educated workers should have produced faster productivity growth in recent years; unless, that is, the quality of workers is dropping relative to the economy's needs. The italicized phrase is the key point of both Workforce 2000 and What Work Requires of Schools, a report from the Secretary's Commission on Achieving Necessary Skills (SCANS).5 Yes, schools are better (slightly) at what they used to do. But what they used to do is not good enough any more. Would Bracey go to a hospital whose performance was only slightly better than it was in 1960? Would he prefer that schools teach pre-World War II courses in history and science better than ever but ignore what has happened since then? Schools may teach what one had to know and be able to do to make a good living in the postwar period up to 1973. But they do not impart the skills required by a good career in today's economy. As a result, there is a skills shortage.

Skills Shortage

Bracey says that the claim of an imminent skills shortage in Workforce 2000 is wrong. Well, if one looks at the increasing amount of education of the average American worker, Bracey would seem to be correct. Quoting from Anthony Carnevale (a source Bracey also uses), "In 1959, 52% of American workers did not have a high school degree; the figure was only 14% in 1995. Meanwhile, the wage premium separating high school and college graduates grew from 49% in 1979 to 89% in 1993."6 Bracey's response was that the 14% of American workers without a degree in 1995 constituted a "less able pool of students" (read "less skilled") than the 59% in a similar place 36 years earlier.

Perhaps there is confusion over what the word "shortage" means. The fact that employers are willing to pay a growing premium for more education indicates that there is a "shortage" of skilled workers. But that does not mean that skilled jobs are going unfilled; it means that fewer skilled jobs are being created because it costs too much to fill them. In other words, there are not empty desks waiting for the next technician. The seat is now filled by a less-skilled person doing work that is less productive.

Underinvestment in human capital mirrors the situation that arises when there is underinvestment in physical capital. Insufficient (or misdirected) savings and investment create a capital shortage that reduces productivity growth. The capital shortage does not mean that there is no capital or that equipment is "missing" from the production floor. It means that the price (the interest rate) is too high to call for the "optimum" level of investment. Companies make do with the old factory or machine tool or computer, and productivity growth stagnates. Insufficient (or misspent) educational spending creates an analogous skills shortage that also retards productivity growth. The premiums that some employers are now paying to acquire new workers in information technology are evidence of a shortage. Some firms are unwilling or unable to pay the bonus, and a new productivity-enhancing project goes undone.

Perhaps the confusion arises because of BLS projections that so many unskilled jobs will be created. However, employers can realistically create jobs only for people who can fill them.

The trends in supply and demand clearly indicate a skills shortage. The supply of well-educated workers is increasing and so is their pay relative to the pay of those with less education. Even though the pay of both groups may be decreasing, the pay of low-skilled workers is decreasing faster.7

The ambiguous meanings of statements made by President Clinton, Vice President Gore, and others have generated additional confusion on this subject. Bracey presented the "Statistics from Thin Air Award" to the President and Vice President for stating that "60% of all jobs will require advanced technological skills." It is not clear what skills they meant, but Bracey thinks these are the skills needed by "operators, fabricators, and laborers" and by those engaged in "precision production, craft, and repair" in other words, technology used on the production floor or at construction sites. As Bracey points out, these occupations account for only a quarter of all jobs in the U.S. economy and a declining share of the total jobs.

It is more probable that Clinton and Gore were referring to skills used in offices and laboratories. But what specifically did they mean by those "advanced technological skills" not possessed by the majority of high school graduates? The question of whether there will be a "skills shortage" depends on the specific kinds of competencies that the 21st-century workplace will require and whether schools are teaching them.

Competencies New and Old

If education is going to help narrow the earnings gap, then schools, especially those in urban centers, will have to change how and what they teach and assess. Bracey quotes a report by Carnevale and Stephen Rose about the growing importance of office jobs.8 The authors emphasize that the office sector is not composed solely of people doing routine office work. "It employs the decision-makers in management, supervision, coordination, promotion, and planning." Such positions include lawyers, accountants, computer specialists, editors, sales reps, and other executive, professional, and technical jobs. Carnevale and Rose refer to these and other office workers as requiring "specialized high-tech skills." Does developing a budget on a spreadsheet or preparing a multimedia presentation require high-tech skills? Are these part of the advanced technical skills that Clinton and Gore have in mind when they refer to the requirements for 60% of jobs in the 21st century? What knowledge, skills, and abilities do graduates need in order to have a decent career in the early part of the 21st century?

I was executive director of SCANS, which attempted to answer this last question. Our response was framed in terms of five competencies and a three-part foundation.9 Only one of the competencies refers to "technology." This competency includes, for example, the ability of a dentist to choose as well as use the equipment he or she will purchase. A related skill would help a manager choose and use a database. Another competency refers to the so-called soft skills, such as teamwork, negotiating, and teaching. Even these activities may be technical, depending on the subject. (Negotiating a contract about a technical piece of equipment or teaching a scientific or technical subject would qualify.) Another competency understanding and designing systems is generally "technical," even if the system is an economic or social one. Planning the competency of allocating money, time, space, and staff is also technical. The final competency is acquiring, evaluating, organizing, and communicating information. This competency may or may not be technical, depending on the nature of the information and the technology employed.

Do Clinton and Carnevale mean the SCANS competencies when they refer to high-tech or advanced technical skills? I don't know the answer to that question, but I do know that the person who possesses the SCANS competencies has a good chance of success.

We at Johns Hopkins University have been experimenting with a means of blending instruction in the SCANS competencies with academic learning. Our solution is to teach academic skills in the context of career situations. Electronic case studies or "scenarios" are established (via a CD-ROM), and students use algebra and writing skills, for example, to develop a marketing plan or determine where to locate a factory. Since the students (who are in high schools and community colleges) work in teams on multiweek projects, faculty members have an opportunity to teach and assess their "soft" skills. Since students have to develop budgets in a spreadsheet or determine pollution fallout using weather data, we can also teach and assess academic knowledge (e.g., algebra and physics) and the "hard" or technical SCANS competencies (e.g., allocating money and space).

Such changes in teaching and learning will require new assessment strategies that go well beyond traditional multiple-choice tests. And these changes will also require us to expand the way we keep records of student learning. The current academic transcript records only academic knowledge. If students acquire the technical and teamwork skills that employers seem to demand, there is no place to document that capability. Thus the upshot is that there are few incentives for faculty members and students to teach or learn these skills. An additional part of our work will be development of a "career transcript" that records SCANS or SCANS-like competencies. We believe that this transcript will become a record of lifelong learning from high school, through college, and beyond.

Can education serve the economic needs of the nation and its students? We believe that it can, without sacrificing education's other goals. The solution to the problem is not to make schools more "vocational." Indeed, with computers handling more of the routine work, schools will need to teach creativity. Otherwise, they will not be preparing students for the 21st century. And the narrow goals that are tested by TIMSS and similar exams must be taught and assessed in context. The outcome will be a richer and more humanistic school system that contributes to our economic well-being, citizenship, and personal fulfillment.

1. William Johnston and Arnold Packer, Workforce 2000 (Indianapolis: Hudson Institute, 1987).

2. Tim Smart, "Productivity Gains Are Holding Off a Major Slump," Washington Post, 11 November 1998, p. C-9.

3. "U.S. Productivity Growth Up in 3rd Quarter," Bloomberg News, 11 November 1998, p. B-2.

4. Robert Lerman, "Wage Inflation? Not to Worry," Washington Post, 26 October 1998, op-ed page.

5. Secretary's Commission on Achieving Necessary Skills, What Work Requires of Schools: A SCANS Report for America 2000 (Washington, D.C.: U.S. Department of Labor, 1991).

6. Anthony Carnevale, Education and Training for America's Future (Washington, D.C.: Manufacturing Institute, 1998), p. 6.

7. For a more detailed analysis, see Arnold Packer, "Skill Deficiencies: Problems, Policies, and Prospects," Journal of Labor Research, Spring 1993, pp. 227-47.

8. Anthony Carnevale and Stephen Rose, Education for What? The New Office Economy (Princeton, N.J.: Educational Testing Service, 1998).

9. Secretary's Commission on Achieving Necessary Skills, op. cit.

ARNOLD PACKER is chairman of the SCANS/2000 Center and a senior fellow at the Institute for Policy Studies, Johns Hopkins University, Baltimore.
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Author:Packer, Arnold
Publication:Phi Delta Kappan
Date:May 1, 1999
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