Solving America's Skilled Labor Shortage Means Rethinking School
Credit: Back to School image via Shutterstock

What's the United States' most valuable resource? It isn't petroleum, natural gas or coal, but something infinitely more difficult to measure: the cognitive skills of its workers. Education experts agree that maintaining a highly skilled workforce is essential to the continued economic prosperity of any knowledge-based economy. But new research suggests that America's stores of skilled labor may be running low.

A recent survey of workers in 23 industrialized countries — the International Survey of Adult Skills (ISAS) — found that only 9 percent of U.S. adults perform at the highest proficiency in math. In reading, one in eight U.S. workers performed at the highest level of proficiency. Overall, American workers aged 16 to 65 were found to possess below average cognitive skills — like basic problem-solving, reading and math skills — when compared to workers in other countries.

And the bad news doesn't end there. The results of the ISAS also indicate that many of the most highly skilled American workers — those who performed at the highest level of proficiency in reading and math — were also the oldest. In other words, the most skilled workers in the United States are those getting ready to leave the workforce.

But does this dearth of human capital mean that the United States will lose its place as leader of the global economy? Eric Hanushek — a Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University and expert on educational policy — doesn't necessarily think so. He believes that the imperiled nation can still achieve continued economic prosperity. All the United States has to do, Hanushek suggests, is overhaul its current system of public education, a task that has proven to be particularly difficult in recent decades.  

In his new book, "Endangering Prosperity: A Global View of the American School" (Brookings Institution Press, June 2013), Hanushek — along with Paul Peterson, director of the Program on Education Policy and Governance at Harvard University, and Ludger Woessmann, professor of economics at the University of Munich — explains why dramatic changes need to be made to the American school system in order to salvage the country's economic future. Based on comprehensive research of public schools in all 50 states, Hanushek Peterson and Woessmann explain the potentially devastating effects of maintaining the status quo, as well as the possible benefits of raising the level of student achievement in the United States.

In an email interview with BusinessNewsDaily, Hanushek explained why public education is endangering the United States' role as an economically competitive nation and why maintaining the skills of the American workforce is a surefire plan for ensuring prosperity.

BusinessNewsDaily: If nothing changes within the U.S. school system over the next several years, what do you predict will happen to the American economy in the decades to come?

Eric Hanushek: In the short run, nothing will look much different. We have a strong economy that will continue to recover from the recession. Over time, we will see countries with higher skills growing faster than the U.S., and they will begin to take over the jobs that are "knowledge intensive." This will leave the U.S. less the technological leader in the world, and our economic supremacy will be eroded.

BND: Please define human capital in the context of your book. How does human capital affect a nation's economy?

E.H.: Human capital is [represented] by the test scores of students —their performance on math and science achievement tests. The key point is using the actual skills of studentsinstead of how long they sat in school. These skills in turn are related to the ability of countries to innovate — to invent new things and to find more efficient ways to produce things. The productivity improvements that come from having not only skilled scientists and engineers but also a skilled workforce lead to economic growth.

BND: You argue that throwing money at American schools isn't the right solution, so what do you believe is?

E.H.: How money is spent is much more important than how much is spent. The key, according to research, is having effective teachers in the classrooms. One way to do this, following the model of Washington, D.C., is to pay effective teachers more and to fire ineffective teachers. But more than that, one needs an effective accountability system, parental choice of schools and more local decision-making.

BND: According to your research, which job skills are U.S. schools failing to teach future workers?

E.H.: The U.S. is falling behind in basic cognitive skills, measured by math and science. This means that all of our college and university programs are doing worse, because they have less-able students to work with. Thus, the basic skills affect the ability of all workers to be productive.

BND: Which school subjects carry the most weight in terms of preparing today's schoolchildren for their role in tomorrow's workforce?

E.H.: All of advanced education rests on having strong basic skills, in the areas of math and reading. These basic skills are key to being able to develop higher-order reasoning and the range of things generally lumped under "college-ready" skills.

BND: You mention that the American economy is increasingly based on innovation and entrepreneurship rather than manufacturing. How does the American educational system need to change to account for this shift?

E.H.: The American economic system rewards innovation and incentives. People who develop more skills are prepared to enter this economic system and to invent new things and to develop new businesses. But the skills they have heavily influence their ability to perform. The American education system needs to lift its game so that its graduates are competitive with those from other countries. Otherwise, we will see that Silicon Valley increasingly relies upon people schooled in other parts of the world.

BND: What are some of the economic benefits that would accompany higher performance in American schools?

E.H.: Both individuals and all of society benefit from higher skills. Individuals with higher skills on average earn considerably more than those with lower skills throughout their lives. But the nation will grow faster if the schools lift the level of skills to, say, those of Germany or of Canada. If we lifted our school performance to that of Germany, history suggests that our economy would grow faster, yielding trillions of dollars of added GDP. In fact, the present value of added GDP for getting our schools up to those in Germany would, by historical standards, be worth 10 times the total cost of the 2008 recession. 

Canada would put useven farther ahead, reaching a present value of some five times our current GDP. Another way of looking at it is that getting our schools up to the level of Canadian schools would yield gains equal to a 20 percent higher paycheck for every worker in the U.S. over the next 80 years.

BND: You argue that in the future, the United States will have to rely more on the skills of its workforce and less on other advantages, like low government regulation and free labor and product markets. Why is this? 

E.H.: The U.S. has taken advantage of its favorable economic institutions — low taxes, secure property taxes, free movement of labor, etc. — and we will continue to gain from these. But other nations have seen the value of these institutions and are copying them. Thus, we will see our economic growth fall behind these other countries that have better schools and that, in the future, will also have good economic institutions.

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