U.S. Must Retool Workers to Keep Pace, Panel Warns

A bipartisan commission of prominent American businessmen, educators and labor leaders said Monday that the United States’ productivity crisis can be solved only by radically restructuring both the country’s educational system and its basic manufacturing philosophy along the lines of industrialized nations of Western Europe and Asia.

The Conference on the Skills of the American Workforce, headed by former U.S. Labor Secretaries William E. Brock III and F. Ray Marshall, called for a rigorous national program that would require all students to obtain certificates of academic achievement by age 16, a system of apprentice-like certification for older students who do not go to a four-year college and a requirement that businesses spend an amount equal to 1% of their payroll on worker training.

The commission said the United States must quickly invest tens of billions of dollars in public schools and on-the-job training to emulate its overseas competitors, whose workers are far better educated and handle a far broader range of responsibilities, resulting in more productive companies and higher-quality goods and services.

Inherent in the recommendations are political and economic choices the United States has long resisted: a national standard for education and a national industrial policy that uses tax incentives or laws to push businesses away from short-term profits and toward longer-term investment in worker skills.

However, members of the commission, which based its findings on a year of interviews with 2,000 people in 450 businesses in the United States, West Germany, Sweden, Denmark, Ireland, Japan and Singapore, said it is time for drastic economic changes.

“By silently accepting America’s descent into a low-skill, low-wage economy, we are on the brink of sentencing our children and ourselves to a lower standard of living,” said Brock, who was labor secretary under President Ronald Reagan and now runs a consulting firm specializing in international trade.

Reflecting a harsh view of American business management, the commission said improvements in education must be accompanied by drastic shifts in the way most employers manage their “front-line” production workers.

The commission was created by the Rochester, N.Y.-based National Center on Education and the Economy, which is headed by Apple Computer Inc. Chairman John Sculley. The center is an outgrowth of the Carnegie Forum on Education and the Economy, which has produced several reports on restructuring education.

The report, researched by two dozen corporate executives who worked on loan from a variety of companies, is regarded as the broadest effort yet to meld growing concerns about the related crises in education and industrial productivity.

It said traditional mass production, in which jobs are broken into the most simple rote tasks, has been made obsolete. More complex production processes and more frequent introduction of new products have required companies to add many management levels to keep tabs on line workers. By contrast, the best companies in the world--which the commission said it found far more readily overseas--”reduce bureaucracy by giving autonomy to front-line workers.”

Most American businesses, the report said, continue to rely “on an outdated system in which a small educated and highly trained elite directs the activity of another three-quarters of our workers with minimal skills.” Of the $30 billion that business spends on employee training, only 7% reaches front-line workers.

Rather than increase productivity through fundamental improvements, the vast majority of businesses have relied on cutting wages or “outsourcing” work to Third World countries, a tendency that has kept hourly wages of American workers 15% behind the pace of inflation in the last decade.

However, business can squeeze no more productivity out of the work force through this “low-wage” strategy without dangerously widening the gap between the rich and poor classes, the report said.

Instead, employers must be prodded to pursue productivity through a “high-skill” system, which requires better-educated front-line workers to be deployed as production teams that perform many of the tasks now accomplished by layers of middle-management supervisors, the report said. This approach is intended to cut production costs, raise profits and permit redeployment of middle-management personnel as a business grows.

Only about 5% of American businesses currently use the team-production approach, which has won far swifter acceptance during the last decade in Western Europe and Japan, the report said.

Although the report made no recommendation about changes in U.S. industrial relations, it noted that most Western European countries have strong unions and government policies that make it far more difficult for companies to lay off workers or cut their pay. This has forced those businesses to pay higher wages than U.S. companies and thus forced them to become more skill-conscious in raising productivity.

By contrast, the United States, having allowed such issues to be resolved by its market economy, “is faced with a work force crisis that most of us are unaware of,” Sculley said Monday.

Added Brock: “It is clear we are only paying lip service to improving skills and productivity.”

American worker productivity has fallen this year by an annual pace of 2.7%, the poorest showing since the 1981-82 recession. Much of the decline is related to the overall slowdown of the economy and is typical of an economy at the end of an expansion, some analysts say.

What was troubling about the new study, Brock said, was that 90% of the employers interviewed did not consider low skill levels a problem and that the vast majority were more concerned about an applicant’s social behavior or punctuality than his or her educational background.

One of the most critical recommendations of the report is that the United States establish a system to allow an orderly school-to-work transition by non-college-bound students.

It calls on the secretary of labor to develop a national system of industry-based standards to professionally certify young men and women. These certificates, which the report hopes would eventually be needed to obtain jobs in particular industries, would be granted after two to four years of combined study and apprentice-like work.

For example, a certificate in retail work could involve courses in psychology, business, customer relations and marketing.