Morici: Redefine education to rekindle growth

Technical training is the only way to ride the wave of innovation

Morici-Column-SigAmericans face daunting challenges beyond the apparent grasp of the principal contenders for president. Rekindling growth and creating enough good-paying jobs will require wholly rethinking how we educate and socialize young people for work.

Economic growth since the financial crisis has been a disappointing 2.1 percent, and this year it has slowed to about 1.6 percent. That is not enough to finance our commitments to seniors, rising health care costs and an adequate national defense, never mind provide for federally subsidized child care and other initiatives proposed by Donald Trump and Hillary Clinton.

Consumers are spending again, but growth is held back by lackluster business investment. And more is at work than high business taxes, onerous regulations and competition from Chinese imports.

With accelerating technological progress – 3D printers, automated checkout machines and pocket phones that double as personal assistants – economists would expect a surge in capital spending and the creation of significant new, higher-paying jobs to implement those innovations. Not just for whiz-kid engineers and industrial designers but also for folks to make and service the devices that replace assembly line workers, store help and clerical workers.

Consequently, the dollars spent on new capital equipment throughout the economy remain depressed, and the new jobs created to manufacture and deploy new technologies are simply too few to adequately employ the working-age population.Those haven’t happened for two reasons.

Many of the newest machines are fairly inexpensive to install and run, hence businesses can modernize and expand with less capital than in the past. And as retailers and other service enterprises automate and manufacturers switch over from assembling products to making smart machines and robots that do all these things, they face profound skill shortages among American workers.

The gig economy is so potent because it permits small businesses to scale up and down, and empowers workers with flexible skills and the capacity for self-direction.

Big tech companies like IBM and Hewlett-Packard are shrinking, and Apple and Microsoft are more challenged to grow, not because they can’t innovate but because smaller enterprises and the self-employed often can do so more nimbly and efficiently. The latter often can provide business services, hardware and software with more flexible product designs and fewer workers.

Simply, most big companies are locked into high administrative costs – eight-figure salaries for executives to preside over armies of paper shufflers – bureaucratic decision-making, and rigid, quasi-permanent employment relationships that make responding quickly to changing customer expectations too impractical, and redeploying and retraining workers as technology evolves too costly.

Many big-company workers develop job-specific skills only to be jettisoned by the next wave of innovation and retrenchment, and then they can hardly match their old salaries in the labor market.

The gig economy is so potent because it permits small businesses to scale up and down, and empowers workers with flexible skills and the capacity for self-direction. More than two-thirds of contract workers do so by choice because they revel in the freedom it offers and ability to define their own career path.

Sadly, the American work force is sharply divided between those educated at top universities, colleges of engineering and better post-secondary training programs – who possess the technical and entrepreneurial skills to move frequently among employers or be self-employed – and those who attended second-tier colleges or have general high school diplomas and often still expect – or at least hope – to land a position with an employer who offers training, good pay and a career track. Unfortunately, the IBMs, back offices of banks and government bureaucracies are not creating enough of those kinds of positions, and many are disappearing altogether.

Further subsidizing college tuition and more resources for public schools won’t address that problem. University presidents and other education leaders are too disinclined to downsize liberal arts to adequately increase opportunities to study engineering or require that each child learn to write code instead of reading Chaucer. And faculties are too locked into promotion ladders and tenure to comprehend the gig economy and prepare young people for what they may expect when they leave school.

At minimum, we need to dramatically expand engineering and other applied arts as was once the primary mission of state universities, send fewer students to four-year colleges, and steer more young people and resources into vocational tracks at community colleges.

The Germans have great success with skills-based education through cooperative programs with industry – and that should be our point of departure. In case anyone has noticed, its industrial sector is thriving while ours goes begging for qualified workers to modernize and grow.

Peter Morici is a professor at the University of Maryland’s Robert H. Smith School of Business. He served as chief economist of the U.S. International Trade Commission from 1993-1995. He tweets @pmorici1.

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