The Economics of Workplace Education

America embarked on a remarkable social experiment 100 years ago: State and local governments built an expensive and free secondary public school system open to the mass of youth, male and female.

Many factors came together to create the "high school movement" but economics was key. Business worried about a lack of skilled workers for the new high-tech economy marked by the spread of electrification, the rise of the internal combustion engine, and the embrace of scientific research by industry. Government leaders fretted about falling behind rival nations. The radical idea took hold in the United States that people and training, not technology and capital, were key to robust economic growth.

"Education might uplift, build moral fiber, enhance art, literature, and culture, and produce public officials, as even the ancients knew," writes Claudia Goldin, economist at Harvard University. "The novel concern at the dawn of the 20th century was that post-literacy training could make the ordinary office worker, bookkeeper, stenographer, retail clerk, machinist, mechanic, shop-floor worker, and farmer more productive, and that it could make the difference between an economic leader and a laggard."

The high school movement was remarkably successful. In 1910 a mere 9 percent of 18-year-olds had a high school diploma, according to Goldin and her Harvard colleague Lawrence F. Katz. Many of those graduates were from better-off families that sent their children to private academies that charged tuition. By 1940 the high school graduation rate had swelled to more than 50 percent and most of those students got their diploma at a public school. Equally striking, the scholars calculate that in 1955 the high school enrollment rate in the United States. was just under 80 percent. No European country had a comparable rate of more than 25 percent.

The next dramatic step up in mass education came after World War II with the G.I. Bill of Rights. It sent millions of returning veterans to college.

For much of our history, each generation has been better educated than the previous one

But this heartening story of a rising tide of education has taken a turn for the worse. For the first time, America's overall educational achievement is deteriorating and the picture is worst for the poor, minorities, and inner-city students. The lifelong price of a poor education measured in jobs and incomes for these students has gone up sharply in recent decades. Brawn and a willingness to work no longer cut it.

Despite America's more than 10 percent unemployment rate, business is looking for educated workers that can operate in highly complex organizations and in an environment of rapid technological change. Job growth in the future will be in the parts of the economy that require at least some college education, including health care and the education industries. Even manufacturing jobs require higher degrees, such as aircraft mechanic and environmental engineering technician.

"Of particular concern is the future of good jobs, those that pay high wages and provide a ticket to the middle class," says a recent report by the White House Council of Economic Advisors. "In today's economy, these jobs disproportionately employ workers with education and training beyond the high school level."

The Obama Administration and much of the nation are focused on increasing the numbers of college students. But what about those that never finished high school, let alone attended college? It's starting to dawn on many policymakers and reform advocates that the epicenter of education trouble is high school dropouts.

The facts are dismaying. The unemployment rate of high school dropouts is steep. They're essentially barred from good jobs in the modern workplace. They're more likely to be incarcerated: High school dropouts account for 6.3 percent of the 16- to 24-year-olds that were in jail and prison in 2006-07, according to the Center for Labor Market Studies, Northeastern University. That's far higher than the 1 percent figure for high school graduates. Dropouts are also likely to be poor. The Center calculates that the average high school dropout will have a lifetime negative net fiscal contribution to society of some -$5,200. The average high school graduate generates a positive lifetime number of $287,384 and a college graduate (B.A. only) $793,079.

The problem has been growing over time. The growth in high school graduation rates has slowed since the 1970s. Although there is controversy around the actual dropout numbers, it does appear that America's four-year high school graduation rate now hovers around 69 percent, according to the Alliance for Excellent Education. Some minority groups do even worse, a mere 55 percent for Hispanics and 51 percent for African Americans. Many of the world's wealthiest nations have caught up with - and in some cases surpassed - the United States in educating their young people. Even poor countries are investing heavily in secondary and college education, especially as their economies grow and incomes rise.

There is a great deal of reform activity going on at the local, state, and federal levels to reduce the dropout rate and open up opportunities for dropouts. For instance, thousands of parents, teachers, business executives, and civic leaders have embraced charter schools that are free from many of the regulations and bureaucratic hurdles that constrain existing public schools. The hope is that these students will get a better education and graduate on time. Another example is the renewed interest in vocational high schools (often called Career and Technical Education in the more recent literature.) The popularity of a full-time vocational high school education declined sharply starting in the early 1980s. Schools put a greater focus on preparing students for college, and blue collar jobs were disappearing fast. There are only 900 career and technical education high schools in the United States, a mere 5 percent of the approximately 18,000 high schools in the country. However, a majority of public high schools do offer some occupational courses. The dropout rate with vocational schools has been substantially lower than the overall secondary school dropout rate. For instance, the National Academy Foundation supports nearly 400 public career academies in 41 states, and it reports a 90 percent graduation rate compared to some 50 percent overall in many of the communities it serves.

For adults, the government at all levels currently supports a number of remedial efforts, including the high school equivalency program General Educational Development (GED), adult basic education programs (ABE), and English as a Second Language. Many of these programs are located in community colleges around the country. The record of these adult programs is largely positive, although the performance varies by state.

Still, completion rates are low. It turns out that if "drill and skill" didn't work for people in high school it often doesn't work when they're older. "Academics who work on the problem think the solution is in academia," says Tony Carnevale, head of the National Center for Education and the Economy. "That's their bias."

That's why an old idea has been revived and turned into a leading edge idea: Turn the workplace into a learning center.

The importance of the job as classroom was illustrated during a seminar organized by the late Columbia University economist Jacob Mincer in the early 1990s. A labor economist, Mincer was one of the University of Chicago-trained economists, along with such luminaries as Theodore Schultz and Gary Becker, who developed the modern theory of human capital. The seminar focused on the role that education played in widening income inequality during the '80s. Among the participants was Fischer Black, the legendary scholar who co-created in 1973 the main method financiers still use to value options-the Black-Scholes model. At the time he was a partner at Goldman Sachs, a key member of the investment bank's quantitative brain trust. The conversation kept revolving around the gap between earnings of high school-educated workers and college-educated workers. Black said nothing for a long time. Suddenly, he said, "Why are we talking about school so much? What you learn on the job is nine to 11 times what you learn at school. That seems a reasonable estimate to me."

It's not only that many people learn more on the job. It's that they know why they are learning to figure percentages, to write complete sentences, to engage with a team. "Applied learning or learning in context is powerful for a lot of people," says James Stone, professor of education at the University of Louisville.

Many innovative "Workplace U" programs around the country have suffered during the Great Recession. Companies cut their per-worker learning expenditures by 3.8 percent in 2008, according to the American Society for Training & Development. It's likely that further cuts were made in 2009. State and local governments have been struggling with decreased funding and increased demand.

Nevertheless, shifting the center of learning to the workplace offers promise for giving the working poor and the poor a chance at an education - and a reason for putting in the time and effort.

The radio documentary highlights three innovative "Workplace U" programs, and the Web site offers up links to other initiatives around the country.

Back to Workplace U.

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