Education is no longer the economic cure-all

Analysts warn that more training will not stop the outsourcing of jobs to
other countries


By PETER G GOSSELIN

WHEN US President George W Bush met with a group of business school students
in the Indian city of Hyderabad last week, he came face to face with the
people whose first-rate education, rising aspirations and readiness to work
for a fraction of US wages are tugging jobs overseas and away from even
well-educated Americans.

Mr Bush used the occasion to offer advice to workers back home: Get more
training. 'Let's make sure people are educated so they can fill the jobs of
the 21st century,' he said.

But the president's assertion that the answer to foreign outsourcing is
education, a mantra embraced by Democrats as well as Republicans, is being
challenged by economists and other scholars. Education - as delivered by the
nation's colleges, universities and technical schools - is no longer the
economic cure-all it once was, nor the guarantee of financial security
Americans have come to expect.

'More education has been the right answer for the past few decades,' said
Princeton economist and former Federal Reserve vice-chairman Alan Blinder,
'but I'm not so convinced that it's the right course' for coping with the
upheavals of globalisation.

Not that Mr Blinder or other experts think workers would be better off not
going to school. Rather, they point to evidence that education may not offer
as much protection against globalisation as it once did and as much as Mr
Bush and others claim.

'One could be educationally competitive and easily lose out in the global
economic marketplace because of significantly lower wages being paid
elsewhere,' said Sheldon Steinbach, general counsel of the American Council
on Education, representing most of the nation's major colleges and
universities.

Some analysts believe that what Mr Steinbach describes is already under way.

Starting in 1975, the earnings difference between high school and
college-educated workers widened for 25 years. But since 2000, the trend has
stalled. Census figures show that average after-inflation earnings of
college graduates fell by more than 5 per cent between 2000 and 2004, while
the earnings of those with only high school degrees rose slightly.

Most studies suggest that beyond the manufacturing sector, the 'offshoring'
of jobs has been comparatively modest. But some analysts say the ground has
been laid for a substantial pick-up. In a recent paper, Mr Blinder offers a
rough estimate that suggests that as many as 42 million jobs, or nearly
one-third of the nation's total, are susceptible to offshoring.

These analysts warn that more education will do little to stop the outflow.

'What's missing here from both parties is a global economic strategy and a
worker adjustment strategy,' said Anthony Carnevale, a senior fellow at the
Washington-based National Center on Education and the Economy who was
appointed to major commissions by both Presidents Ronald Reagan and Bill
Clinton.

'When they don't know what else to do,' he remarked, 'there's a tendency
among politicians to stand up and say: Education.'

In Mr Bush's case, arguing for more education draws particular fire from
educators because the administration's record of providing money to support
the training he advocates has been weak.

He has defended outsourcing as an economic reality and a trend that will
work in America's favour. But he was exceptionally candid about its
downsides during his exchange with the Indian university students.

'People do lose their jobs as a result of globalisation and it's painful for
those who lose their jobs,' he said.

Even so, he continued, the only way forward for Americans is through
improved education and pro-growth economic policies, not protectionism.

In coming down against trade barriers, he extended policy positions he has
taken in recent weeks that favour US openness and unfettered interaction
between countries and corporations over other concerns. These positions have
fuelled intense controversy, even among Republicans.

Mr Bush came out strongly, for example, in favour of a plan by an Arab
company to take over operations at port facilities in six US cities, though
White House aides subsequently said the administration backed a 45-day
review. The proposal by Dubai Ports World provoked bipartisan criticism that
Mr Bush was shortchanging national security.

He also has offered a guest-worker programme that's faced criticism in
Congress, especially from conservative Republicans who have argued that his
plan would encourages more migrants to enter the country illegally.

Mr Bush's latest plug for the economic importance of education, especially
college and graduate education, may contain the seeds for another
controversy. Although he has endorsed education rhetorically, many analysts
say that he has not put federal money where his mouth is.

'The president's record for supporting college and post-secondary jobs
training is anaemic,' said Mr Carnevale.

Total spending on Pell Grants, Washington's chief means of providing
financial aid to poor college-bound students, rose from US$10 billion in the
2001-2002 school year to US$13.1 billion last year, but that was almost
entirely because more students qualified. The average amount of aid per
student barely budged in after-inflation terms.

Mr Bush's 2007 budget plan calls for cutting Education Department spending
by eliminating a major loan programme to help needy students attend
community college. Last week, Senator Arlen Specter, chairman of the Senate
Appropriations subcommittee that oversees education, labelled the proposal
'scandalous' and 'insufficient'.

But Mr Bush may face a bigger challenge than defending the dollar amounts
his administration directs to higher education. He may find himself having
to argue for what has been accepted as fact - that going to college or
graduate school is a route to high pay and protection against global
competition.

What's undermining these comfortable assumptions, according to analysts, is
a basic change in the kinds of jobs and careers that are vulnerable to
outsourcing.

Declines in transportation costs and improvements in communications
technology - including computers and the Internet - are vastly expanding the
range of things that can be bought and sold across international borders
and, therefore, the range of American workers who are exposed to
international competition.

Until the last decade or so, most of what could be traded were bulky
manufactured goods that could be boxed up and sent abroad or bought
overseas. That meant American manufacturing workers faced the brunt of
competition. Service workers appeared immune, especially highly educated
doctors, lawyers, computer programmers and financial experts.

But service work can be performed almost anywhere in the world. Many service
workers are finding themselves exposed to the same withering global
competition as their manufacturing counterparts.

'Many people blithely assume that the critical labour-market distinction is,
and will remain, between highly educated (or highly-skilled) people and
less-educated (or less-skilled) people, doctors versus call-centre
operators, for example,' Mr Blinder writes in a recent article in Foreign
Affairs.

This leads policymakers to call for 'more education and a general
'up-skilling' of the workforce'.

But, Mr Blinder writes, the critical distinction in the future may not be
between the more-educated and the less-educated, but between 'those types of
work that are easily deliverable through a wire . . . and those that are
not'.

Some education-heavy jobs such as computer programming are easily
deliverable by wire and many programming jobs are being shifted overseas, an
irony in an era when many had thought that tech-savvy workers would be among
the economy's big winners. - LAT-WP


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