Investing in Human Capital

Our education system must do more than produce foot soldiers for the economy by Anthony P. Carnevale

The current wave of education reform has become a play in two acts. The curtain has already come down on Act One, with education standards in place across the country. Act Two, the long march toward the alignment of standards with assessments, curricula and the professional development of teachers and administrators, has just begun.

Act One was the easy part. Act Two will be far more difficult. Setting standards entails little more than making fond wishes for American youth. Meeting those standards will require enormous effort and new resources.

Some say we put the cart before the horse, that we should have provided the resources necessary to meet standards before we raised the stakes on educational performance. Others argue that a superficial alignment among standards, tests and classroom practices will produce little real learning and will fail to produce broader problem-solving, communications or creativity skills.

If the standards-based accountability movement degenerates into a constant stream of failed test performances or is dismissed as superficial "teaching to the test," they say, leaders will get cold feet about accountability. In the worst case, lower standards and a backlash against the standards movement will result.

The current wave of education reform will have its ups and downs as we lurch and learn our way forward. But standards-based reform is here to stay because this time there are relentless economic forces behind it.

The Education Ante

While no one can predict the future, today's economic realities suggest the shape of things to come. One certainty already evident is that in today's new knowledge economy, the way in which we produce and distribute education determines our economic competitiveness as a nation and the apportionment of economic opportunity among individual Americans and their families.

Let's look at the facts.

  • Education has become the key ingredient in the 21st century recipe for growing the economic pie. Human capital in the form of high levels of educational attainment is the collateral for successful technology investments. In modern economies, about 25 percent of increasing wealth and productivity improvements come from investments in technology; the other 75 percent come from increases in educational attainment and related advances in applied knowledge that allow us to use our technology investments effectively.
  • Educational equity pays for itself in increased wealth for all. For instance, if we could equalize the opportunity to learn among blacks, Hispanics and non-Hispanic whites, the resultant productivity improvements would add more than $230 billion in national wealth and $80 billion in new tax revenues every year. No one is going anywhere in the new economy without some postsecondary education and training.
  • Jobs that require at least some college increased from 20 percent of all prime-age jobs (ages 30 to 59) in 1959 to 56 percent of all prime-age jobs in 1997. Access to college has become the new threshold for realizing our individual hopes and aspirations as well as for supporting a family financially.
  • The education ante for good jobs has been driven up consistently. In 1973, for example, 59 percent of managers and professionals had at least some college education and 33 percent had only high school diplomas. By 1998 more than 80 percent had at least some college and 18 percent had only high school diplomas.
  • High-technology jobs follow a similar pattern. In 1973, roughly 60 percent of high-technology workers had at least some college; that number grew to 85 percent in 1998.
  • Education and health care workers always have been highly educated, but even among them, the proportion with at least some college has risen from 83 percent in 1973 to 95 percent in 1998.
  • The proportion of skilled blue-collar workers with at least some college has increased from 17 percent to 28 percent since 1973. The share of clerical workers with at least some college has more than doubled, from 25 percent to 54 percent.

New Skill Requirements

The new economy requires not only higher levels of cognitive skills, but a new set of problem-solving and behavioral skills as well. Going back to basics won't give young Americans the skills they need in the new knowledge economy.

The new skill requirements have emerged, in part, as a result of the changing occupational structure. High-technology employment is growing quickly but still represents fewer than 10 percent of all jobs. Service jobs in education, health care and in white-collar office jobs represent the vast majority of good jobs in the highest quintiles of the wage distribution in the new economy.

Service jobs require greater interpersonal and problem-solving skills because the work entails more human interaction and personalized responses to people's wants and needs. These same skills are required in high-tech and manufacturing jobs as well because the technology itself takes on more of the rote, manual processing tasks, allowing employees to spend more time interacting with each other to meet new competitive requirements.

Unlike the old manufacturing-based economy where simple productivity—high volume at low cost—was paramount, the new economy demands a more complex set of performance standards and workers with the broad skills to meet them. These new standards include quality, variety, customization, customer focus, speed of innovation and the ability to add novelty and entertainment value to products and services.

Companies that meet quality standards require conscientious employees who are able to take responsibility for the final product or service. Variety and customization require workers who are creative problem solvers.

Focusing on customers demands empathy as well as good communication and interpersonal skills. Continuous innovation requires a general ability to learn and work in groups. Adding novelty and entertainment value requires creativity.

Most employers associate problem-solving and behavioral skills with educational attainment, especially college-level attainment. As a result, American employers increasingly use college-level experience as the standard by which to screen job applicants.

Access to the Future

As access to education beyond high school emerges as the new threshold for jobs with a future, readiness for postsecondary education or training for all students has emerged as the bottom line in standards-based reform in elementary and secondary education.

Solid preparation in elementary and secondary school is key to postsecondary enrollment and retention. For instance:

  • Among students whose test scores were in the top quartile of their high school senior class, more than 70 percent had at least some college by age 28; in the bottom quartile, fewer than 20 percent had some college by age 28.
  • Among students from the top 20 percent of the family income distribution, almost 90 percent of those who took a rigorous curriculum received a bachelor's degree, compared with half of those who took a less demanding college-preparatory curriculum.
  • Among students from the 20 percent of American families with the lowest income, 62 percent who took a rigorous college preparatory curriculum completed a bachelor's degree, compared with 30 percent of those who took a less demanding college-preparatory curriculum.
  • Today, only 58 percent of students are qualified for postsecondary education upon high school graduation. By age 28, only about 60 percent of American youth have at least some college or formal training beyond high school—the level of education or training necessary for access to high-paying jobs.

Targeting Investments

As human capital emerges as the critical ingredient in economic growth in the knowledge economy, relentless pressures are mounting to invest more in human capital and to produce it cheaper, faster and better. But the new skill requirements make education reform an expensive agenda that includes the whole pre-K-16 education pipeline.

The knowledge economy is demanding higher quality from K-12 education and expansion of the nation's education system at both ends of the traditional education pipeline by moving toward universal access to pre-K and postsecondary education.

College readiness begins in preschool, especially for low-income students and English- language learners. Low-income children begin public school knowing about 5,000 words, while higher-income students begin school with roughly 20,000 words. A growing chorus advocates universal access to pre-K child development at a minimum cost of about $40 billion.

Aligning standards with assessments, curricula and teacher professional development will require substantial new financial investments to create robust learning environments rather than anemic and rigid systems that focus on narrow education goals.

K-12 educators are still our lowest-paid professionals at a time when we are making even more demands on their performance and looking for more of them in order to reduce class sizes. Moreover, elementary and secondary education is facing costly demographic pressures.

Public schools will need to hire an additional 200,000 to 300,000 teachers if current pupil/teacher ratios are to be maintained, let alone reduced. This is above and beyond the hiring needed to fill vacancies created as teachers leave the profession.

Higher education also will be competing for scarce public funds. There will be 31 million students in the traditional college-age population by 2015, an increase of 4.3 million compared with the year 2000. Results from the National Assessment of Educational Progress suggest that the new youth cohort will be at least as qualified as current high school graduates. As a result, by 2015 the number of qualified postsecondary students could grow by as much as 1.6 million students, and it is not clear that we can afford them.

Currently, states, the federal government, families and endowments pay 35, 21, 22 and 22 percent, respectively, of higher education costs. An additional 1.6 million students could cost more than an additional $19 billion.

If current funding patterns hold, states will need to find more than $6 billion or roughly one-third of the money necessary for funding higher education at a time when states are steadily reducing their share of higher education funding. Moreover, these demographic pressures will arise in the same states that will experience the greatest growth in pre-K and K-12 populations.

Technology won't save us from our resource problems by creating "virtual schools" for new students. In general, our experience with technology in education and other service industries shows that technology adds value more than it reduces cost. Technology eventually can reduce education costs, but initial investments are expensive and the most powerful long-term effects are not to reduce costs but to provide new kinds of added value in the form of quality, variety, customization, convenience, speed and novelty.

We need to reduce costs but we already know that many improvements will cost more money. We should invest more to get better returns on our human capital investments.

Social capital is the collateral necessary for human capital development. Middle-income families from the majority culture have access to social capital in the form of material resources that provide greater opportunity to learn in and outside of school. They also derive supportive social capital and validation because of their membership in the majority middle-class culture.

Many disadvantaged students beat the odds by overcoming low social and human capital investments. But for the vast majority, it's the odds that count.

If we are to ensure an equal opportunity to succeed at school, we will need to spend more money and energy focused on social supports for low-income and minority students, not with the intention of assimilating them into the dominant majority culture but to validate their experience in ways that make them feel welcome and valued.

Questioning Education

The economic pressures behind standards-based reform raise more profound issues as well. The knowledge economy makes education more important in the nation's overall competitive standing and in the career prospects of individuals.

The growing economic importance of education, in combination with the inevitable cost squeeze, will raise fundamental questions about the purposes of education, forcing choices between its economic, educational and cultural roles.

The obvious concern is that the growing economic and vocational value of education may result in a devaluation and diminution of its academic and cultural roles. In a participatory political system and an individualistic culture, the academic and cultural roles of education are critical. Our education system must do more than provide foot soldiers for the American economy.

At the same time, however, education cannot fulfill its cultural and academic missions without paying attention to its economic role. Ours is a society based on work. Access to pre-K-16 education is the threshold for access to good jobs, which create good neighbors and autonomous citizens.

Those who cannot get and keep a good job are unlikely to participate fully in family and community life or in their own intellectual and spiritual development. In the worst cases, those unable to get and keep a job create alternative cultures, economies and political movements that are a threat to the mainstream of American life.

Looking ahead, the relentless forces unleashed by the new global economy ensure persistent demands to achieve high academic standards for all students.

Performance-based outcome standards, rather than time-based standards for promotion and degree requirements as well as for receipt of public funds, are likely to become more prominent. At a minimum, we need to ensure that those standards balance our cultural, educational and economic needs. Beyond that, we will need to make the case that higher standards require higher levels of investments in teaching, learning and the education professions.

However difficult, we need to stay the course on standards-based reform in general, if not in particular, or we will continue moving toward a nation of education-haves and education-have-nots. The first wave of standards-based reform is beginning to crest; we need to swim with it, not against it.

Anthony Carnevale is vice president for public leadership with the Educational Testing Service, 1800 K St., N.W., Suite 900, Washington, D.C. 20006. E-mail: acarnevale@ets.org