The Incapacity of Our Talent Pool


The French poet Valery said, "The future isn't what it used to be." Alas, that is true in ways he never imagined.

While most of the 20th century was obsessed with human plentitude and the belief there were insufficient job opportunities for the growing population, the 21st century will be based on a labor scarcity. For children of the Depression, this is an unprecedented historical moment. As my father used to say continually, "Thank God I have a job."

Clearly, many firms are still downsizing. Jobs are being lost, and lives adversely affected. The 50-year-old employee released during a downsizing cycle is not unlike the security-conscious products of the Depression. He or she is part of current reality, a very sad part of it.

But the emerging reality is strikingly different. In some respects it is like the 1820s with the construction of the Erie Canal and 1900 with the Panama Canal--periods when labor was in demand.

Envision, if you can, the simultaneous construction of 20 Panama Canals linking one region of the world to another in a cyberspace autobahn, and you begin to recognize the potential market for labor in the future.

Human capital will be the scarce and valuable commodity of the future, and skilled labor will command enormous wages.

Aging Realities
A demographic profile of the future makes that clear. Between 1995 and 2020, the over-65 population in the United States will increase by 60 percent, the 45-to-64 population by 34 percent and the 18-to-44 population by 4 percent.

As baby boomers retire in unprecedented numbers, available jobs will increase correspondingly. Note that 87 percent of those eligible to receive Social Security accept reduced rates of compensation to retire at 62. And keep in mind that a healthy person at age 62 is likely to live at least another 20 years.

Then consider that in the 1930s when Social Security was introduced, the average life expectancy was 62 and Social Security payments did not begin until age 65. The system appeared to be a low-risk, low-expense actuarial winner.

To avoid imposing enormous wage taxes on Generation Xers to support the immense population of retiring baby boomers, the age for Social Security eligibility will rise to reflect current aging realities. Similarly, the most striking thing the government can do to reduce pressure on the system is to encourage older workers to remain in the workforce, by eliminating the earned income penalty on Social Security. The present threshold of $12,500 for workers over 65 simply forces more into retirement.

Just as training is needed for the young, we must recognize the need for skilled employment for the elderly. The labor scarcity applies to young and old alike.

For the economy to grow at 2.5 percent annually, the labor force grew at an annual rate of 1.8 percent. Extrapolating to the first two decades of the next century, labor growth is likely to decline to 1.1 percent, thereby dramatically affecting national growth rates just when pressure on Social Security and Medicare will be greatest.

A Talent Drought
At the outer edge of this debate is a lugubrious scenario in which the talent drought undermines our national economy and we lose our competitive advantage in technology. Harris Miller, president of the Information Technology Association of America, said, "This is like running out of iron ore in the middle of the Industrial Revolution."

Despite impressive starting salaries, most young people steer away from technical fields. Although some analysts blame boredom on the job, I believe the true explanation lies elsewhere.

After all, lots of jobs are fairly uneventful, and with average salaries for computer programmers hovering around $70,000, there ought to be many eager applicants on the horizon. The problem is all too many students who graduate from American schools are insufficiently grounded in the skills necessary even to be trainable to become computer specialists.

It is no coincidence that U.S. technology companies have set up operations in India, Ireland and the Philippines to take advantage of skilled labor overseas. Also, some 15,000 foreign professionals under federal immigration law come here each year to engage in computer-related employment, and industry leaders are lobbying to raise the immigration cap.

If the global employment market addresses the U.S. labor shortfall, good jobs for Americans will become good jobs for foreigners. We are not building a skilled labor force for the future because we have allowed an inferior education system to ill-prepare our future employees.

Microsoft has established a division to train recruits in skills that used to be part of the high school curriculum. The director of the Computer Task Group in Buffalo, a company that provides information technology specialists to corporations, admits she will train "anyone she can find."

But how do you train computer programmers when much of the prospective employment pool already has been trained in incapacity? Rather than spend millions of dollars on training programs directed by the federal government--an effort that must fail because the prospective employees are not sufficiently educated to benefit from it--President Clinton would be well advised to urge the states to impose math and language requirements sufficiently rigorous to meet the demands in the technology labor market.

Filling the Void
As long as schools remain derelict in their duty to require demanding standards of academic attainment, the labor shortage will persist. It may be true many of a programmer's duties are not very stimulating, and that may discourage some young people from entering the field. But when one considers the opportunities that now exist and the relatively high salaries in the computer world, it is a shame our schools are not preparing students to fill the labor void.

Imagine telling a student with no experience and limited skills that he or she can find a job that in a few years will be paying $70,000 per year. You might think the corporate doors would have to be reinforced to prevent a stampede. That such jobs go begging demonstrates that the U.S. educational system is not doing its job.

If the United States loses its technological edge because of this labor shortage, the blame will not rest with business and industry, which has been sensitive to the supply and demand equation. Rather, fault will lie with an educational system that has been unable or unwilling to transmit the requisite skills to prospective employees in the advanced technological age we are entering.

Return to Prosperity
Where do we go from here? I, for one, don't despair, in large part because markets always respond to labor scarcity by putting a premium on human capital. And the knowledge explosion born by the Internet already is changing the educational landscape. But schools must respond to the opportunity and quickly.

The next big stock market will not be in high-yielding corporate securities but rather in the human capital market, where the debt created by college loans and training programs can be converted into an equity in individual career futures.

What is axiomatic about this nation is that we have the capacity to adapt. That is as American as apple pie.

As the world changes, we must adapt to prosper. That is not only the American legacy, it is our national prescription for success.

Herbert London is the president of the Hudson Institute, 5395 Emerson Way, Indianapolis, IN 46226. E-mail: herb@hudson.org. He also is the John M. Olin professor of humanities at New York University.