Speeches by Secretary Elaine L. Chao

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Remarks Prepared for Delivery by
U.S. Secretary of Labor Elaine L. Chao
23rd Annual Kentucky SHRM Conference
Louisville, Kentucky
Thursday, October 4, 2007

Thank you, Pam [Cox, outgoing chair, Kentucky SHRM State Council].

I also want to recognize Trasee Whitaker, incoming chair of the Kentucky SHRM State Council, and the SHRM Louisville Chapter President, Natalie Alonso.

This afternoon, I'd like to share some thoughts on the state of the economy, the competitiveness of our workforce, and Labor Department initiatives to prepare workers for the challenges ahead.

Today, despite challenges in the housing and financial credit markets, the fundamentals of our nation's economy are still healthy. GDP grew by 3.8 percent in the 2nd Quarter, driven in part by increasing U.S. exports. And even with the numerous headwinds our economy is facing, most economists expect growth to continue.

Unemployment nationally remains near historic lows and employment in the Commonwealth is improving, as well. Our labor market's strength becomes especially evident when the U.S. is compared with other major industrialized nations. Over the past few years, for example, unemployment rates in France and Germany have averaged nearly twice that of the U.S. And our country's economy has created more than 8.2 million new jobs since August 2003, more than the EU and Japan combined. And the ILO recently issued a report that named U.S. workers as the most productive of any industrialized nation. The productivity of our workers is reflected in the fact that since January 2001, real after-tax personal income has risen 12.5 percent.

But as we all know, there are challenges ahead. Our economy is increasingly part of the worldwide economy. And our nation is transitioning to a knowledge-based economy, as well. Two-thirds of the new jobs created over the decade will require some kind of post-secondary education or training. By definition, these jobs pay above average wages because employers are paying a premium for workers with skills that are in demand.

So, more than ever before, education, training, and re-training are the keys to future employment and earnings. Let me share with you a few examples of how education impacts wages:

Today, high school dropouts average about $522 per week for full-time work and their unemployment rate is about 6.7 percent.

Workers with a high school diploma average $704 weekly and have a 4.3 percent unemployment rate.

And workers with some college or an associate degree average about $846 per week and their unemployment rate is 3.7 percent.

But workers with a bachelor's degree or higher average $1,393 per week and have an unemployment rate of 2 percent.

So post-secondary education really pays off!

But at the same time that education is becoming more important, our country is facing a skills gap. That's the mismatch between the skills of some in our workforce and the skills needed for jobs in growing sectors of the economy.

If our country is to remain competitive, we must ensure that our workforce has access to the education and training it needs to continually update workers' skills.

The competitiveness of our workforce is a major priority of this Administration and the Labor Department. That's why in 2003, the Labor Department launched a series of initiatives to expand workers' access to post-secondary education and training. The first initiative identifies the sectors of the economy that are growing and the skills needed to access these opportunities. The second expands the capacity of community colleges and other education providers to offer relevant job training to workers.

Let me note that these initiatives were specifically designed to solicit the input of employers so that worker training and education is relevant and prepares workers for real jobs in the real world. And the Department chose community colleges as a centerpiece of these initiatives because they are affordable, accessible, and have close connections to local labor markets. They are perfectly positioned to prepare workers for high-growth occupations.

So far, the Department has awarded $250 million in grants throughout the nation to fund 142 education and training partnerships with community colleges. In Kentucky, Bluegrass Community and Technical College received over $1.4 million to increase its capacity to train nurses. Madisonville Community College received over $1.2 million, also to expand training in nursing. And Owensboro Community and Technical College received nearly $825,000 to train workers for careers in biotechnology.

The Department is also focusing on the need to prepare workers for careers in the fastest-growing occupations. To date, an additional 156 grants totaling over $288 million have been awarded nationwide to expand training for careers in high growth sectors of the economy. Here are two examples in the Commonwealth: The Kentucky Community and Technical College system was awarded nearly $2.5 million to train workers for careers in advanced manufacturing. And the West Kentucky Workforce Investment Board and the Pennyrile Area Development District received over $3 million to strengthen the coal industry workforce.

Let me mention one more initiative that is especially important for regional economies. Over the last several years, it has become clear that for economic development to be successful, it must be centered at the regional level. To address this challenge, the Department launched Workforce Innovation in Regional Economic Development, or WIRED. The WIRED initiative provides the seed capital to bring together all the key players at the local and regional level to develop an economic development strategy centered around talent and skills development. That's key because employers are telling us that the availability of a skilled workforce is a critical factor in the decision to locate in a community.

In February 2006, the Department of Labor announced the first WIRED investment of $195 in 13 regional economies. In January 2007, the Department added another 13 regions and an additional $65 million in WIRED investments. And recently I announced the Third Generation of WIRED investments totaling another $65 million for 13 regions. So the total investment to date is $326.3 million in 39 regions.

In late June I was pleased to announce that the 15-county Central Kentucky I-65 Corridor — which includes Louisville — was selected as a Third Generation WIRED Region. Regions have to compete for these grants, so let me congratulate Central Kentucky for its winning proposal. The Central Kentucky I-65 Corridor will receive a $5 million investment over a period of three years. This seed money will help fill workforce gaps by supporting worker education and entrepreneurship. Some in Congress want to put WIRED on hold until the program is officially authorized. Given how slowly the legislative wheels turn, I hope we can avoid any interruptions in this program.

As human resource managers, you have a deep understanding of Kentucky's workforce needs and issues individual workers face. Let me share a few timely initiatives that affect workers and employers, which you should know about.

As some of you may know, the Department succeeded in clarifying the nation's outdated white-collar overtime regulations, which had not been substantially updated since 1949. After a difficult, three-year process, the Labor Department issued new rules in 2004 clarifying and updating overtime rights for America's workers. Under the revised rules, workers clearly know their rights and employers know their responsibilities. In fact, with the updated regulations in place, more than 6 million workers have had their overtime rights strengthened. Let me once again thank SHRM members for their thoughtful comments, efforts and support regarding our changes to the overtime rules.

Another major reform has been strengthening the reemployment rights and responsibilities of our nation's citizen soldiers. Here, too, the Department very much appreciates SHRM's thoughtful and insightful comments on our proposed regulations. Each year, about 318,000 of our men and women in uniform return to civilian status. In 1994, Congress passed the Uniformed Services Employment and Reemployment Rights Act — known as USERRA — to protect the employment and reemployment rights of veterans returning to the public and private sectors after active-duty. However, no regulations were issued clarifying what the law meant until the Labor Department issued them in 2005.

These first-ever regulations have helped to clarify and explain the legal obligations required of employers by USERRA. And they help our veterans understand their rights and responsibilities under the law, as well. As I'm sure you will agree, our servicemen and women are always there for us. So it's our turn to be there for them. You can find out more about USERRA by going to the Department's website at www.dol.gov/vets.

Finally, human resource managers have a very special charge because they deal with the entire life cycle of their co-workers. Your office is the first place workers go to seek information about adjusting their benefits for life-changing events such as the birth of a child, or retirement. Retirement planning is an area of increasing importance as baby boomers begin reaching retirement age. Younger workers as well should be encouraged to start saving early. There's so much information available on retirement that at times it is helpful to stress the basics. The Labor Department has many programs to encourage workers to save — it's never too late to start saving, and the earlier the better.

As you well know, retirement security in the U.S. is based on a three-legged stool: Social Security, employer-provided pension systems, and personal savings. This Administration supported passage of the Pension Protection Act to strengthen the second leg of the system. The Act represents the most significant change in our pension laws since ERISA — the major law regulating employer provided pension plans — was enacted. The Act contains important reforms for both defined benefit and defined contribution plans. Its provisions will help protect the retirement income security of America's workers and enhance our pension system. An important provision of this act is automatic enrollment, which will hopefully increase the number of workers participating in their employers' pension plans.

Other important provisions of the Act include:

• Strengthening plan funding requirements,
• Providing for greater plan transparency and disclosures to workers, and
• Improving the solvency of the pension insurance system.

The Department is working with the Treasury and the Pension Benefits Guarantee Corporation to write clear, concise regulations to implement the provisions of the Act. I know that SHRM will continue to offer its useful comments during this important regulatory process, and we welcome your views.

SHRM members are keenly aware of today's workforce challenges because you deal with them every day. That's why it's so important that you continue to make your voices heard. Working together, we can continue to ensure that our nation's workers have access to the training and skills they need to thrive in the 21st century worldwide economy.

So thank you, once again, for the opportunity to join you today. I know you will receive a wonderful, warm welcome here in Louisville — we are so glad to have you!

God bless you all! And thank you for everything you are doing to keep American workforce strong and competitive.

Enjoy the rest of the conference!

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