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OSEC Congressional Testimony

Testimony of Robert B. Reich Secretary of Labor, before the House Ways and Means Committee, Subcommittee on Trade, U.S. Trade Competitiveness and Workforce Education and Training, [7/25/96]

Mr. Chairman, Congressman Rangel, members of the subcommittee:

I am delighted to have the opportunity to present testimony today and I look forward to answering any questions you may have.

Let me commend you for holding this hearing, because I believe you are on to something here. You are making the right connections -- the right links.

For America to succeed in the 21st Century, our industries must succeed in the global marketplace.

For our industries to succeed, their workers must be highly productive.

And for workers to be highly productive, they must have the education and training necessary to keep them in tune with the onward march of technology.

As America moves further into this age of information and global competition, it becomes increasingly important that we make critical investments in our "human capital" -- that is, in the knowledge, education and skills of our workers.

Today, tomorrow and far into the future, a highly-skilled workforce is and will be our comparative advantage.

It's true on a national scale and it's true for individual companies, as well. One study has found companies that introduced formal employee training programs experienced a 19 percent larger rise in productivity than firms which did not train their workers. Two recent studies of 3,000 businesses showed that a ten percent increase in the average educational level of the workers paid off with productivity increases of between five and nine percent in the manufacturing sector, and six to 13 percent in the non-manufacturing sector.

The fact is, Mr. Chairman, training works. Don't just take my word for it. George David, the CEO of United Technologies -- which is spending millions of dollars to help employees get more education -- put it best: "It's in our interest to have an educated workforce."

I could give you volumes more from CEOs, economists, investors and academics about these payoffs, and how a better-trained, better educated workforce is so vitally important to the future of the nation's enterprises.

Last Sunday, The New York Times ran a lengthy article about the new, well-paying, high-skill jobs that are being created by this economy in great abundance. The article focused on the Minneapolis area, where the jobless rate is less than three percent and employers are reporting that they're having trouble finding enough workers who have the necessary skills to fill these good-paying jobs.

And Minneapolis, the article indicates, mirrors the national economy.

Which begs the question: How do we grow this economy in a non-inflationary way? It seems to me that raising the skill levels of workers -- and with it their productivity and the nation's competitiveness -- is, and should be, a vital part of the equation.

Nowhere, however, has the impact of education, or lack of it, been felt more acutely than in the homes of America's working families.

Skills have always made a difference in income, but today that difference is enormous. Earnings for men without college degrees -- three out of four working men -- have fallen by 12 percent since 1979. And, over the same time period, the income gap between men with college degrees and those with high school diplomas has widened from 49 percent to 96 percent. For women, the disparity has gone from 44 percent to 84 percent.

One study, reported in the newspaper the other day, says that this gap may be levelling off. But whether it's 70 percent, 80 percent or 90 percent, it's a substantial difference. And other research indicates that the least-educated are less likely to improve their skill levels over the course of their careers.

Americans whose skills are out of date, or out of sync with the economy, risk falling farther behind.

According to the Bureau of Labor Statistics, about half of the new jobs that will be generated over the next decade will require some post-high school education, and many will require advanced technological skills.

Left unchecked, the widening disparities in income and opportunity can undermine the coherence of our society. A society too sharply divided between winners and losers cannot win in the global competition of the 21st Century.

So what do we do about it?

Getting the economy moving again -- creating a framework for businesses and working families to succeed -- has been the first order of business in this administration. Under our watch, unemployment is down, interest rates are down, inflation is low, and the economy has generated 10 million new jobs.

But there's a second challenge, and that is restoring wage growth and economic security for the majority of working families, and making the American dream of opportunity for all a reality for all who are willing to work for it.

And central to the task of meeting that challenge is to help Americans get more education and build their skills. Doing so is important to working families. It's important to our industries. It's important to our future competitiveness.

That's why the President has proposed to expand our standard of education from 12 to 14 years. He would do that through tax credits that would enable virtually anyone to attend two years of community college at no cost. Those credits could also be used for job training and re-training.

Or, families could get tax deductions of up to $10,000 a year to help them offset college tuition costs.

The President has also consistently favored the exclusion of employer-provided educational assistance under Section 127 of the IRS Code. And he has called for a new small business tax credit for 10 percent of the amounts paid for employee education and training.

We're working to change our unemployment system into a re-employment system that will help dislocated workers get the training they need to move them into new and better jobs.

We have begun the process of working with the states to set up "One Stop Career Centers." Any job seeker can go to these centers and get information on where the jobs are, where the training is, and how to get it.

We're proposing to put more power into the hands of unemployed, dislocated workers by combining scores of federal job training programs into a simple voucher that they can use as they please to get the training they feel they need.

In partnership with state and local governments, and the private sector, we're continuing to build School-to-Work opportunities throughout the country. Since its enactment two years ago, states report that more than a half-million high-school students have participated in School-to-Work programs in communities nationwide. Businesses are also becoming involved, with many students getting real job experience with participating companies. This initiative is preparing young Americans for the jobs of the future.

School-to-Work, training vouchers or "skill-grants," and our efforts to help dislocated workers find new jobs -- all are important components of our strategy of building a highly-skilled workforce that will keep our nation prosperous in the new global economy.

These initiatives have received broad, bipartisan support in the past. The nation's business leaders have been supportive. And that's why it is so disheartening that the President's workforce development legislation has been stalled here in the Congress. The attacks from outside groups on School-to-Work and America's Job Bank have been distorted, misleading and outrageous. America's workers deserve better. America deserves better.

So we'll fight on -- because our economic competitiveness is at stake, because these initiatives work, and because they are right for the economic future of our country.

Inevitably, some workers, particularly those with lower-skills, will be displaced by trade. That is precisely why we should continue to fund programs such as the Trade Adjustment Act and NAFTA-TAA -- so that we can ensure that these workers, who are hit hardest by the effects of trade, have an opportunity to re-enter the workforce with enhanced skills. Further, we need to continue to support Title III of the Job Training Partnership Act, which serves workers who have been affected by other economic changes.

And we must continue to seek ways to use education, training and job-placement initiatives as a vehicle of hope for those who live in America's most impoverished areas -- places where jobs are scarce and the prospects for employment are diminished. We simply cannot expect to build a world-class workforce while so many are left behind.

On that point, let me commend Congressmen Rangel and Houghton for their work in reshaping the Targeted Jobs Tax Credit into the new Work Opportunity Tax Credit. The bills that have passed the House and Senate address many of my concerns and those of the Office of Inspector General, and I look forward to working with you further as they are taken up in conference.

There is one other element of our strategy, Mr. Chairman, which I believe is also vitally important to this challenge -- and that is encouraging the private sector to do more to upgrade the skills of their workers.

We know that government cannot possibly do what is needed to ensure that more than 100 million working Americans get the opportunity to learn more, to work smarter and to stay ahead of the technological curve. In fact, we are paring back the amount of resources that government devotes to this task.

So the private sector has to do more. Many companies are going the extra mile to help their workers upgrade their skills. And they are making money in the process.

At the President's conference on corporate citizenship here in Washington a couple of months ago, we heard the CEO's of several companies -- large and small -- outline their strategies for increasing worker education and training. We heard about on-site education centers offering basic math and reading courses to production workers. We heard about college tuition reimbursements and in-house training programs to which every worker must devote five percent of his or her work time. We heard about huge investments of company resources on training.

So, many companies are taking the ball and running with it. We ought to be encouraging others to follow their lead.

Mr. Chairman, there is no doubt that this nation has the resources to make its workforce the most productive on the planet. Doing so would make us a shoe-in to win the global economy of the 21st Century. The question is whether or not this nation's institutions will join together to make the necessary investments in the skills of our people.