The Human Capital Debate: Advantage, Bush

To raise the productivity of the U.S. economy and its competitiveness in world markets, President Bush and Governor Clinton are offering rival plans to invest more in the skills, training, and other human capital of American workers. Who has the better plan?

Both candidates pay considerable attention to education reform. They recognize that many public elementary and high schools are awful and fail to educate their students, but they propose very different remedies. Governor Clinton supports greater competition only among public schools, whereas the President is advocating a government-funded voucher system of choice that would include private schools as well.

Bush's approach to school reform seems to me far superior, since the absence of effective competition from the private sector is the biggest defect in the present education system. Greater competition only among public schools probably will improve their efficiency, but the effect will be small compared to the impact on innovation and school productivity of harnessing the forces unleashed by private initiative. Comparisons of the performance on standardized tests of students in public and private schools--especially studies of Catholic high schools by sociologist James Coleman of the University of Chicago and others--clearly indicate that private schools tend to provide a better education for less money.

GROWING GAP. More than 20% of all students who enter high school fail to graduate, and the inadequate preparation of most dropouts for work highlights a major failure of the public school system. I advocate subsidies to improve the job skills of dropouts as part of my "G.I. Bill" for ghetto youth (BW--June 22). The President calls for "a G.I. Bill for children" that includes an apprenticeship program with both academic instruction and on-the-job training for all persons who do not go on to college.

The governor has similar plans for training and apprenticeships. But he would also require companies to spend no less than 1.5% of payrolls on worker education and training. Clinton is making a major mistake by proposing additional government mandates for business spending, including health insurance. The growth in such mandates during the past decade is one of the most pernicious developments in federal legislation. His training mandate reflects Clinton's desire in several fields to extend the influence of the federal government over business decisions.

Both candidates favor more generous grants to college students and expanded student loans. But neither candidate makes a good case for greater subsidies. The gap in earnings between the typical American college graduate and high school graduate is now about 60%, the largest in the past half century. With all the concern about growing income inequality, it is unseemly to propose additional subsidies to a high-income group that is doing better than ever.

FAMILY AFFAIR. It would be easier to understand the concern about helping college students if the fraction of U.S. high school graduates who continue their education was falling or lagging behind the percentages of other countries. However, the U.S. sends more than half of its high school graduates on to college, which is the largest percentage in the world. And the fraction of high school graduates who go to college increased significantly from the mid-1970s to the 1990s; even the racial gap in college attendance narrowed a little during this period.

The human capital of the working population is determined not only by schools and job training but also by parental efforts to improve the health, habits, values, and skills of their children. Most parents may do a reasonably good job, but a few of them are failing badly, especially those who are drug addicts, alcoholics, have too many children, or just don't care. Both candidates address the issue of family responsibilities partly by supporting welfare reform that places greater emphasis on workfare and puts limits on how long families can stay on welfare.

It is desirable to get families off welfare, but the most urgently needed reform is a change that rewards parents whose children invest in their own human capital. We should change the present welfare system to make benefits depend not mainly on the number of children but on what parents do for each child. Benefits should rise when children attend school regularly or when they are taken for health checkups, and they should fall when parents are on drugs or when children do poorly in school. These are not ivory-tower suggestions, because several states, including Wisconsin and Connecticut, have already proposed reforms along these lines, and it is a shame that neither Presidential candidate is supporting such an approach.

However, both candidates deserve credit for their emphasis on the skills, training, health, and values of the American population. Although the proposals of both have good and bad features, I believe the President's schooling and training proposals are clearly better because they more consistently support voluntary private choice rather than compulsion.