Training Programs Alone Can't Produce $20 An Hour Workers

First, the economy must grow at a fast enough clip that industry can afford to redeploy workers. Then, employers must think hard about how they structure work, so that new jobs exist for the new skills.

Last month in this space, I wrote about the disappointingly slow rate of U.S. productivity growth and, hence, economic growth. The success of the Clinton Presidency hinges on whether America's growth rate can once again rise to the level of our aspirations.

The centerpiece of Clinton's Feb. 17 economic address was budget reform. He got this part about right, proposing to cut the deficit enough to reassure the Federal Reserve and the money markets, but not so steeply that the recovery will be threatened. If Congress goes along and the Fed continues to have confidence in his strategy, interest rates should keep coming down, which will more than compensate for the pain of modestly higher taxes.

However, it is not clear that the budget plan will be sufficient to push the economy onto a trajectory of significantly higher growth. The Administration estimates annual economic growth at slightly less than 3% during Clinton's four-year term. That's not enough to dramatically reduce unemployment or increase most workers' earnings.

Budget reform, however arduous politically, is the easy part. The economy's deeper problems are structural. Clinton and his Labor Secretary, Robert B. Reich, are certainly on the right track when they emphasize education and the quality of the work force. However, improving the schools and reforming job training are also relatively easy. The hard part is improving the kinds of jobs that the economy offers.

DIRTY SECRET. Executives bemoan the poor quality of applicants for $5- and $6-an-hour jobs, but when they offer jobs that pay $12 an hour--that's just $25,000 a year--qualified applicants line up at dawn. In circles where experts earnestly call for additional highly skilled workers, the dirty little secret is the scarcity of jobs that require more advanced skills.

A handful of specialized fields--in biotechnology and engineering, for example--have labor shortages, but millions of college graduates are working at jobs that require only a high school diploma. According to the Bureau of Labor Statistics, the fields producing the largest number of new jobs continue to be janitor, data-entry clerk, fast-food worker, nurse's aide, and other dead-end, low-pay work. So, while part of the productivity story is indeed on the supply side--the quality of the work force--the more subtle and knotty story is on the demand side. How can industry upgrade jobs, making them more challenging and better paying?

For one thing, the economy needs a higher overall rate of growth so that industry can keep replacing labor with capital--and then redeploy labor at more capital-intensive and higher-wage tasks. In this respect, Clinton's emphasis on investment-led recovery makes sense. But we will need more investment--probably a second big dose of stimulus once the deficit is brought under control.

GREATER REWARDS. A higher growth rate is essential, quite independent of how well we educate the work force. In the 1940s and 1950s, the rate of productivity growth exploded even though most factory workers lacked even high school diplomas. But the physical capital was becoming "smarter," real economic growth was in excess of 4% per year, and labor markets were fairly tight. Thus, even workers with relatively low skills could look forward to steadily rising standards of living.

Which was the chicken, and which was the egg? Did high economic growth drive high productivity growth, or vice versa? Surely, the two factors are interdependent. A rapidly growing economy can absorb productivity growth at the micro level without producing high general unemployment. That combination in turn yields high levels of overall growth.

For example, if a self-service gasoline pump replaces a $6-an-hour filling-station attendant, society is producing the same output with one fewer worker and is hence more productive. But the aggregate rate of productivity growth depends on what happens to that worker. If the economy is running at or near full employment, he is much more likely to be reemployed at a job that pays more than $6 an hour, leaving the whole economy better off.

So the first imperative is full employment. The second part of the strategy calls for better-trained workers in the first place. The third requirement is that employers pay far more attention to how they structure jobs and job ladders.

Many of the jobs in the new high-tech economy can be structured either as routine work--entering data, following rote manufacturing systems, and the like--or as far more demanding jobs requiring problem-solving skills and leading to career ladders. An apprenticeship system doesn't just produce better-trained workers, it forces employers to think about how they structure work. Machines can replace human drudgery--but society's challenge is to reemploy the humans at more rewarding work.

Clinton's budget strategy is a promising beginning, but his more difficult task is to arrange a rendezvous between a better-trained work force and more demanding jobs, and to provide the rapid growth that allows such a rendezvous to take place. No small feat, that.

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