The Time Bomb in the Workforce: Illiteracy

The fastest-growing groups in the U.S. have the worst skills

Ten years ago, what worried corporate leaders most was that U.S. competitiveness would be undercut by inadequate workforce skills. But those fears dissipated as the economy boomed in the late 1990s and productivity soared. Now, a new study raises troubling questions about the country's human capital once again, as well as about the failure of U.S. schools to keep pace in an increasingly competitive global economy.

The study, by the Princeton (N.J.)-based Educational Testing Service (ETS), finds that the literacy of American adults ranks 10th out of 17 industrialized countries. More troubling, the U.S. has the largest gap between highly and poorly educated adults, with immigrants and minorities making up the largest chunk of those at the bottom. Since both groups make up a growing share of the workforce, the U.S. will drop even further behind unless adult training and education improve sharply. Nor are U.S. schools likely to help: 16- to 25-year-olds not only underperform their foreign counterparts but also do so to a greater degree than Americans over 40 (tables).

The study illustrates how shortfalls in skills, experienced even in the midst of the current recession, are only likely to intensify as the economy picks up again. It also drives home the urgency of school reform. "We're living off the GI bill," says study co-author and Northeastern University economist Andrew M. Sum. "Our older workers still have a skill advantage, but other countries are catching up because their young workers are better prepared."

The ETS survey, which will be posted on the Web site on Feb. 15, represents the first time anyone has been able to consistently compare skills of adults across countries. It looks at tests done by 17 countries between 1994 and 1998. Using the same methodology, each country judged three aspects of functional literacy: understanding texts such as books and newspaper articles, using documents such as maps and bus schedules, and employing math skills needed to balance a checkbook or calculate a tip. The Organization for Economic Cooperation & Development (OECD) published the raw data in 2000, but the ETS is the first to analyze them. The outcome: The U.S. scored an average of 272 out of 500 on the three aspects, 32 points behind top-ranking Sweden.

Despite the mediocre U.S. ranking, it still beat out most of its major trading partners except Germany, including France, Britain, and Italy. (Japan didn't participate.) The showing is particularly good in light of America's far more diverse population. The U.S. has more minorities, immigrants, and poor people than most participating countries.

But the results aren't much to brag about, either. The OECD divided the results into five proficiency levels based on widely accepted standards. While few adults in any country are illiterate in the sense that they can't write their own names, those in the bottom two levels can't read or write as well as a high school graduate. Fully 45% of Americans fell into this category. Almost half of those, or 20%, scored in the lowest level, which puts their literacy below that of a high school dropout.

Most of the problems show up among immigrants and minorities. Immigrants accounted for more than 40% of U.S. labor-force growth since 1990. But because many are unskilled, they rank 74 points behind native-born Americans. They also scored 16 points lower than newcomers in the other countries, which give preference to educated immigrants.

U.S. minorities scored no better. Hispanics ranked as many as 75 points lower than whites, while blacks scored 63 points lower. Native-born whites and Asian Americans averaged 288 points, tying for second place in the international rankings on understanding texts. "Our school system has failed minorities and immigrants, which is a big problem for companies because that's who's out there to hire," says Phyllis Eisen, head of the National Association of Manufacturers' education arm.

The U.S. has long tolerated greater gaps between rich and poor, at least partly from the belief that the economy grows faster when more rewards go to the talented and the entrepreneurial. But the expansion of a low-skilled underclass threatens economic growth, too. Unless the U.S. redoubles its educational efforts for those on the bottom, its global workforce disadvantage is likely to worsen.

By Aaron Bernstein in Washington

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