**Archived Information**

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######## The Missing Middle:

######## Aligning Education and the Knowledge Economy

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######## Anthony P. Carnevale and Donna M. Desrochers

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######## Educational Testing Service

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######## April 2002

This paper was prepared for the Office of Vocational and Adult
Education, U.S. Department of Education pursuant to contract no.
ED-99-CO-0160. The findings and opinions expressed in this paper do not
necessarily reflect the position or policies of the U.S. Department of
Education.

######## The Missing Middle:

######## Aligning Education and the Knowledge Economy

Anthony P. Carnevale and Donna M. Desrochers

# *Introduction*

While no one can predict the future, today's economic and demographic
realities suggest the opportunities and challenges that will face
America in the years to come. The U.S. economy has already undergone
dramatic changes in the latter part of the twentieth century. The
extension of product and labor markets has expanded global competition,
and the infusion of technology has been widespread across all sectors of
the economy. Both of these forces have affected the structure of jobs
and the way we work, fueling increases in educational attainment and the
demand for skill.

The kind of education and skill demanded has also changed. General
reasoning, problem-solving, and behavioral skills as well as a positive
cognitive style are increasingly needed to supplement the narrow
cognitive and occupational skills sought in a more directed work
environment. Access to good jobs and earnings in the American system are
driven by the complementarities between these soft skills, general
education beyond high school, occupational preparation, and the
resultant access to learning and technology on the job.[^1]

As we begin the twenty-first century, our ability to produce and
disseminate education will increasingly determine our nation's economic
competitiveness as we shift from an industrial to an information
economy. Education facilitates the current transition in two ways:
First, the initial stock of education in individual nations determines
growth potential in the new information economy. Countries whose
populations have high levels of education are fertile soil for
information-based technology (Romer, 1990).[^2]

Second, increases in a country's overall level of educational attainment
causes corresponding increases in their overall rate of economic growth
(Topel, 1998; Krueger and Lindahl, 1999).[^3]

But increases in the demand for skilled workers can have varying effects
on individual workers. Ratcheted-up skill requirements, while beneficial
for the most educated and skilled workers, are ever more problematic for
the least educated and skilled.[^4] The United States has increasingly
turned to workers with at least some college or postsecondary training
to fulfill a wide variety of labor-market slots, leaving the least
educated workers with few opportunities to access good-paying jobs.[^5]
Currently, almost six in ten jobs are held by workers with at least some
college, compared with two in ten in 1959. Even more stunning is the
fact that the wage premium for college-educated workers, compared with
high school educated workers, has increased by almost 70 percent since
the early 1980s in spite of the fact that the supply of college-educated
workers has increased by 60 percent over the same period.

The increasing divide between those with skills at the "some college"
level and those with skills typical of people with high school or less
has increased income dispersion in the United States to the point where
we have surpassed Great Britain as the nation with the widest income
differences among the world\'s advanced economies. Currently, about 40
percent of American adults do not have skills typical of those with some
college, but the fastest job growth will occur in those jobs in which
incumbent workers currently have skill levels that reflect at least some
postsecondary education or training. Looking into the future, there is
every reason to believe that the demand for college-educated workers
will continue to grow along with the income divide between those who
have some postsecondary education and those who do not.

The growing importance of education in overall economic growth and
individual opportunity creates two primary economic challenges for
education reformers. The first is to meet the need for a greater
quantity and quality of human capital necessary to foster overall growth
in the new knowledge-based economy. The second is to reduce the growing
differences in family incomes by closing the gap between the nation\'s
education-haves and education-have-nots.

Absent reforms that allow us to produce and distribute education
cheaper, faster, and better, we may not be able to afford all the
education we need to maintain our competitive position or to reduce the
widening gap in earnings between the most and least educated. At a
minimum, greater efficiency will require a stronger alignment between
curriculum and work requirements as well as stronger relationships
between educational institutions and employers.

Strengthening the relationship between education and work requirements
begins with a stronger focus on the "missing middle" in education
policy: the years when academic and applied learning overlap between the
completion of basic academic preparation and the completion of
occupational or professional training.[^6] These are the critical years
when young adults begin to mix educational experiences with their
growing independence in families and communities, and with their early
attachment to the world of work and careers. The missing elements at the
critical juncture between education and careers are curricula that
effectively mix academics and applied learning as well as institutional
relationships that create venues for applied learning and successful
transitions from school to school and school to work.

For most, the missing middle begins early in high school. At this
juncture in the education pipeline, more applied curricula become an
effective complement to abstract academic pedagogy in deepening
knowledge even among college-bound students. Yet, most college-bound
students continue their studies by moving up in the hierarchy of
academic disciplines taught in isolated silos via abstract methods. At
the same time, general academic content is missing from many high school
vocational and general education curricula, creating barriers to the
achievement of academic standards as well as barriers to access and
success in postsecondary education and training programs.

![](media/image1.wmf)

Institutional relationships also are missing in the middle years between
the completion of basic academic competencies and the final
establishment of occupational or professional credentials. At each grade
level, applied contexts for learning at work and in the community are
rare. Institutional relationships that encourage successful transitions
from high school to postsecondary education and training and from school
to work are haphazard.

Economic and demographic changes already underway will increase the need
to align curricula with work requirements and to create stronger
relationships between high schools and colleges, communities, and
employers. The economic and technological forces that fuel the new
demands for access to postsecondary education and training will only
accelerate in the future. Demographic trends will bring added pressures.
As the baby boomers with postsecondary education retire over the next
twenty years, we will be hard pressed to produce a sufficient number of
Americans with postsecondary education or training to meet our needs.
Shortages of workers with some college-level skills could increase to
more than 12 million by 2020.

In addition, in the near term, we actually may experience a bottleneck
in the transition from secondary to postsecondary education as the
smaller "Generation X" gives way to a much larger \"Generation Y." The
added costs of providing postsecondary education for "Generation Y"
could reach \$19 billion by 2015 (Carnevale and Fry, 2001a). Between now
and 2015, we will face a surge in the number of 18- to 24-year-olds that
will force hard fiscal choices among the diverse missions in
postsecondary institutions. In addition, there will be competition for
resources throughout the education pipeline. Preparation for college
begins in preschool, and increasing access to postsecondary education
requires increases in investment in the quantity and quality of
education throughout the entire Pre-K-16 system.

The costs of delivering the education we need will be high, even with
successful reforms. But the costs of failure will be even higher.
Failure will jeopardize our future competitiveness in the global
economy. We are currently number one in the global economic race but our
mediocre performance on international assessments of educational quality
suggests that our preeminent status is living on borrowed time. Our
current edge in global competition is based more on our size and
market-based flexibility and less on the quality of our workforce. In
the future as the European Union and other global trading coalitions
achieve scale and learn flexibility and as financial capital and
technology become even more footloose, the quality of human capital will
become the decisive competitive edge in global competition. Finally, as
retirements and economic change increase the demand for workers with at
least some college, income differentials between the most and least
skilled will continue to grow, threatening the egalitarian base at the
core of our culture.

# *Where the Jobs Are*

Early in this country's history and, in fact, pretty much through our
first 200 years, a job was easy to find---especially an entry-level
low-skilled job. Throughout our history, the American dream and the
American reality have been that people could start at the bottom and,
without much formal education, work their way to the top. Even in the
modern industrial era beginning in the early twentieth century when
college became a requirement for the growing numbers of professionals,
getting through high school and then working hard and playing by the
rules were enough to secure good jobs for most of the rest of us. But in
the past 40 years, the rules have changed because the nature of the
global economy has changed.

The concentration of jobs in the United States today is radically
different than it was in 1959 (Carnevale and Rose, 1998; Carnevale,
1999). In the new economy, the number of high-paying blue-collar jobs
available to workers with high school diplomas is shrinking, largely as
a result of productivity improvements.[^7] The shares of farm and
factory jobs have each declined by at least one-half, while the share of
jobs in low-skilled services has remained relatively stable (see Figure
1). And farm and factory jobs have not only lost employment shares, but
have suffered actual job losses.

New job creation has been concentrated in "knowledge jobs" rather than
production jobs or extraction jobs like farming and mining. Tracking the
share of total employment shows that jobs in hospitals and classrooms
have grown substantially, but white-collar office employment has grown
the most---accounting for almost 40 percent of all jobs in 2000. The
overall number and share of technology jobs also has grown, but they
still do not represent a large share of all jobs.

The changes in the kinds of jobs available and the skills required to
get them have been dramatic. These days, if the competition for jobs
were a track meet, one might think of entering the job market as
competing in the pole vault: The bar is very low for entry-level jobs
with low pay; all a person needs is a high school diploma, at most. The
bar is set quite a bit higher for jobs in the middle tier of the economy
that require at least some college and preferably an associate degree.
And for the really good jobs, the bar is far above one's head---and the
only way to vault it is with at least an associate degree and preferably
a bachelor's degree.

![](media/image2.wmf)In 1973, only 28 percent of prime-age workers[^8]
had any postsecondary education (see Figure 2). Today, 59 percent of
prime-age workers have attended some type of postsecondary institution.
In fact, the proportion of workers with an associate degree,
certificate, or some college has more than doubled from 12 to 28 percent
of the workforce---10 percent hold an associate degree, while 18 percent
have a certificate or some college coursework but not a degree. The
proportion of workers with bachelor's degrees also has more than
doubled, from 9 percent in 1973 to 20 percent in 2000, while graduate
degree holders have increased at a slightly slower pace, increasing from
7 to 11 percent over the same period.

These educational changes in the skills of American workers result from
two kinds of labor market shifts: 1) a shift in job creation toward
occupations that tend to require at least some college; and 2)
increasing postsecondary skill requirements in all jobs, many of which
only used to require high school or less. The largest share (about 72
percent) of the increase in postsecondary education requirements comes
from "upskilling"---higher skills demanded by employers for jobs that
previously did not require any college. A significant but smaller share
(about 28 percent) comes from occupational shifts toward jobs that have
always required postsecondary education.[^9]

## *White-Collar Office Jobs*

![](media/image3.wmf) The greatest increase in jobs has occurred in the
nation's offices, whether situated on downtown street corners or
suburban office complexes. Office workers---managers, accountants,
editors, and marketers among other office jobs--- are the largest,
fastest-growing, and generally best-paid group of employees. In 2000,
there were 53 million white-collar office jobs in the economy, or 39
percent of all jobs, up from just 30 percent in 1959. These office jobs
tend to pay more than jobs in other economic sectors, \$44,800, on
average, per annum.

Office workers are on the front lines of the knowledge economy. They
don't create productivity-enhancing technology and do not have specific
technical skills, but they are more productive because they are
empowered by the information technology that has spread throughout the
workplace. In 1973, only 38 percent of office workers had some kind of
postsecondary education. Today, 69 percent of office workers have some
kind of postsecondary education, while 37 percent have at least a
bachelor's degreemaking office work one of the most highly educated job
sectors (see Figure 3).

## *Education and Health-Care Jobs*

More of us are working in education and health care---jobs associated
with the development and maintenance of human capital---because the new
economy requires more education, the demand for health care continues to
rise, especially as the population ages, and productivity is not rising
as fast in these education and health-care jobs as it is in
manufacturing. Because of increased demand and slow productivity growth,
since 1959 health care has grown from 4 to 8 percent of all jobs. Over
the same period and for similar reasons, education jobs have grown from
6 to 9 percent of all jobs.

![](media/image4.wmf)

The health-care and education sectors have always been one of the most
postsecondary education intensive in the economy. Even in 1973, one-half
of workers in schools and health-care institutions had at least some
higher education. In 2000, 75 percent of education and health-care
workers had at least some college---second only to technology jobs (see
Figure 4).

## *Technology Jobs*

Since the late 1970s, the share of technology jobs has doubled, but they
still only account for about 7 percent of all jobs in the economy.[^10]
More and more of us are using technology on the job, but it takes fewer
of us to make, maintain, or repair our information technology. Growing
productivity has held the overall number of jobs that require technical
education to around 10 million, out of the total 138 million jobs in the
U.S. economy. However, changing demands within the technical
workforce---for instance, the shift from jobs from high-tech crafts
workers to computer technicians---do create surpluses in declining
occupations as well as openings and worker shortages in growing
occupations. While technology jobs have always required highly educated
and skilled employees, the demand for these workers has increased. In
1973, 63 percent of technology workers had at least some college and by
2000, 86 percent had postsecondary education---and more than one-half
had at least bachelor's degrees (see Figure 5).

![](media/image5.wmf)

The powerful impact of the new information technology comes from its
pervasive use by non-technical workers and consumers not from the
increasing employment in the production and maintenance of the
technology itself (Carnevale, 1999; Lerman, 1998; Freeman and Aspray,
1999). The effects of the new information technology at the core of the
new information economy are consistent with past trends in economic
development. For instance, electricity was the core technology in
building the urban industrial economy that began in the early twentieth
century, but very few of us needed to become electricians.

## *Low-Wage Services Jobs*

Low-wage services jobs are a mixed bag. For some they are dead-end jobs,
but for many they are transitional jobs that provide entry-level work
that leads to further education or career mobility. Most of these jobs
are at the bottom of the new earnings and skill hierarchy. They include
jobs for cashiers, retail clerks, stockers, cab drivers, cleaners, and
other occupations that typically pay low wages and require low skills.

The share of low-wage services jobs has not grown since Eisenhower was
president in the 1950s, remaining at about one-fifth or about 28 million
of the available work opportunities. Although these jobs aren't growing
as a share of all jobs, because we have low minimum wages and no benefit
guarantees, we have a lot of these low-wage services jobs in the United
States, compared to other nations that guarantee high minimum wages and
benefit guarantees for all workers. The majority of these jobs require
high school or less. In 1972, 86 percent of workers in low-wage services
jobs had only a high school education or less. Today, still nearly 60
percent of workers in these jobs do not have any postsecondary education
(see Figure 6).

![](media/image6.wmf)These jobs are easy to get but they don't pay well
and carry few or no benefits. Among those workers with postsecondary
education who are employed in these types of jobs, many are students who
are working temporarily until they complete their education. This is
especially true for workers below the age of 25 who comprise about 30
percent of employment in this sector and will likely move on to better
jobs when they complete their education. Low wages and no benefits are
not a long-term concern for people such as students, immigrants,
part-time workers, retirees, and others who do not want or are not ready
for better jobs. At the same time, those stuck in these jobs for the
long-term struggle to meet basic living standards.

## 

## *Factory Jobs*

While low-wage services jobs are not growing as a proportion of all
jobs, frontline factory jobs are shrinking both proportionally and in
absolute numbers. Between 1959 and 2000, the share of factory jobs fell
from 32 to 17 percent of all jobs. That translates to 20 million fewer
factory jobs in 2000 than would have existed had the 1959 share of
employment continued.

![](media/image7.wmf) Workers who have skills beyond high school are
increasingly filling the declining number of factory jobs that remain.
New technology and high‑performance work processes combine to enable
manufacturers to produce more while using fewer, but more highly
skilled, workers. For instance, since 1960 the United States has
increased real manufacturing output by more than \$2 billion annually,
while cutting by nearly one-half the number of production workers. In
addition, because of the changing technology and the introduction of
flexible high-performance work processes, the factory workers who
remained needed more skill.

In 1973, one-half of factory workers were high school dropouts and, by
2000, only about one in five had not completed high school (see Figure
7). In spite of the increase in college-educated workers in factory
jobs, they are still a minority of frontline workers. In 1973, only 12
percent of workers on the factory floor had any college and, by 2000,
that proportion had increased to more than 36 percent.

***Education and Wages***

![](media/image8.wmf)Wage trends also suggest an increase in demand for
skilled labor. Among prime-age women, earnings at all levels of
education attainment have risen, but the earnings of those at the top of
the education ladder have risen the most (see Figure 8). The earnings of
prime-age men with at least a bachelor's degree also have increased, but
at a slightly slower rate. In contrast, the earnings of men with some
college or less have seen declines in their inflation-adjusted earnings.

The increase in the wages of college graduates relative to high school
graduates is the most telling sign that the economy is demanding highly
skilled workers. As the share of workers with postsecondary education
has increased, the wage advantages of college-educated workers have also
continued to increase. For an increase to occur simultaneously in both
the supply and the wages of more-skilled workers, the demand for skilled
workers must be rising faster than the supply. Furthermore, among
workers with the same credentials, the highest earnings go to those with
the highest assessed skills, suggesting that employers are buying
skills, not degrees (Levy and Murnane, 1992; Levy, 1998).

# *Where Job Growth Will Occur*

Employment shifts experienced during the latter half of the twentieth
century are expected to continue to increase throughout the decade. Jobs
that require an associate degree are expected to grow the fastest,
increasing by 32 percent through 2010, followed by jobs that require a
bachelor's degree, growing by 24 percent (Hecker, 2001). Apart from
education requirements, jobs that require the highest levels of assessed
cognitive skills also are expected to grow the fastest. About six in ten
workers already have skills similar to those demonstrated by people with
at least some postsecondary education and access to jobs that pay at
least \$33,400, on average, per year. Jobs that require skills typically
demonstrated by four-year degree holders will likely grow by nearly 20
percent, while those requiring skills similar to those with a
sub-baccalaureate education will likely grow by 15 percent (see Figure
9).

Although the most robust job growth will occur within skilled jobs, more
moderate job growth and creation will occur at the lower end of the
education and skill continuum. Less skilled jobs, those employing
workers whose skills are similar to below-average high school graduates
or high school dropouts, are expected to grow slower than average, by 13
percent. Similarly, employment projections by education level correspond
to those by skill level, showing that jobs requiring apprenticeship or
other work-based training greater than a year\'s duration are only
expected to grow 8 percent by 2010. Jobs that require less than a year
of customized training beyond high school also are expected to grow
slower than average at 13 percent.

![](media/image9.wmf)

While not growing as fast as high-skilled jobs, there will still be a
sizable number of job openings for less skilled workers. But because
workers in these jobs change jobs more often, these jobs are more likely
to create openings through greater job turnover rather than by new job
creation. Only one-third of total job openings in less skilled jobs are
a result of new job creation, compared to 47 percent in the
highest-skilled jobs.

While more and more workers need skill on the job, not all workers need
to go to college to prepare for work. About one-half of those who
terminate their education with a high school diploma need and get
training from various sources, but principally from their employers (see
Figure 10). Three-quarters of high school dropouts get jobs for which
they do not need any training at all. Overall, just over 20 percent of
all workers are in jobs that do not require training but a substantial
number of those jobs are transitional. Although these less skilled
workers may be able to find jobs, the almost 40 percent of the current
workforce whose skills are similar to workers in low-paying jobs
typically earned no more than \$26,900, on average, per annum.

![](media/image10.wmf)

# 

# *The Skills Employers Want*

As the structure of the U.S. economy has shifted, so have the kinds of
skills required. While we can easily quantify changes in the economy
using information on education and cognitive skill levels, the skill
requirements in modern workplaces encompass broader, and often less
measurable, general skills (Lynch and Nickell, 2001). The demand for
specific vocational skills has been augmented with a growing need for
general skillsincluding reasoning abilities, general problem-solving
skills, and behavioral skills. Cognitive styles, such as how workers
handle success and failure on the job, also are important in determining
success on the job. And while general skills are becoming increasingly
important, occupational and professional competencies are still needed
to complement these more general skills.

***General Skills: Reasoning, Problem-Solving, and Behavioral Skills***

Little is known about how to develop and assess general problem solving
and behavioral skills in students and workers, but most employers
associate them with educational attainment, especially college-level
attainment. Educational attainment also is used as a proxy for reasoning
ability. As a result, American employers use education and training
attainment as the most reliable standard by which to screen job
applicants.

The new applied skill requirements have emerged, in part, as a result of
the changing occupational structure of the economy. Increasing
productivity in manufacturing and other technology intensive industries
means that fewer workers with specific technical skills are needed to do
the same amount of work. And because most of the new positions are being
created in business services, education, health care, and office jobs,
fewer technical skills and more general skills typical of these jobs are
required. Broader and more general skills also are required because of
the spread of "high-performance work systems" that locate broader
responsibilities to work teams at the point of production and service
delivery (Office of Technology Assessment, 1990; Dertouzos, Lester, and
Solow, 1989; Cyert and Mowery, 1987; Hirschorn 1988; Zuboff, 1988;
Cohen, Dickens, and Posen, 2001).

The new business, education, health care, and office service jobs
require higher levels of interpersonal and problem-solving skills
because the work entails higher levels of human interaction and
personalized responses to people\'s wants and needs. These same
behavioral skills are required in high-technology and manufacturing jobs
as well, because the technology itself takes on more of the rote, manual
processing tasks, allowing employees to spend more time interacting with
each other in order to exploit the new flexible technologies capable of
providing higher quality, variety, and speed of operation (Ichniowski,
Shaw, and Prennushi, 1997; Autor, Levy, and Murnane, 2001).

In both manufacturing and services, these new problem-solving and
behavioral skills are also required in order to create new kinds of
value added. Unlike the old manufacturing-based economy where simple
productivity---high volume at low costwas paramount, the new economy
demands new kinds of value, measured by a more complex set of
performance standards and workers with the broad skills to meet them.
These new kinds of value include quality, variety, customization,
customer focus, speed of innovation, and the ability to add novelty and
entertainment to products and services.

For instance, companies that make or sell quality products or deliver
quality service need workers with solid academic and occupational
preparation. But good academic basics do not guarantee quality.
Companies that meet quality standards require conscientious employees
who are able to take responsibility for the final product or
service---regardless of their position in the company. Variety and
customization require workers who are creative and good at problem
solving.

Continuous innovation requires a general ability to learn and work in
groups. Adding novelty and entertainment value requires creativity. The
growing consumer demand for customization and variety requires workers
with problem-solving skills that emphasize the flexible application of
reasoning abilities in multifaceted work contexts. To continuously
improve products and services, institutions require employees up and
down the line to have leadership and learning skills. Successful
teamwork and good customer service require interpersonal and
communication skills.

***Positive Cognitive Style***

The new, fast-paced, and unforgiving global economy results in constant
change in skills required for specific jobs. Constant economic and
technological change also discourages growth in job tenure and increases
the overall rate of job creation and job destruction. The subtlest
behavioral asset in managing school, work, and life in the constant flux
of modern times is a positive cognitive style (Seligman, 1998).

The notion of "positive cognitive style" is more than "self-esteem" or
"the power of positive thinking." \"Self-esteem\" and \"positive
thinking\" are internal attitudes that persist irrespective of external
experiences of success or failure. Cognitive styles are the various ways
people process information gained from experience---positive cognitive
styles encourage success and negative styles encourage failure. The
notion of "positive cognitive style" argues that the way in which people
understand and engage reality can encourage successes and discourage
failures. From this perspective, individual choices are the key to
explain otherwise differences in human behavior that cannot be explained
by environmental or biological factors.[^11] Cognitive style helps
explain why some succeed against the odds and others fail in spite of
their advantages.

Cognitive psychologists tend to agree that the way people explain events
to themselves, or their cognitive style, is a key determinant of success
and failure.[^12] Those with a negative cognitive style tend to see
failure as a result of causes that are \"permanent, pervasive, and
personal.\" They tend to discount successes as temporary, limited in
scope, and unrelated to personal merit (Seligman, 1998). People with a
negative cognitive style tend to be less successful because they cede
control over the choices in their lives to their circumstances, reducing
their ability to act and persevere.[^13]

## *Occupational and Professional Competencies*

The general reasoning, problem-solving, and behavioral skills as well as
a positive cognitive style are critical for lifelong learning and
success in modern labor markets but, at some point, everyone has to put
an occupational point on his educational pencil. There is a general
consensus that occupational preparation---or college-level coursework
leading toward occupational or professional preparation---should begin
sometime in high school. A small share of students begin to receive
occupational preparation in high school through vocational programs,
career academies, and other applied curricula. For the most part, these
programs survive as an alternative applied pedagogy to meet statewide
academic performance standards and as preparation for further
postsecondary education. Among those who terminate their education with
high school, the half that need training get it primarily from their
employers.

For most high school students, occupational preparation continues or
begins after high school with enrollment in occupationally oriented
programs in degree and non-degree granting postsecondary programs. A
much smaller share continues their education past the first four years
of college and gets their occupational or professional credentials in
graduate or professional schools.

Increases in general education requirements on the job is the driving
force that results in complementary increases in job-specific
certificates, certifications, and customized job training. The most
highly educated get the most initial job training and retraining. In
addition, there is an increasing share of occupations in fields such as
information technology, public safety, and health care that supports or
requires regulated proficiency standards (Carnevale and Desrochers,
2001).[^14]

To some extent the increase in the demand for occupational credentialing
derives from the changing relationships between employers and employees.
These days a career is no longer defined by working for one company, but
by moving among employers within an industry or occupation (Neumark,
2000). Workers change jobs more often, and employers, constantly
changing form in response to economic and technological change, are
always looking for new talent.

Nor, as change accelerates on the job, can employers take the time to
develop talent from the ground up (Cappelli et al., 1997). As
relationships between employers and employees become less stable and as
the pace of change accelerates, reliable occupational credentials become
more important in matching individual skills to new job requirements.
Employers want to hire the most training-ready employees, those with
educational and occupational credentials, and then add company-specific
training or training prompted by changes in work processes or technology
(Bishop, 1996).

Workers who also have a solid base of general knowledge and current
occupational know-how become more portable, since their value is
internalized in their individual experience and credentials and not tied
to a particular company. An associate or bachelor's degree with a
particular occupational emphasis is more likely than a high school
diploma to ensure these basic transferable skills.

The need for certified occupational skills also is driven by the
geographic extension of labor and product markets. Product markets, and
to a more limited extent service markets, have extended their boundaries
from local to regional, from regional to national and, in some cases,
from national to global markets. The principal effect of the expanding
geography of markets on workers is not to increase geographic mobility
but to raise skill requirements from local to national and, ultimately,
world-class standards (Porter, 1998; Kanter, 1997).

# *The Demographic Twist* 

Although future economic realities favor higher levels of education and
a broader array of skills, a reversal in two longstanding demographic
trends may make it difficult to fulfill these needs. The most powerful
of these trends is the retirement of the baby boom. The U.S. workforce,
whose size has increased by almost 40 percent over the past 20 years,
will slow its growth by one-half over the next several decades, creating
a growing need for youth with postsecondary education or training to
replace college-educated retirees (Ellwood, 2001).

For instance, we know that retirements begin aggressively after age 55,
especially for men, and retirement ages have been declining steadily.
The only debate among labor economists is whether they will continue to
decline or stabilize. We also know that by 2020 there will be about 46
million baby boomers with at least some college who will be over 55
years of age (Carnevale and Fry, 2001b). These boomers are working
today, but they will age beyond 55 years from here on out. Over the same
period, if we maintain current attainment rates in postsecondary
education, there will likely be about 49 million new adults with at
least some college---a net gain of about 3 million (Carnevale and Fry,
2001b). If the Bureau of Labor Statistics projections of a 22 percent
increase in jobs that will require at least some college by 2010
continue through 2020, roughly 15 million new jobs that require
college-educated workers will be created. This far exceeds the small net
increase expected in the college-educated population, resulting in a net
deficit in workers with at least some college of about 12 million
workers by 2020.

We also will experience a second demographic reversal as the diminutive
"Generation X" gives way to the larger "Generation Y." As the baby boom
leaves the labor force taking their experience, education, and training
with them, there will be a surge in the number of 18- to 24-year-olds.
But on balance, the increase in the number of 18- to 24-year-olds will
be far short of the number of youth necessary to replace the education
and experience of the retiring baby boomers. Moreover, the increasing
costs of providing postsecondary education and training for the surging
Generation Y may limit access to skills. The result will be an even more
substantial shortage in skilled workers with at least some postsecondary
education and training.

In addition, the present economic slowdown may actually accelerate these
longer-term trends toward shortages of educated and skilled labor.
During the 1990-91 recession, companies aggressively used the pause to
restructure production processes and to shift toward fewer workers using
more sophisticated technology. These productivity-enhancing
retrenchments require higher skill levels in the remaining job slots. It
is conceivable that the present economic pause will encourage a further
reorganization of production and service delivery processes,
accelerating the increase in demand for skilled labor.

In the face of sharply reduced labor force growth rates and possible
skill shortages, education and training policies will have to play the
lead role. We know that a plethora of policies underlying the social
safety net has effects on individuals\' decisions to work. While changes
in social policies might increase the size of the labor force, only
expensive and politically difficult policy changes are likely to
increase the available numbers of highly skilled workers (Ellwood,
2001).

Increasing retirement ages, for instance, will sustain labor force
participation most among those most dependent on social security
payments for retirement. These tend to be the lowest paid and least
skilled workers. Further increases in the labor force participation of
married women by expanding child care assistance to the middle class may
be the best bet for bringing more skilled workers, but would be
extremely expensive (Ellwood, 2001). Large-scale skill-based immigration
policies would be effective but politically sensitive.

***Meeting Skill Needs: The Missing Middle in Education Policy***

Policy goals are well defined in elementary and higher education, but
the middle sections in the K-16 education pipeline have become the
"missing middle" in the education policy dialogue. It is widely agreed
that the road to meeting work-based skill needs starts by ensuring that
all students in elementary education master the basics upon which more
advanced education and training are based. In the United States, there
are standards and goals for elementary education and broad agreement
that all students should meet common standards sometime between the
8^th^ and the 12^th^ year of public schooling. It is also widely agreed
that the K-12 system should prepare all students for some kind of
postsecondary education, training, or good jobs. But while there is a
policy consensus on the need to meet high standards sometime prior to
high school graduation and the value of postsecondary education and
training, there is much less agreement on curriculum appropriate to
achieve these goals in the middle years that begin in high school and
end with the transition from postsecondary education and training to
work.

At issue is the mix of academic and applied curriculum appropriate in
the transition of years from high school to college or high school to
training and work. This is the nexus, beginning in the middle years of
the K-16 pipeline, where general education, occupational education, and
work begin to overlap---the terrain covered by the more highly regulated
European "dual systems."

The missing middle in American education and training policy has
gradually come to light in response to the diverse needs that have
emerged among adolescents and young adults over the last twenty years.
In general, these needs tend to arise in different ways among the most
and least educationally advantaged and among the majority of students
caught in the middle of their high school class.

The "comprehensive" high school that provided something for everybody
now focuses on a single set of standards for all students but fewer
educational paths to meet those standards. The general consensus on
performance standards has yet to produce alternative pedagogies that
meet the diverse needs of the student population in their young adult
years.

There are still three educational pathways to meet standards: the high
road, the low road, and the muddy middle path. The most advantaged and
able students are on the high road to college and graduate education.

Few would disagree with the basic democratic premises that are implicit
in standards-based school reform. But what do we do with students on the
high road who master standards long before high school graduation? They
are too young to go off to college. Instead, we bring the college
curriculum to them in the form of dual enrollments, academically
enriched summer school, and an elite "Advanced Placement" curriculum
that currently exists in 13,680 high schools. In 2001, 845,000 students
took 1.4 million AP exams, an increase of 10 percent over the previous
year (College Board, 2001).

The educationally disadvantaged are on the low road with the steepest
uphill climb to meet standards. The egalitarian instincts in the
standards-based education reform movement demand that educationally
disadvantaged students be held to the same standards as other students.
These are the 11 percent of young adults who have no high school
diploma, and the 37 percent of students who do not get any kind of
postsecondary education or training directly after high school (NCES,
2001). Policymakers reason correctly that meeting standards will give
these students the threshold skill required for better chances at
postsecondary education, training, or job opportunities after high
school. What's missing are the compensatory resources and customized
curricula and pedagogy that help these students learn and enable them to
meet the high standards that provide access to postsecondary education,
training, and good jobs.

Further evidence of the missing middle in K-16 policy comes from
students who are themselves caught in the middle between the
educationally advantaged and the educationally disadvantaged in American
high schools. These students are on the muddy middle path to college.
They complete high school successfully and go on to college but do not
finish. For instance, more than 45 percent of high school students go on
to four-year schools but just less than three in five graduate within
five years (Horn, 1998; Berkner, Cuccaro-Alamin, and McCormick, 1996).

## 

## *The Curriculum Mismatch*

The current core secondary curriculum is organized around discrete
disciplines including math, science, English, and languages. Moreover,
the "back-to-basics" spirit of the education reform movement tends to
strengthen the hold of the traditional academic silos on secondary
education. Currently, transcript studies show that in 1998, 56 percent
of students met the \"new basics\"[^15] requirements (excluding the half
year of computer science) recommended in *A Nation At-Risk*, compared
with only 14 percent in 1982 (Roey et al., 2001).

Our ability to move the majority of high school students into the most
rigorous curriculum is a remarkable achievement. Furthermore, the
current academic curriculum produces the math and verbal reasoning
skills that correlate with success in college and in subsequent careers
(Adelman, 1999). In fact, success in the traditional academic
curriculum, especially the math curriculum, is the most powerful
predictor of wage advantages from increased postsecondary attainment,
and improvements in mathematics skills account for most of the growth in
wage premium from increased postsecondary educational attainment since
the early 1980s (Murnane et al., 1995; Grogger and Eide, 1995).

But part of what's missing starting in the middle years of the K-16
pipeline is a curriculum that matches up with the diverse educational
and career needs of young adults. In particular, we are still hard at
work trying to develop curricula that (1) integrate academic
competencies into applied and vocational pedagogies, especially in high
schools; (2) align the content of the core academic curriculum that now
dominates in secondary schools with the more applied curricula that now
dominate postsecondary education and training; (3) align academic
curricula more closely to the competencies people actually use on the
job once they finish their initial education, including cognitive
reasoning abilities and "soft skills" such as problem solving,
interpersonal skills, and positive cognitive styles that are important
in career success.

First, there is a need to integrate academic and applied curricula. The
current math, science, and humanities curriculums are organized as
discrete hierarchies focused almost exclusively on preparing students
for the next rung up in the disciplinary sequence. Because they are
taught as specialties, they are less accessible to generalists at each
successive level of specialization. And because they are taught
abstractly, they do not take advantage of applied pedagogy and are less
accessible to students with an applied orientation and learning style.

Second, the focus on an academic core curriculum in high school does not
provide an obvious transition to the more applied focus of postsecondary
education and training. The majority of students step off the
disciplinary hierarchy in math, the sciences, English, and the
humanities after high school. In postsecondary education, the vast
majority of students avoid the academic silos of math, science, and the
humanities in favor of vocational curricula with a more applied focus
such as business, engineering, and K-12 teaching.[^16]

Third, it appears that there is a mismatch between the content and
pedagogy associated with both academic and applied courses and skill
requirements on the job. The current curriculum is best at producing
general reasoning abilities, but the content of academic curriculum does
not match up well with job requirements in particular. For instance, the
current math curriculum that emphasizes arithmetic through calculus does
provide high levels of mathematical reasoning ability, but does not
match up with the math requirements of the vast majority of jobs. Even a
casual analysis of the distribution of occupations demonstrates that
relatively few of us, less than 5 percent, use geometry, algebra, or
calculus on the job. In spite of these realities, in 1998, 75 percent of
high school students took geometry, 63 percent took algebra I, 62
percent took algebra II, and 18 percent of high school students took
calculus (NCES, 2000). However, mathematical literacy in labor markets
is an ability to use arithmetic operations with increasing independence
and in situations of increasing complexity.

Does the fact that only 5 percent of us use mathematics beyond
arithmetic on the job mean that we should stop teaching algebra,
geometry, trigonometry, and calculus in high schools? Does the fact that
even fewer of us use Shakespeare, world history, or French at work mean
these studies are a waste of time? Not necessarily, and certainly not
until we can do better. In the current education curriculum, these
higher-level courses are the means by which people learn higher level
reasoning skills. Throwing out the current curriculum without a superior
alternative in place would be like throwing out the baby with the bath
water.

But while we are striving to meet common academic standards, educators
should continue to explore alternative pedagogies that mix academic and
applied learning and provide students with the same higher level
reasoning abilities conveyed by the current curriculum. The support for
applied curricula is that they are superior to more abstract academic
pedagogies and provide practical learning that keeps young people
interested and in school. While these alternative pedagogies are still
controversial and still under construction, the emerging consensus view
is that they should be focused on occupational and industry-based
content that ties into the traditional academic disciplines.

# 

# *What's At Stake?*

If we are unable rise to the challenge of meeting increasing skill
demands, there will be broad and diverse impacts on the U.S. economy
that will be both economically and socially costly. A stabilization or
decline in the productivity gains that we have only recently reaped, or
a slowdown in growth, may be the primary negative economic impacts. The
financial benefits of a robust economy may also be dampened if companies
are forced to move to off-shore production to find skilled
workers---American workers will lose out on job opportunities, foreign
workers will spend their dollars overseas, and U.S. state, local, and
federal governments will lose corporate and personal tax dollars. But if
we are able to increase the skills of American workers, we also could
increase the tax dollars that flow into our financial coffers.

Neglecting to raise the achievement of youth will also put these new
workers at a disadvantage in the labor market. High school graduates
without a solid set of skills are less likely to have access to
technology and on-the-job training, both factors that increase earnings.
They also are more likely to remain in low-wage, low-opportunity jobs
that provide few career path options. In addition, those high school
students who do not graduate with a solid base of skill will have
curtailed their options for obtaining additional postsecondary education
and training and the wage increases that accompany them. They may also
stimulate broader social problems; particularly continued increases in
wage inequality as employers pay increasingly high wage premiums to
skilled workers who are in short supply.

## *Education and Economic Growth*

The ultimate determinates of economic growth are labor supply, usually
measured by hours worked, labor productivity, which depends on the
amounts of human and physical capital, and changes in technology and the
organization of work (Bluestone and Harrison, 2000). Education has
historically played a strong role in increasing growth, by improving
human capital. During the postwar years from 1948 to 1973, education
accounted for 29 percent of the increase in gross domestic product
(GDP), and economic innovation accounted for 37 percent (Shapiro, 1998;
Denison, 1984).[^17] So all totaled, the direct and indirect benefits of
increases in education accounted for more than two-thirds of the
increase in U.S. economic growth.

Targeted studies tend to confirm the macro data on the importance of
education and training in improving productivity growth. Increasing the
education level of workers by one year has been shown to increase
productivity by 8.5 percent in manufacturing and 12.7 percent in
non-manufacturing industries (Black and Lynch, 1996). Training affects
productivity as well: one hour of training can increase productivity
five times as much as it impacts wages. Formal employer-provided
training has been shown to increase productivity by 10 to 19 percent
(Bartel, 1989 and 1994; Bishop, 1994).

A better-educated workforce can also have real fiscal impact. Sweden is
one of the most literate countries in the world. If the distribution of
skill in the United States mirrored that of Sweden, a
back-of-the-envelope calculation suggests that we could increase GDP by
\$463 billion and reap as much as \$162 billion in additional federal,
state, and local tax dollars.[^18]

## *Skill and U.S. International Economic Competitiveness*

Our ability to produce high levels of skill is critical to the overall
performance of the American economy in global competition. Although
American educational performance is improving at home, our scores on
international tests are consistently sub-par. And among youth aged 25 to
34, we have quietly dropped to sixth in the world in high school
graduation rates behind Norway, Japan, Korea, Czech Republic, and
Switzerland (OECD, 2001).[^19] How can we reconcile our mediocre
educational standing in the world and our economic success in the
high-tech global economy?[^20] The answer is that we may not have, on
average, the world's *best* stock of skills, but we are pretty good and
because of our size we have *more top students.*

On average, we may be in the middle of the pack on international tests
but, because of our size, we tend to have more high performers than the
nations that do better than the United States. For instance, our
population is roughly four times the size of that of France, Italy, and
the United Kingdom, and three times the size of Germany.

Our student population is only twice as large as the Japanese school-age
population but our size advantage still prevails. For instance, in the
TIMSS data on eighth-grade students, the Japanese rank 5^th^ in math and
we rank 18^th^. Sixty-four percent of Japanese eighth-graders scored in
the top quartile of international benchmarks in math, compared with 28
percent of American students. But because our eighth-grade population is
twice as large as the eighth-grade population in Japan, there are
970,000 U.S. students in the top international quartile, compared with
928,000 Japanese eighth-graders.

More is not always better. But oftentimes, four pretty good engineers
tackling a business problem is better than one very good engineer
working alone addressing the same issue. Similarly, four companies in
the software business competing directly against each other are likely
to produce better software than a single company.

A second advantage that allows us to be the number one economy with a
mediocre educational performance is our flexibility (Bertola, Blau, and
Kahn, 2001). In the United States, labor markets are flexible, allowing
employers enormous agility in hiring, paying, and allocating workers.
America's agility gives us an edge in the global race because it allows
us to make better use of our talent.

In Europe and Japan, by comparison, access to jobs and pay is highly
regulated by skill certification and seniority. And jobs are protected
shelters from economic and technological change. Unemployed or
underemployed workers are eligible for high levels of income assistance,
pensions, and benefits. The result is job security, income security, and
structural rigidity. But European and Japanese education and labor
market systems have a tough time redesigning jobs or shifting human and
machine capital investments in response to economic and technological
change. In recent years, the equitable but inflexible European and
Japanese models have driven up costs, suppressing job creation, and
driving up unemployment. In contrast, the agile American model has
boosted job creation *and* income inequality.

America's characteristic flexibility also means that employers don't
need to rely on the nation\'s homegrown talent. Immigration is a major
source of talent among math and science professionals. For instance, a
majority of America's civil engineers are foreign born and more than a
third of all engineers are foreign born. In addition, American companies
are free to produce offshore if they cannot find the talent at home at
the right prices.

The problem is that our advantages won\'t last. We cannot remain a
first-rate economic power with mediocre human capital. All forms of
advantages are temporary in global economies. The European and Japanese
versions of highly planned economies surged in the 1970s but lost out to
American flexibility in the 1980s. Eventually, our competitors will
narrow our economic lead as they learn how to create their own versions
of agility and scale. At that point, the competition will really come
down to who has the best human capitalespecially in a world where
people are no longer nation bound and technology and financial capital
ignore national boundaries as they hop across borders from one
entrepreneurial opportunity to the next.

At some point soon, if we are to retain the lead in the global economic
race, we will have to rely on our homegrown human capital for our
competitive edge. Eventually, we will have to close the education gap
between our competition and ourselves.

***The Individual Cost of Skill Deficits***

The growing importance of skills, especially at the college level in
allocating economic opportunity is especially significant in the United
States. Our growing reliance on postsecondary education and training as
the threshold for allocating opportunity means that poorly educated
individuals, rather than employers or governments, pay the price of
educational inequality.

Individuals who do not acquire college-level skills are more likely to
be forced into low-wage and low-benefit jobs, and the earnings
disadvantage associated with those jobs has been rising since the 1970s.
The college-wage premium---the earnings advantage of college-educated
workers over high school graduates---in 1979 was 36 percent for men and
34 percent for women. By 1997 however, the premium rose to 67 and 72
percent for men and women, respectively (Mishel, Bernstein, and Schmitt,
1999). The wage premiums for those with "some college" have also
doubled, although they remain far below the premiums for four-year
college graduates. In addition to the increasing wage premium over the
past 20 years, real inflation-adjusted earnings of less educated men
have actually declined over the period. But those with at least some
education beyond high school---a year\'s worth of courses---can earn
from 5 to 11 percent more than high school graduates.

###### Workers with the least education also are less likely to receive training and access to technology on the job that lead to earnings advantages. Training can increase employee wages by 3 to 11 percent, with formal training providing higher returns than informal training (Bishop, 1996; Mincer, 1988; Altonji and Spletzer, 1991; Loewenstein and Spletzer, 1998). And those who receive training earn more, on average, than more-educated workers who do not (Eck, 1993). High school dropouts who use technology on the job earn about 15 percent more than high school dropouts who do not, but the earnings premium for college graduates who use technology is nearly twice as high (Krueger, 1993; Mishel and Bernstein, 1995). Good pay and benefits are linked to postsecondary educational attainment, achievement, training, and technology.

As access to college becomes more important in allocating economic
opportunity, the large gaps in access between youth from high- and
low-socioeconomic status families become a greater threat to upward
mobility. Families with the highest incomes are increasingly likely to
be parents with the highest level of educational attainment. Parental
education and income are strong threads in the complex weave of social
and economic forces that influence academic readiness for college and
college enrollments. As a result, many are concerned that access to
college, especially highly selective ones, and career opportunity are
becoming more concentrated among families with high incomes and high
levels of parental education. There is a further concern that advantages
are passed on from one generation to the next, frustrating the American
promise of intergenerational mobility.

Thus far, the available evidence on opportunity is mixed. First the good
news: Educational performance and college going has improved among all
income classes and racial and ethnic groups since the early 1970s, when
policy, especially federal policy, began funding targeted assistance for
disadvantaged students throughout the education pipeline. This has
continued in spite of the widening income distribution. But there is
also bad news: The gap in educational performance and access to college
has not narrowed in spite of those same policies.

In our work-based society, failure to give people the knowledge and the
skills they need to get and keep good jobs can have disastrous personal
consequences. Those with the least education are much more likely to
experience violence, addiction, poverty, illness, incarceration, and
other forms of abuse. And those who can\'t get and keep jobs often drop
out of the political system, withdraw from community life, and in some
cases, create alternative economies, cultures, or political structures
that are even more damaging to the mainstream.

# *Conclusion*

Providing all youth with sufficient skill necessary to access good jobs
that tend to require at least some education or training after high
school presents fiscal, curriculum, and institutional challenges. Simply
adding years of schooling at both ends of the education pipeline in
order to meet expanding skill requirements on the job will be
prohibitively expensive. In order to afford the human capital we need in
the new economy, we will have to produce Pre-K-16 education cheaper,
faster, and better. This will require a more effective alignment of the
Pre-K-16 education curriculum to meet rising labor market requirements
for (1) cognitive reasoning skills, (2) problem-solving skills, (3)
"soft" behavioral skills, (4) positive cognitive styles, and (5)
specific occupational preparation.

Aligning education curricula to labor market requirements is no small
feat. The alignment challenge has both horizontal and vertical
dimensions. The horizontal dimension focuses on the integration of
academic and applied curricula at each grade level, especially in high
school and beyond. The vertical dimension is the alignment of the
education pipeline and labor market institutions.

The curriculum challenge lies in the alignment of academic and applied
curricula in the middle years in the education pipeline where basic
academic development of cognitive skill begins to overlap with the need
for more applied forms of learning and career choices. The traditional
vocational curricula have not been successful in teaching the core
cognitive math and verbal competencies, especially in high schools. The
current academic curriculum, "the new basics," in secondary schools
represents the state of the educational art in producing cognitive
reasoning ability, but it is organized as a set of discrete disciplinary
hierarchies and is taught in an abstract manner that discourages
interdisciplinary and applied learning. In addition, the current
academic curriculum in both secondary and postsecondary institutions
does not lend itself easily to the teaching of problem solving,
behavioral skills, positive cognitive styles, or occupational
competencies---other than the content knowledge necessary for a career
in teaching one of the core academic subjects.

Making better sense of the missing middle in education policy also
requires better alignment among secondary, postsecondary, and employer
institutions. In the American system, the alignment between general
education and occupational education and training and jobs is market
driven. Relationships between employers and educational institutions are
informal. Secondary and postsecondary institutions are only loosely
aligned. Secondary schools are locally controlled and the postsecondary
education and training system is market driven and increasingly diverse
in its offerings of degreed programs, certificates, certifications, and
customized training.

Ultimately, the vision of a learning system that can fill the missing
middle in education policy should be judged by standards that measure
its ability to increase choices and opportunity for both work and
learning for students as well as its ability to satisfy performance
requirements in school and on the job. The diversity among American
students, workplaces, and communities requires a variety of alternative
paths that mix work and learning integrated by an incremental and
sequential system of competency-based standards (Carnevale and Porro,
1994).

The challenge is to build an integrated system of pathways with
different points of access and exits controlled by posted education
skill standards. Individuals should not be allowed to enter or exit a
particular path without certification of qualifying skills and applied
competencies. Every exit from a learning path should be validated by
accredited learning and lead to either work or continued progress along
another learning path that ultimately makes a four-year college degree
accessible (Carnevale and Porro, 1994).

While reforming and aligning education is costly, not implementing these
changes is perhaps even more expensive. At stake are our economic
competitiveness and our ability to sustain high levels of growth and the
productivity gains we have recently recaptured. The number of youth
coming through the education pipeline will not offset impending
demographic changes as the baby boom retires, and social policies show
little promise of alleviating skill needs. Education is the best bet to
help us maintain out competitive edge. At the same time, failure to
serve the educationally disadvantaged is a lost opportunity in a time
when more and more skilled workers are needed. Failure to take advantage
of the unmet demand for skilled labor will move us further away from our
egalitarian goals as low-skilled workers are blocked off from access to
good paying jobs, further increasing earnings inequality between the
most and least educated.

The inescapable reality is that ours is a society based on work *and*
knowledge. If educators cannot fulfill their *economic* mission to help
our youth and adults become successful workers, they also will fail in
their *cultural* and *political* missions to create good neighbors and
good citizens.

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[^1]: Education, training, and technology tend to be *sequential and
    complementary* in producing productivity and earnings. The career
    and earnings advantages of the sequence of academic, occupational,
    and work-based learning accumulate rapidly. Higher levels of formal
    education not only increase access to jobs with training, they also
    increase access to technology that complements rather than replaces
    skills. More highly educated workers use technologies that increase
    worker autonomy and complement skill---for instance, desktop
    computers and flexible machine tools. To some extent, education,
    training, and technology can be *substitutes* as well as complements
    for one another. Technology can substitute for both education and
    training by deskilling jobs. Less educated workers tend o use
    technology that reduces the level of skill required---for instance,
    cash registers with pictures of foods on keyboards rather than
    numbers. Narrow training can substitute for broader educational
    deficiencies, although it does not provide longer-term adaptability,
    especially if narrow tasks are automated or shifted offshore.

[^2]: Comparisons among OECD countries show that the level of education
    does not have a significant effect on growth (Krueger and Lindahl,
    1999). However, in less developed countries that are "in
    transition," levels of education may be a more important determinant
    because very low levels of education stocks make it difficult to
    implement complex growth-inducing technologies and
    productivity-enhancing practices (Rosenzweig, 2000).

[^3]: Krueger and Lindhal (1999) find that these returns are "at least
    as much as" the increase in the individual returns to schooling,
    which are about 5 to 15 percent for each additional year of
    schooling.

[^4]: The notion that skill requirements are growing and that people are
    becoming more skilled is a safe bet. The value of knowledge has
    increased inexorably for roughly 3,000 years since early
    efficiencies in agriculture provided food surpluses that freed up
    human labor for more complex tasks (McNeil, 1999). Increasing
    complexity requires more formal teaching and learning. At the same
    time, daily life and work in environments of growing complexity also
    enhance knowledge and reasoning ability as we learn by doing
    (Schooler, 1998; Greenfield, 1998; Neisser, 1998). The empirical
    evidence of the synergy between social complexity and new learning
    ability is that the performance on standardized tests of human
    reasoning power has been rising about three points every decade ever
    since testing began early in the 1900s. For instance, the average
    scores for Americans taking the Wechsler-Binet or the Stanford
    reasoning test has increased by 15 to 25 points since 1918 (Neisser,
    1998). In Great Britain, scores on the Raven Progressive Matrices
    test of abstract reasoning show that score levels that included the
    bottom 90 percent of the population born in 1877, include only the
    bottom 5 percent of the population born in 1967 (Flynn, 1998). These
    increases in basic reasoning ability have occurred in spite of the
    fact that the highest fertility rates persist among the lowest
    scorers. Although the dispersion in the scores is not changing,
    scores are rising at similar rates across the board.

[^5]: The phrase \"at least some college\" as well as the term
    \"college-educated\" includes all those who have had coursework that
    leads to two-year or four-year degrees, including both those who
    attain a degree as well as those who pursue college coursework but
    do not attain a degree.

[^6]: We first heard this phrase in conversation with Hans Meeder,
    Deputy Assistant Secretary, Policy and Planning, Office of
    Vocational and Adult Education, the U.S. Department of Education.

[^7]: Trade is another factor that both eliminates and creates jobs both
    on the production line and managerial and professional jobs in
    manufacturing. Of the 20 million jobs lost to trade, about 3 million
    were probably lost to trade and the other 17 million were lost to
    productivity improvements. Jobs lost to trade tend to be low-skilled
    low-wage jobs. Jobs gained from trade tend to be more highly skilled
    and highly paid, both in manufacturing and in the economy on the
    whole. The globalization of competition for low-skilled jobs,
    especially in manufacturing, holds down wages of low-skilled
    workers. Some estimates suggest that trade accounts for as much as
    30 percent of the increase in wage disparities since the 1970s.
    Ultimately, however, trade affects wages more than the number of
    jobs. Trade tends to drive down the earnings of low-skilled labor
    and increase the relative earnings of skilled workers in
    manufacturing and in the economy on the whole.

[^8]: Prime-age workers include those aged 30 to 59.

[^9]: A debate exists over the extent to which skills and skill
    requirements have increased in the economy. Different measures of
    skills---direct measurement, wage inequality, and skills
    gaps---often result in different outcomes (see Cappelli, 1993 and
    1996 for a review of this literature). However, the balance of the
    literature that examines wage inequality and supply and demand
    shifts concludes there has been an increase in skill requirements in
    the economy (Autor, Katz, and Krueger, 1997; Katz and Autor, 1999;
    Katz and Murphy, 1992; Murphy and Welch, 1993; Goldin and Margo,
    1992; Juhn 1999; Levy and Murnane, 1992; Johnson, 1997; Topel, 1997;
    Gottschalk, 1997). The literature that emphasizes skill measurement
    concedes that there has been an increase in skill requirements,
    although some argue the changes are not exceedingly large and have
    slowed dramatically since 1960 (Judy and D'Amico, 1997; Mishel and
    Teixeira, 1991; Mangum, 1990; Barton, 2000). The evidence on
    upskilling within specific occupations is mixed with some evidence
    to support the thesis and additional evidence that upskilling in
    some occupations is offset by deskilling in others (Cappelli, 1993;
    Mishel and Teixeira, 1993).

[^10]: Although there is much discussion about the importance of
    technology employment, it is rarely carefully defined. This document
    defines technology jobs to include only those jobs that are heavily
    science-based and/or utilize specialized machinery and equipment.
    These jobs either require at least a bachelor's degree (e.g.,
    engineers, chemists, architects, computer system analysts, etc.) or
    some specialized postsecondary education or training (e.g., computer
    programmers, medical and other technicians, cad-cam operators,
    etc.). Virtually, all workers today have some contact with
    technology, especially information technology, but the definition of
    high-technology workers used in this paper limits their number to
    those with some special expertise, education, and training.

[^11]: This derives from new thinking in cognitive psychology in
    response to the failure of behaviorism---the notion that people were
    purely products of their environments---and the Freudian emphasis on
    deep-seated sexual drives to explain behavior. After 1967, with the
    publication of Ulric Neisser's *Cognitive Psychology,* psychologists
    began to argue that human actions could be better understood by
    examining the way people processed information, using advances in
    computer information processing as a relevant model.

[^12]: Studies on personality also show that some personality traits
    correlate with success on the job. For example,
    \"conscientiousness\" correlates positively with job performance,
    the ability to learn on the job, and positive personnel data such as
    low absentee rates. While the relationship between \"positive
    cognitive style\" and \"conscientiousness\" is not well established,
    it seems logical that cognitive styles are among the mediating
    forces that determine successful traits like \"conscientiousness.\"
    (For a meta-analysis of the effects of \"personality dimensions\" on
    job performance and learning see Barrick and Mount, 1991; Mount and
    Barrick, 1998; Tett, Jackson, and Rothstein, 1991; Tett et al.,
    1994.)

[^13]: The available evidence and old-fashioned common sense suggests
    that the feelings of helplessness that underlie a negative cognitive
    style are a learned behavior subject to environmental influences
    (Seligman, 1998). If those subjected to persistent negative feedback
    in their interactions with the world learn to perceive failures as
    \"persistent, pervasive, and personal,\" this can lead to \"learned
    helplessness\" unless extraordinary compensatory support is
    provided.

[^14]: The number of certifying organizations has grown substantially
    over the past several decades, from about 120 in 1965 to more than
    1,600 in 1996 (National Organization for Competency Assurance,
    2000).

[^15]: The New Basics recommended by the National Commission on
    Excellence in Education (1983) include four years of English, three
    years each of mathematics, science, and social studies, and one-half
    year of computer studies.

[^16]: Of the 1,184,000 bachelor\'s degrees conferred in 1998, 33,000
    were conferred in the liberal arts and sciences, general studies,
    and humanities. In 1998, there were 12,000 bachelor\'s degrees
    awarded in math but, in the same year, there were 233,000
    bachelor\'s degrees awarded in business; 17,000 bachelor\'s degrees
    awarded in parks, recreation, leisure, and fitness studies; 50,000
    in communications; 52,000 in the visual and performing arts; 17,000
    in home economics; and 25,000 in protective services (NCES, 2000).
    The same pattern is reinforced in the expansion in applied
    sub-baccalaureate associate degrees, certificates, certifications,
    and customized training (Carnevale and Desrochers, 2001). Of the
    555,000 associate degrees conferred in 1996, 115,000 were conferred
    in the liberal arts and sciences, general studies, and humanities,
    and only 758 were conferred in mathematics (NCES, 2000).

[^17]: Of the remainder, 15 percent was attributed to increases in plant
    and equipment, 10 percent was attributed to greater economies of
    scale, and the final 10 percent was attributed to shifts and more
    efficient use of labor and capital (Shapiro, 1998; Denison, 1984).

[^18]: Using data from the International Study of Adult Literacy shows
    that workers in Sweden have the following distribution of skills:
    Level 1 (lowest): 5 percent; Level 2: 17 percent; Level 3: 40
    percent; and Level 4/5 (highest): 38 percent. In contrast, the
    distribution of workers\' skill in the United States is much lower:
    Level 1 (lowest): 16 percent; Level 2: 24 percent; Level 3: 33
    percent; and Level 4/5 (highest): 27 percent (OECD, 1995). To
    estimate the increases in GDP and taxes that would occur if we had a
    skill distribution similar to Sweden, we first calculated the number
    of workers in the United States in each skill level, and second,
    applied the distribution of skill in Sweden to the total number of
    workers in the U.S. to estimate how many workers would fall in each
    skill level if the United States' skill levels resembled Sweden.
    Taking both of the distributions, we multiplied the average earnings
    of U.S. workers in each skill level by the number of workers in each
    level, and summed to get aggregate earnings. The difference in
    aggregate earnings using the U.S. and Sweden distributions provides
    an estimate of the potential increase in GDP. We then multiplied the
    estimated increase by 35 percent to capture the additional federal,
    state, and local taxes that would be paid by these more skilled
    workers.

[^19]: Among the 25- to 64-year-old population, the United States still
    has the largest secondary education completion rate.

[^20]: Japanese students are among the front-runners in international
    tests. But the average purchasing power of American families is 40
    percent greater than the average purchasing power of Japanese
    families. In general, members of the European Union outperform us on
    international tests. But in 1996, the U.S. gross domestic product
    per capita towered over that of the European Union nations\$27,800
    versus \$19,300. During the same period, U.S. unemployment has been
    consistently less than half the European level.