```

[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]

 
                 STRENGTHENING AMERICA'S MIDDLE CLASS:
                       FINDING ECONOMIC SOLUTIONS
                       TO HELP AMERICA'S FAMILIES

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                          EDUCATION AND LABOR

                     U.S. House of Representatives

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, FEBRUARY 7, 2007

                               __________

                            Serial No. 110-3

                               __________

      Printed for the use of the Committee on Education and Labor

                       Available on the Internet:
      http://www.gpoaccess.gov/congress/house/education/index.html

                                 ______

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                    COMMITTEE ON EDUCATION AND LABOR

                  GEORGE MILLER, California, Chairman

Dale E. Kildee, Michigan, Vice       Howard P. ``Buck'' McKeon, 
    Chairman                             California,
Donald M. Payne, New Jersey            Ranking Minority Member
Robert E. Andrews, New Jersey        Thomas E. Petri, Wisconsin
Robert C. ``Bobby'' Scott, Virginia  Peter Hoekstra, Michigan
Lynn C. Woolsey, California          Michael N. Castle, Delaware
Ruben Hinojosa, Texas                Mark E. Souder, Indiana
Carolyn McCarthy, New York           Vernon J. Ehlers, Michigan
John F. Tierney, Massachusetts       Judy Biggert, Illinois
Dennis J. Kucinich, Ohio             Todd Russell Platts, Pennsylvania
David Wu, Oregon                     Ric Keller, Florida
Rush D. Holt, New Jersey             Joe Wilson, South Carolina
Susan A. Davis, California           John Kline, Minnesota
Danny K. Davis, Illinois             Bob Inglis, South Carolina
Raul M. Grijalva, Arizona            Cathy McMorris Rodgers, Washington
Timothy H. Bishop, New York          Kenny Marchant, Texas
Linda T. Sanchez, California         Tom Price, Georgia
John P. Sarbanes, Maryland           Luis G. Fortuno, Puerto Rico
Joe Sestak, Pennsylvania             Charles W. Boustany, Jr., 
David Loebsack, Iowa                     Louisiana
Mazie Hirono, Hawaii                 Virginia Foxx, North Carolina
Jason Altmire, Pennsylvania          John R. ``Randy'' Kuhl, Jr., New 
John A. Yarmuth, Kentucky                York
Phil Hare, Illinois                  Rob Bishop, Utah
Yvette D. Clarke, New York           David Davis, Tennessee
Joe Courtney, Connecticut            Timothy Walberg, Michigan
Carol Shea-Porter, New Hampshire

                     Mark Zuckerman, Staff Director
                   Vic Klatt, Minority Staff Director

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on February 7, 2007.................................     1
Statement of Members:
    McKeon, Hon. Howard P. ``Buck,'' Senior Republican Member, 
      Committee on Education and Labor...........................     4
        Prepared statement of....................................     5
    Miller, Hon. George, Chairman, Committee on Education and 
      Labor......................................................     1
        Prepared statement of....................................     3
    Sarbanes, Hon. John P., a Representative in Congress from the 
      State of Maryland, prepared statement of...................     6

Statement of Witnesses:
    Archey, William, President and CEO, American Electronic 
      Association (AeA)..........................................    18
        Prepared statement of....................................    20
    Feder, Judith, Dean, Georgetown Public Policy Institute, 
      Georgetown University......................................    15
        Prepared statement of....................................    16
    Karoly, Lynn A., Senior Economist, RAND Institute............    22
    Napolitano, Hon. Janet, Governor, State of Arizona, prepared 
      statement of...............................................    57
        Prepared statement of....................................    24
    Trumka, Richard L., Secretary-Treasurer, AFL-CIO.............     7
        Prepared statement of....................................     9

    STRENGTHENING AMERICA'S MIDDLE CLASS: FINDING ECONOMIC SOLUTIONS
                       TO HELP AMERICA'S FAMILIES

                              ----------                              

                      Wednesday, February 7, 2007

                     U.S. House of Representatives

                    Committee on Education and Labor

                             Washington, DC

                              ----------                              

    The committee met, pursuant to call, at 10:30 a.m., in room 
2175, Rayburn House Office Building, Hon. George Miller 
[chairman of the committee] presiding.
    Present: Representatives Miller, Kildee, Payne, Andrews, 
McCarthy, Tierney, Kucinich, Holt, Davis of California, 
Grijalva, Bishop, Sarbanes, Sestak, Hare, Clarke, Shea-Porter, 
McKeon, Petri, Ehlers, Platts, Kline, Fortuno, Davis of 
Tennessee and Walberg.
    Staff Present: Tylease Alli, Hearing Clerk; Jody Calemine, 
Labor Policy Deputy Director; Carlos Fenwick, Policy Advisor 
for Subcommittee on Health, Employment, Labor and Pensions; 
Michael Gaffin, Staff Assistant, Labor; Gabriella Gomez, Senior 
Education Policy Advisor (Higher Education); Brian Kennedy, 
General Counsel; Thomas Kiley, Communications Director; 
Danielle Lee, Press/Outreach Assistant; Joe Novotny, Chief 
Clerk; Megan O'Reilly, Labor Policy Advisor; Rachel Racusen, 
Deputy Communications Director; Michele Varnhagen, Labor Policy 
Director; Daniel Weiss, Special Assistant to the Chairman; 
Andrew Weltman, Legal Intern, Labor; Mark Zuckerman, Staff 
Director; Robert Borden, Minority General Counsel; Kathryn 
Bruns, Minority Legislative Assistant; Steve Forde, Minority 
Communications Director; Ed Gilroy, Minority Director of 
Workforce Policy; Rob Gregg, Minority Legislative Assistant; 
Jessica Gross, Minority Deputy Press Secretary; Taylor Hansen, 
Minority Legislative Assistant; Victor Klatt, Minority Staff 
Director; Stephanie Milburn, Minority Professional Staff 
Member; Molly McLaughlin Salmi, Minority Deputy Director of 
Workforce Policy; Linda Stevens, Minority Chief Clerk/Assistant 
to the General Counsel; and Loren Sweatt, Minority Professional 
Staff Member.
    Chairman Miller. The Committee on Education and Labor will 
come to order this morning for the purpose of continuing our 
hearings on strengthening America's middle class, this morning 
focusing on economic solutions to help America's families.
    I want to welcome our witnesses and all of the members of 
the committee and the audience to this hearing. This is the 
second in this series of hearings.
    Last week, we listened to a distinguished panel talking 
about the challenges facing America's middle class. We learned 
that American workers are not sharing in that increased 
productivity that they have historically shared in and, in 
fact, the disparities have grown more and more unequal; and we 
noticed that when the President visited Wall Street last week 
he said income inequality is real and has been rising for more 
than 25 years. That is a trend that is deeply disturbing to 
America's families because, at the same time, as we all know, 
they are facing the rising cost in the necessities of life that 
they need to hold their families together.
    We heard from Rosemary Miller, a flight attendant, who told 
us about working longer hours, spending more time away from her 
children because of the cutbacks in pay and benefits at work. 
She also talked about what she would want out of her work and 
that was livable wages and a home that she can own, affordable 
health care and retirement security and a reasonable means to 
provide for her children's college costs. That is not an 
exorbitant demand in a country like the United States of 
America, but for too many families it is moving further and 
further out of reach.
    I believe that the House this year has taken two steps that 
will help that, when the House passed the increase in the 
minimum wage and when the House passed the reduction in 
interest rates on subsidized loans.
    Today, we want to move beyond that discussion to talking 
about some of the possible solutions and some of the things 
that can change that would help America's families, would help 
to narrow the current disparities and the unequalness of the 
American economy for America's middle class. We believe that 
can be done. And the panelists will talk to us about creating a 
competitive economy that includes new and good-paying jobs, 
restoring workers' rights, including their rights to bargain 
for better wages and benefits, and making health care more 
affordable and accessible.
    We think that these are key components of making sure that 
the economy remains strong, that people are in a position to 
have representation and to go negotiate for their benefits in 
their pay and working conditions.
    We also know it is important that we create the investment 
in the future in terms of the new scientists, engineers and 
mathematicians that are going to be necessary to go to that 
workplace and to design the workplace and design the products 
and do the research in the future.
    We want to make sure that the government continues in that 
partnership with government and business in creating the 
ability to do high-risk, high-reward research and make sure 
that we have those public-private partnerships in place.
    Also, as we have had this discussion for a long time now, 
health care, of course, has been at the center of a sense of 
insecurity among American families. More of their income goes 
to health care even as employers continue to share the burden 
of health care to offload more of those decisions and, in many 
instances, also accompanied by not only increased deductibles, 
co-payments and premiums but for less health care than they 
might have had before. A major driver of the insecurity in the 
middle class is that many of them are only a major health care 
event away from real, real problems in terms of being able to 
maintain their household, their income and their quality of 
life.
    So we look forward to this panel; and, with that, I would 
like to yield to Mr. McKeon for any opening comments that he 
might have.
    [The prepared statement of Chairman Miller follows:]

   Prepared Statement of Hon. George Miller, Chairman, Committee on 
                          Education and Labor

    Good morning. Welcome to the Education and Labor Committee's second 
hearing on strengthening America's middle class, the key goal for our 
committee this year.
    Last week, we heard from a distinguished panel of economists about 
challenges facing America's middle class.
    They told us that American workers are not sharing in the benefits 
of their productivity. Instead, the economy has grown more and more 
unequal.
    Even President Bush has acknowledged these trends. In a speech last 
week--on Wall Street--the President said that ``income inequality is 
real'' and he said that it has ``been rising for more than 25 years.''
    Making matters worse, over the last several years American families 
have had to contend with rapidly rising costs for life's basic 
necessities.
    None of this is news to American workers or their families. Last 
week, the committee also heard testimony from Rosemary Miller, a flight 
attendant who has had to work longer hours, and spend more time away 
from her kids, because of cutbacks in pay and benefits at work.
    Rosemary said that she and other workers in similar situations 
simply want ``livable wages, a home that they can own, affordable 
health care, comfortable retirement security, and reasonable means to 
provide for their children's college costs.''
    That's not too much to ask for in a country like the United States. 
But for many families, those things are moving further out of reach.
    Now that we have a clear idea of what's happening in today's 
economy, it is time for us to do something about it. Already this year, 
the House has taken two steps in the right direction, by voting to 
increase the national minimum wage and cutting the interest rates on 
need-based college loans.
    But those are just first steps. Much more must be done. And that's 
the purpose of this hearing--to begin to learn about other potential 
ways to strengthen the middle class.
    Today, we will discuss possible solutions in three important areas:
     creating a competitive economy that includes new, good-
paying jobs;
     restoring workers' rights--including their rights to 
bargain for better wages and benefits; and
     making healthcare more affordable and accessible.
    Keeping America and our workforce competitive is an issue of 
critical importance to this committee and to the Speaker of the House. 
In November 2005, House Democrats--under the leadership of Speaker 
Pelosi--unveiled our Innovation Agenda: A Commitment to Competitiveness 
to Keep American Number One.
    The Innovation Agenda was the final product of months of meetings 
with the leaders of high-tech and biotech companies, venture 
capitalists, and academic experts.
    Among other things, the Innovation Agenda aims to graduate 100,000 
new scientists, engineers and mathematicians over the next four years; 
double the funding for overall basic research and development in the 
federal government; and provide support to entrepreneurs to start small 
businesses.
    With a bold agenda like this--one that encourages high-risk, high-
reward research and development, and that truly makes partners out of 
government and business--I believe we can maintain America's economic 
leadership in the world and create good jobs that will stay here at 
home.
    This morning we will also hear about the importance of giving 
workers the ability to join together to bargain for better wages and 
benefits. Current law makes it extremely difficult for workers who want 
to exercise their right to form a union to actually do so, and it we 
must change that by restoring workers' rights to form a union. And we 
must look at approaches to trade that help improve living standards for 
workers in the U.S. and around the world--not hurt them.
    Finally, as we also heard last week, healthcare costs are a 
significant strain on middle class families. Today we will look at ways 
to improve health care coverage and delivery and address spiraling 
healthcare costs.
    This issue affects both employers and workers. Many employers are 
being crushed by their rising health care obligations. Their overseas 
competitors have a competitive advantage in the form of national health 
care systems, since healthcare is not a cost that must be borne by 
employers.
    The sooner we address our long term health care challenges, the 
more productive and prosperous our workplaces will be.
    On all of these topics, I look forward to the testimony of today's 
witnesses. Thank you.
                                 ______
                                 
    Mr. McKeon. Thank you, Chairman Miller. Thank you for 
convening today's second in a series of hearings on our 
Nation's economy. I welcome each of our witnesses, and I am 
eager to hear your testimony.
    Mr. Chairman, as I mentioned at the outset of last week's 
hearing, I have never been one to engage in class warfare; and 
I am hopeful that today we can move beyond the politics of 
division and focus on reforms that have served to strengthen 
our economy and on what we can do to strengthen it even 
further.
    Last week, we heard some of the witnesses who testified 
before this panel speak with great optimism about the state of 
the U.S. economy as well as with great confidence in our 
workforce's capacity to meet the challenges of global 
competition. I was particularly struck by the testimony of a 
California-based manufacturing president who called for better 
alignment between education and training systems to meet the 
challenges faced by workers and employers seeking to adjust to 
the new realities of the 21st century marketplace. She noted 
that the primary challenges for manufacturers are how to 
attract, retain and motivate a high-performing workforce.
    After developing a strong interest in workforce training 
and retraining issues during my time on this committee, I can 
say without a doubt that the manufacturing industry is not 
alone in facing these challenges. In fact, I believe that the 
single best way to find meaningful economic solutions for 
everyone, not just a single class, is by bolstering our 
education and training systems. Through streamlining programs 
under the Workforce Investment Act, evaluating and enhancing 
math and science education programs and expanding access to 
college and other types of postsecondary education, I believe 
we have taken some important steps toward identifying long-term 
economic solutions. But we have more steps to take and as we 
consider how to do so, I believe we should be just as aware of 
what isn't a solution as to what is a solution.
    For example, some may embrace huge new Federal mandates 
upon State and local governments or employers with the hope 
that congressional micromanagement will be a silver bullet for 
practically any economic challenges we now face. Let's be clear 
this kind of heavy-handed action out of Washington is decidedly 
not an economic solution.
    Some may move to create more Federal programs, adding layer 
upon layer of new bureaucracies to training and education 
systems that are already too bogged down by government red 
tape. Once again, let's be clear, creating scores of new 
programs and branding them with the title of innovation is 
decidedly not an economic solution.
    And, as hard as it is to believe, some may even argue for 
dismantling the cornerstone of our democracy, the private 
ballot election, as a way to somehow strengthen worker rights 
and improve their economic standing. Let's be crystal clear 
about this one, killing a worker's right to a private ballot is 
decidedly not an economic solution. In fact, it is more of an 
attack on democracy itself than anything else.
    So what are some real economic solutions? I submit to my 
colleagues that there are reforms that have already worked and 
worked well.
    We have cut taxes for literally every working American, and 
the economy has grown stronger ever since. We have made it 
easier to save for health care expenses, college and 
retirement, giving Americans greater ownership of their 
personal savings. We have insisted on results in our schools 
and insisted that colleges and universities be held accountable 
for their role in raising tuition and fees, and we have 
reshaped worker training programs to provide more individual 
choice and less hand-holding out of Washington.
    Mr. Chairman, these solutions--proven solutions--provide us 
a more solid starting point from which we will take the next 
steps to continue strengthening this robust economy. I look 
forward to taking those next steps with you and my other 
committee colleagues in the weeks and months ahead.
    Thank you.
    [The prepared statement of Mr. McKeon follows:]

Prepared Statement of Hon. Howard P. ``Buck'' McKeon, Senior Republican 
                Member, Committee on Education and Labor

    Chairman Miller, thank you for convening today's second in a series 
of hearings on our nation's economy. I welcome each of our witnesses 
and am eager to hear their testimony.
    Mr. Chairman, as I mentioned at the outset of last week's hearing, 
I've never been one to engage in class warfare, and I'm hopeful that 
today, we can move beyond the politics of division and focus on reforms 
that have served to strengthen our economy--and on what we can do to 
strengthen it even further.
    Last week, we heard some of the witnesses who testified before this 
panel speak with great optimism about the state of the U.S. economy--as 
well as great confidence in our workforce's capacity to meet the 
challenges of global competition. I was particularly struck by the 
testimony of a California-based manufacturing president who called for 
a better alignment between education and training systems to meet the 
challenges faced by workers and employers seeking to adjust to the new 
realities of 21st Century marketplace. She noted that the primary 
challenges for manufacturers are how to attract, retain, and motivate a 
high-performing workforce.
    After developing a strong interest in workforce training and 
retraining issues during my time on this Committee, I can say without a 
doubt that the manufacturing industry is not alone in facing these 
challenges. In fact, I believe that the single best way to find 
meaningful economic solutions--for everyone, not just a single class--
is by bolstering our education and training systems.
    Through streamlining programs under the Workforce Investment Act, 
evaluating and enhancing math and science education programs, and 
expanding access to college and other types of postsecondary education, 
I believe we've taken some important steps toward identifying long-term 
economic solutions. But, we have more steps to take. And as we consider 
how to do so, I believe we should be just as aware of what ISN'T a 
solution as what IS a solution.
    For example:
    Some may embrace huge new federal mandates upon state and local 
governments or employers with the hope that congressional 
micromanagement will be a silver bullet for practically any economic 
challenges we may face. Let's be clear: This kind of heavy-handed 
action out of Washington is decidedly NOT an economic solution.
    Some may move to create more federal programs, adding layer upon 
layer of new bureaucracies to training and education systems that 
already are too bogged-down by government red tape. Once again, let's 
be clear: Creating scores of new programs and branding them with the 
title of ``innovation'' is decidedly NOT an economic solution.
    And as hard as it is to believe, some may even argue for 
dismantling the cornerstone of our democracy--the private ballot 
election--as a way to somehow strengthen worker rights and improve 
their economic standing. Let's be crystal clear about this one: Killing 
a worker's right to a private ballot is decidedly NOT an economic 
solution--in fact, it's more of an attack on democracy itself than 
anything else.
    So what are some real economic solutions? Well, I submit to my 
colleagues that they are reforms that have already worked--and worked 
well.
    We've cut taxes for literally every working American, and the 
economy has grown stronger ever since. We've made it easier to save for 
health care expenses, college, and retirement--giving Americans greater 
ownership of their personal savings. We've insisted on results in our 
schools--and insisted that colleges and universities be held 
accountable for their role in raising tuition and fees. And we've 
reshaped worker training programs to provide more individual choice and 
less hand-holding out of Washington.
    Mr. Chairman, these solutions--proven solutions--provide us a solid 
starting point from which we will take the next steps to continue 
strengthening this robust economy. I look forward to taking those next 
steps with you and my other Committee colleagues in the weeks and 
months ahead.
                                 ______
                                 
    Chairman Miller. Thank you.
    Without objection, I ask that all members will have 5 
legislative days to submit additional material for the record, 
should they desire to do so.

   Prepared Statement of Hon. John P. Sarbanes, a Representative in 
                  Congress From the State of Maryland

    Mr. Chairman, thank you for holding this series of hearings to 
examine the squeeze on America's Middle Class. Last week's hearing 
drove home a now sadly familiar message--basic opportunities are 
increasingly out of reach for those families and communities that have 
traditionally formed the bedrock of American society.
    Our Nation's public education system for example has long been 
considered the great equalizer that allowed all Americans to achieve 
economic prosperity based on merit. But even for academically high-
performing students, socio-economic status is becoming an increasingly 
insurmountable barrier to completing college. If fact, a 12-year study 
by the Department of Education found that the highest performing 
students from lower income families are actually less likely to 
graduate from college than the lowest performing students from wealthy 
families. This is truly the American Dream turned inside-out!
    Protecting the Middle Class does not end, however, with providing 
educational opportunities. It also requires workforce protections that 
promote fair wages and benefits. One of the most telling statistics I 
came across in preparing for this hearing was that since 1980, worker 
productivity has increased by 80 percent while worker wages have only 
increased by 2 percent. During that same period, the income of the top 
.01 percent--those earning over $6 million a year--increased by 497 
percent. Tomorrow, the Subcommittee on Health, Education, Labor and 
Pensions will hold a hearing on the Employee Freedom of Choice Act. 
I've cosponsored this legislation because I believe it will be a first 
step to restoring workers' right to organize in the workplace. Many 
workers who try to form and join labor unions are harassed, pressured, 
threatened, and even fired for exercising their right to organize. 
Labor unions have long helped workers to share in the prosperity of 
economic growth and I believe we need to restore this bargain.
    Mr. Chairman, I know today's hearing offers an opportunity for us 
to take a step toward identifying long overdue solutions beyond the 
rhetoric and I look forward to working with you to restore the bargain 
with America's workers.
                                 ______
                                 
    With that, I would like to introduce our panel.
    We are joined by Mr. Richard Trumka, who is Secretary-
Treasurer of the AFL-CIO, the umbrella labor organization 
representing 54 national and international labor unions. He was 
elected in 1995 and is the youngest secretary-treasurer in the 
AFL-CIO history as part of that campaign to reinvigorate the 
labor movement. He has been very involved in working on 
advanced employer-employee cooperation agreements to enhance 
productivity in the workplace by working cooperatively with 
employers and covering all areas of those agreements, from job 
security to pensions and to benefits.
    Next is Judy Feder, who is a professor and dean at the 
Georgetown Public Policy Institute and is a widely published 
scholar. She has three decades of public policy research at the 
Brookings Institute and continued at the Urban Institute and 
now at Georgetown University. This Congress on both sides of 
the aisle have called upon her time and again to come and 
discuss health care with us. Her expertise is in the uninsured 
and Medicare, Medicaid, and long-term care; and we look forward 
to her testimony.
    Bill Archey is the President and Chief Executive Officer of 
the American Electronics Association, AeA, and is in the 
business of advancing the business of technology. This trade 
organization I think now represents--what--some 2,500 companies 
in the complete span of the field of technology, from 
semiconductors and computers, telecommunications and software. 
But more importantly to us in the Congress, he has been 
absolutely a leading light on this idea of maintaining 
America's competitive advantage, America's leadership in the 
world economy and in intellectual properties, in inventions and 
patents and all those ways that we measure our leadership over 
the last 50 years.
    He has worked with the White House, he has worked with the 
Republicans, he has worked with the Democrats in trying to get 
us all to understand the kinds of changes that are necessary in 
public-private partnerships, in tax policy, in research and 
development, in education. A very outspoken group of CEOs that 
he represents have come time and again not only to this 
committee but to the Joint Economic Committee, to the Budget 
Committee, to the Finance Committee, to the Ways and Means 
Committee seeking funding for education, but they have also put 
their money, their corporate money, their private money, behind 
those efforts in terms of education both at the local and 
national level.
    Lynn Karoly is a Senior Economist with the RAND 
Corporation, she previously served as a director of RAND's 
Labor and Populations Division. She has received and written on 
a broad--excuse me, she has researched and written on a broad 
range of human resources issues, including social welfare 
policy, wage and income distribution, population aging, family 
and child well-being. She holds a Ph.D. and an MA in economics 
from Yale University and a BA from Claremont McKenna College. 
We look forward to your testimony. Sounds like you span the 
family from beginning to end. Thank you.
    Chairman Miller. Secretary Trumka, we will begin with you. 
The lights will go on. It will be green for 5 minutes. Then 
there will be a yellow light that suggests you might want to 
start wrapping up your testimony. Then the red light so that we 
will be able to have questions from the members of the 
committee.
    Welcome.

  STATEMENT OF RICHARD L. TRUMKA, SECRETARY-TREASURER, AFL-CIO

    Mr. Trumka. Thank you, Chairman Miller, members of the 
committee. My testimony focuses on one simple but central 
question: Why in the richest country in the world is it so 
difficult for so many families to make a living by working? 
Despite strong economic statistics for the U.S. economy 
overall, the vast majority of Americans are struggling to 
maintain their living standards in the face of stagnating 
wages, rising economic insecurity, eroding health care and 
retirement benefits and mounting debt. At the richest moment in 
our Nation's history, the American dream is fading for the 
majority of American workers.
    The key issue, in our view, is the growing gap between real 
wages and productivity growth. Since 1980, labor and 
productivity has increased over 80 percent, but the real median 
wage has hardly budged, increasing only 2 percent over a 
quarter century. The key factor contributing to this growing 
rift is the steadily growing imbalance of bargaining power 
between workers and their employers.
    I want to focus my oral remarks today on the crucial policy 
reforms we need in this country to rebalance the bargaining 
power between employees and their employers. The goal of 
economic policy should be to support a strong and 
internationally competitive national economy whose benefits are 
shared broadly by all Americans. To achieve this objective, we 
must reconnect with four important economic values that 
resonate powerfully with all Americans.
    Our country's economic policy should, one, provide for full 
employment; two, protect the right of workers to choose to 
unionize if they want to; three, reform our global economic 
policies to prioritize good jobs and a fair distribution of the 
benefits of globalization; and, four, ensure that people who 
work for a living earn a wage that keeps them out of poverty 
and have access to affordable and adequate health care and 
retirement.
    First, anybody who wants to work in America should have a 
job. We need more balance for macroeconomic policies that 
balance the dual goals of full employment and price stability. 
The Fed's goal should be to maximize growth and employment 
consistent with reasonable price stability.
    Second, American workers should enjoy the fundamental 
freedom to associate with their fellow workers and, if they 
wish, organize unions at their workplace and bargain with their 
employer for dignity at work and a fair share in the values 
that they help create. The current system for forming unions 
and bargaining is broken. Every day corporations intimidate, 
harass, coerce and even fire people who try to organize unions. 
This is an urgent crisis for workers blocking their free will 
and ability to get ahead economically.
    Yesterday, 230 Members of Congress introduced the Employee 
Free Choice Act to allow workers the freedom to organize free 
of employer harassment and fear of job loss. I would like to 
thank the chairman for his leadership in gaining such strong 
support for that important legislation and urge Congress to 
take immediate action to enact the Employee Free Choice Act 
into law.
    Third, we need new policies to assure a competitive 
American economy and decent jobs at home and abroad in a 
rapidly globalizing world. Internationally, this requires more 
balanced trade policies that protect the rights of workers as 
well as they protect intellectual property. We need to enforce 
our trade laws and our trade agreements much more effectively, 
and we need to make sure that our negotiators don't agree to 
weaken even our trade laws in order to cut more deals.
    Domestically, it requires a national economic strategy to 
rebuild our manufacturing capacity. This is important not just 
because of the need for good manufacturing jobs but crucial if 
we are to reduce our trade deficit and dependence on foreign 
borrowing.
    Last week, President Bush called for an extension of trade 
promotion authority, or Fast Track. I think that is an 
indication that he is really not hearing the American people. 
International trade is important and should be pursued, but it 
is essential that we get the rules right. Any future trade 
agreement negotiating authority must require that negotiators 
actually achieve the key negotiating objectives, not just give 
it their best shot. We need to build in a much stronger role 
for Congress in the negotiating process; and if the agreement 
fails to meet the mandatory negotiating objectives, Congress 
should send the agreement back to the President so that he can 
negotiate one that does.
    Finally, people who work every day should not live in 
poverty. They should have access to quality health care for 
themselves and their families and able to stop working at some 
point in their lives and enjoy a dignified and secure 
retirement.
    Thank you, Mr. Chairman.
    Chairman Miller. Thank you very much.
    [The statement of Mr. Trumka follows:]

 Prepared Statement of Richard L. Trumka, Secretary-Treasurer, AFL-CIO

    Thank you, Chairman Miller, members of the Committee. I welcome the 
opportunity to be here today to testify on behalf of the 10 million 
working men and women of the AFL-CIO and share our views on economic 
solutions to help America's middle class.
    Any consideration of the American economy today must address one 
simple, but central, question: ``Why, in the richest country in the 
world, is it so difficult for so many families to make a living by 
working?''
    The U.S. economy is now producing over $13 trillion a year and, 
despite a recent slowdown, has been growing at a respectable, if not 
spectacular, three percent a year. American workers are the most 
productive workers in the world, and they are more productive today 
than ever. Americans work hard and log more hours than workers in any 
other developed country.
    Nevertheless, the vast majority of Americans are struggling to 
maintain their living standards in the face of stagnating wages, rising 
economic insecurity, eroding health care and retirement benefits and 
mounting debt. At the richest moment in our nation's history, the 
American Dream is fading for a majority of American workers.
    We can, and must, do better. But doing so requires us to 
fundamentally rethink our country's economic policies.
    We must restore the promise of America--that all of our citizens 
can expect that by working hard and playing by the rules, they can 
participate fully in the benefits of a rapidly growing and competitive 
national economy.
The Fading American Dream
    American workers are suffering a now generation-long stagnation of 
family income and rising economic insecurity.
    Since 1980, labor productivity has increased over 80 percent, but 
the real median wage has hardly budged, increasing only 2 percent over 
a quarter century. Real median family income has increased a modest 13 
percent over this period, but only because each job requires more 
hours, each worker is working more jobs and each family is sending more 
family members to work.
    When wages advanced with productivity from 1946-73, we grew 
together as a nation. Since then, increasingly, we are growing apart--
economically, socially and politically. As a result of the rupture 
between wages and productivity, an enormous redistribution of income--
perhaps the largest in our history--has occurred from poor and working 
Americans to the top twenty percent of our families. Today, America has 
the most unequal distribution of income and wealth of any developed 
country in the world. And income and wealth are more unequally 
distributed in America today than at any time since the 1920s.
    Moreover, the volatility of family income--and with it the economic 
anxiety so many feel--has increased sharply over the same period. Jacob 
Hacker, the Yale political scientist, estimates that the chances of a 
family suffering a 20 percent or greater decline in its income over a 
two-year period have doubled since 1980.
    Rising health care costs and dwindling retirement assets are 
aggravating the econom ic anxiety of working families. Retirement 
security is fast becoming a goal beyond the reach of most Americans. 
Our private pension system is fraying, with fewer workers now covered 
by pension plans. Companies increasingly view bankruptcy as a business 
strategy to eliminate pension obligations. Even healthy companies with 
marquee names and well-funded plans are reneging on decades-old 
commitments to help provide their employees with a secure retirement.
    Although workers' ability to achieve retirement security has long 
been premised on a system of mutual responsibility--government-provided 
Social Security, employer-provided pensions, and personal savings--only 
Social Security now guarantees a universal benefit.
    Only half of American families have an employer-provided retirement 
plan of any sort, a proportion largely unchanged for decades. However, 
whereas 40 percent of workers participated in employer-guaranteed 
``defined benefit'' pension plans in 1980, today only 20 percent have 
such plans. In substituting ``defined-contribution'' for defined-
benefit plans, employers are shifting the risk of retirement onto 
workers. And American workers are ill prepared to carry this risk.
    And, as health care costs continue to rise, employers shift more 
and more of the cost of health care onto the shoulders of American 
workers. Again, working families with stagnating earnings are in no 
position to shoulder these costs, so the ranks of the uninsured 
continue to rise. Today over 46 million Americans have no health 
insurance at all, despite the fact that as a nation we spend more on 
health care than any country in history.
    The increased volatility of income and increasing burden of risk 
for family health care and retirement security are exacerbating the 
acute anxiety that so many working families are feeling.
Failed Economic Policies
    There are many contributing causes to the stagnation of wages and 
the rupture of the productivity-wage relationship over the past thirty 
years. Central to them all is a steadily growing imbalance of 
bargaining power between workers and their employers. The implicit 
``social contract'' that allowed Americans to grow together, and build 
the American middle class, in the early post-WWII decades rested on a 
rough balance of power between workers and their unions on one side and 
employers on the other.
    Today, this balance of power has eroded and the social contract 
with American workers is unraveling. America's CEOs, who once viewed 
themselves as stewards of our country's productive assets, now present 
themselves as agents of shareholders in whose name they aggressively 
shift good American jobs off-shore, reduce workers' pay and walk away 
from their health care and retirement obligations.
    American corporations are facing two enormous challenges that have 
changed the way they do business and are poisoning their relationship 
with their employees. The first is intense competition in product 
markets--exacerbated by globalization abroad and deregulation 
domestically. The second is pressure from institutional investors in 
capital markets to increase shareholder value by raising profit 
margins.
    If corporations must increase margins, but cannot raise prices, 
they must reduce costs. And most of the costs of business are in 
employee compensation in one form or another. Therefore, ``the 
market,'' as business leaders say, is forcing American corporations to 
aggressive reduce compensation costs however they can: by outsourcing 
and off-shoring work, by reducing worker pay and by shifting the costs 
of health care and retirement onto workers. These same forces are 
behind corporate demands to lower the tax and regulatory burdens in the 
name of ``competitiveness.''
    The shift in economic policies in the late 1970s from a ``Keynesian 
consensus'' to what George Soros has called ``free market 
fundamentalism'' explains much, in my view, about changing corporate 
behavior, the imbalance of power between workers and their employers, 
stagnating wages and the growing divide between productivity and wages.
    The policies that make up ``free market fundamentalism'' are like a 
box that is systematically weakening the bargaining power of American 
workers, constraining their living standards and driving the growing 
inequality of income and wealth in our country.
    On one side of the box is ``globalization,'' unbalanced trade 
agreements that force American workers into direct competition with the 
most impoverished and oppressed workers in the world, destroy millions 
of good manufacturing jobs and shift bargaining power toward employers 
who demand concessions under the threat of off-shoring jobs.
    On the opposite side of the box are ``small government'' policies 
that privatize and de-regulate public services and provide tax cuts for 
corporations and the wealthy, all to ``get government off our backs.''
    The bottom of the box is ``price stability.'' This leads to 
unbalanced macro-economic policies that focus exclusively on 
controlling inflation and neglect the federal government's 
responsibility to ``maximize employment,'' even out the business cycle 
and assure rapid economic growth.
    The top of the box is ``labor market flexibility,'' policies that 
erode the minimum wage and other labor standards, fail to enforce 
workers' right to organize and bargain collectively and strip workers 
of social protection, particularly in the areas of health care and 
retirement security.
    Each of these economic policies--``globalization,'' ``small 
government,'' ``price stability'' and ``labor market flexibility''--may 
sound innocent enough. But they each undermine the employment security 
of American workers. And together they powerfully weaken the bargaining 
power of workers and provide corporations with both the incentive and 
the means to enrich themselves at the expense of their employees.
Restoring America's Promise
    To balance bargaining power between employees and their employers, 
rebuild the relationship between wages and productivity and restore 
America's promise, we must begin by reflecting on the purpose of the 
economy and the goal of the economic policies that guide our country's 
economic development.
    Do Americans as workers exist to serve the needs of the economy? Or 
does the economy exist to serve the needs of Americans, the vast 
majority of whom earn their living by working? In our view, the economy 
exists to serve the needs of the American people, not the other way 
around.
    The goal of economic policy should be to support a strong and 
internationally competitive national economy whose benefits are shared 
broadly by all Americans. To achieve this objective, we must reconnect 
with four important economic values that resonate powerfully with all 
Americans.
    Our country's economic policies should (1) provide for full 
employment; (2) protect the right of workers to choose to unionize if 
they want to; (3) reform our global economic policies to prioritize 
good jobs and a fair distribution of the benefits of globalization; and 
(4) ensure that people who work for a living earn a wage that keeps 
them out of poverty and have access to affordable and adequate health 
care and retirement security. :
    First, anyone who wants to work in America should have a job. We 
need more balanced macroeconomic policies that balance the dual goals 
of ``full employment'' and ``price stability.'' That is, the Federal 
Reserve's goal should be to maximize growth and employment consistent 
with reasonable price stability. The Humphrey-Hawkins Act mandates the 
Federal Reserve to serve these dual objectives, but only Congress can 
hold the Fed accountable for serving both.
    We also need more coordination between the fiscal policy of the 
Treasury Department and the monetary policy of the Federal Reserve. In 
recent years, Treasury has been absent from its responsibility to help 
smooth the business cycle and support rapid growth and full employment. 
One school of thought at Treasury is to cut taxes and hope for the 
best. Another school of thought has been to balance the federal budget 
and hope for the best. Neither school well serves the country's need 
for rapid growth and full employment. Moreover, both schools have 
supported ``strong dollar'' policies that have contributed to 
misaligned exchange rates, particularly with China and other Asian 
trading partners, and left American producers at a distinct competitive 
disadvantage in global markets.
    Second, American workers should enjoy the fundamental freedom to 
associate with their fellow workers and, if they wish, organize unions 
at their workplace and bargain with their employer for dignity at work 
and a fair share in the value they help create.
    The best opportunity for working men and women to get ahead 
economically is to unite with their co-workers to bargain with their 
employers for better wages and benefits. Workers who belong to unions 
earn 30 percent more than non-union workers. They are 62 percent more 
likely to have employer-provided health care coverage, and four times 
more likely to have pensions.
    More than half of all American workers--nearly 60 million--say they 
would join a union right now if they could.
    But the current system for forming unions and bargaining is broken. 
Every day, corporations deny employees the freedom to decide for 
themselves whether to form unions. They routinely intimidate, harass, 
coerce, and even fire people who try to organize unions. Workers are 
fired in a quarter of private-sector union organizing campaigns; 78 
percent of private employers require supervisors to deliver anti-union 
messages to the workers whose jobs and pay they control; and even after 
workers successfully form a union, they cannot get a contract one-third 
of the time. This is an urgent crisis for workers, blocking their free 
will and their ability to get ahead economically.
    The system has to be changed to give all working people the freedom 
to make their own choice about whether to have a union and bargain for 
better wages and benefits. If the law is changed to allow more workers 
to make their own decision-without management coercion-more of 
America's workers will be able to ensure fair treatment on the job and 
improve their standard of living.
    Yesterday, 230 members of Congress introduced the Employee Free 
Choice Act to allow workers the freedom to organize free of employer 
interference and the fear of job loss. The Employee Free Choice Act 
would strengthen penalties for companies that coerce or intimidate 
employees; establish mediation and binding arbitration when the 
employer and workers cannot agree on a first contract; and allow 
employees to form unions when a majority express their decision to join 
the union by signing forms designating the union as their 
representative in bargaining with management.
    We urge Congress to take immediate action to enact the Employee 
Free Choice Act into law. This legislation would represent an enormous 
step toward restoring balance between workers and their employers and 
helping repair the ruptured productivity-wage relationship.
    In 1935, Congress declared it to be the ``policy of the United 
States'' to ``encourage the practice and procedure of collective 
bargaining.'' In large measure, Congress's adoption of this policy, 
which remains embodied in federal law, was based on a finding that the 
``inequality of bargaining power between employees who do not possess 
full freedom of association or actual liberty of contract, and 
employers who are organized in the corporate or other forms of 
ownership associations * * * tends to * * * depress wage rates and the 
purchasing power of wage earners in industry.'' 29 U.S.C. Sec.  151. It 
is thus not surprising that the defects in federal labor policy which 
have been exploited by employers in order to frustrate employees' 
freedom to choose whether to bargain with their employers have led to 
precisely the depressed wages and growing inequality that Congress 
aimed to prevent.
    The declining percentage of the workforce represented by unions has 
contributed to growing income inequality, declining medical insurance 
coverage, and declining pension coverage. There are large gaps between 
unionized and non-unionized workers in many other important areas, 
including education and training, disability benefits, and life 
insurance coverage. Moreover, all workers, union and nonunion, benefit 
from a higher percentage of the workforce being unionized, as evidenced 
by the fact that workers in the ten states with the highest union 
density earn almost $2 an hour more than those in the ten states with 
the lowest percentage. The World Bank has confirmed these findings in 
an international comparison.
    In many of the expanding occupations in our service economy, union 
representation is the difference between poverty and living wages. The 
average non-unionized cashier, child care worker, food preparation and 
serving worker, dishwasher, maid and housekeeper earns less than the 
federal poverty level for a family of four, while their unionized 
counterpart earns a living wage. And these are precisely the 
occupations in which workers are actively seeking to join unions. As a 
result, in the ten states with the highest percentage of union 
representation, the percentage of the population living in poverty is 
more than 2 percent lower than in the ten states with the lowest 
percentage.
    Union representation is also the best antidote to the poison of 
discrimination. Because the premium earned by union workers is larger 
among minorities and women, union representation reduces wage 
inequality. For example, the Bureau of Labor Statistics found that in 
2004, Latino workers who were union members earned 59 percent more than 
their nonunion counterparts, while unionized women workers earned 34 
percent more than their nonunion counterparts.
    Dr. Martin Luther King, Jr. recognized the important role of 
unions: ``The labor movement was the principal force that transformed 
misery and despair into hope and progress.'' This was true as the 
industrial age gave way to the prosperity of the 1950s and 1960s and 
can be so again provided Congress restores the promise of American 
labor law.
    Third, we need new policies to assure a competitive American 
economy and decent jobs at home and abroad in a rapidly globalizing 
world.
    We have lost 3.4 million good manufacturing jobs since 1998, 
partially as a result of misguided exchange rate policies, unbalanced 
trade policies, and corporate strategies to aggressively off-shore 
manufacturing operations. Moreover, Princeton economist Alan Blinder 
warns that as many as 42 million service sector jobs are also 
vulnerable to off-shoring, many of them held by highly-educated and 
highly-paid American workers.
    We need a fundamental overhaul of our failed policies, which have 
led to skyrocketing trade deficits and a cumulative $3 trillion in 
debt.
    Internationally, this requires more balanced trade policies that 
protect the rights of workers as well as they protect intellectual 
property. Only with effective and enforceable protections of core 
worker rights integrated into national and international trade and 
financial rules will the benefits of globalization be equitably shared 
with workers. We need to enforce our trade laws and our trade 
agreements much more effectively, and we need to make sure our 
negotiators don't agree to weaken our trade laws in order to cut more 
deals.
    Domestically, it requires a national economic strategy to rebuild 
our manufacturing capacity. This is important not just because of the 
need for more good manufacturing jobs, but crucial if we are to reduce 
our trade deficit and dependence on foreign borrowing.
China's Illegal Currency Manipulation and Workers' Rights Violations
    The Bush administration has simply refused to hold the Chinese 
government to its international obligations on trade, currency 
manipulation and human rights, and has denied American businesses 
import relief they are entitled to under the law.
    The AFL-CIO has filed two Section 301 petitions alleging that 
China's systematic and widespread repression of workers' human rights 
is an unfair trade practice under U.S. law, costing hundreds of 
thousands of U.S. jobs and millions of dollars in lost business. 
Representatives Benjamin Cardin (now Senator Cardin) and Christopher 
Smith joined us in filing the second petition last year.
    In 2004, we also joined with a broad domestic business coalition in 
filing a Section 301 case outlining how China's currency manipulation 
constitutes a violation of China's obligations under World Trade 
Organization and International Monetary Fund rules, and how it harms 
American workers and producers. A bipartisan Congressional coalition 
then refiled the same petition.
    All of these efforts were cursorily denied by the Administration, 
which has declined even to investigate the underlying economic 
arguments.
    We call on the Bush Administration to move beyond ``bilateral 
consultation'' and continued dialogue to address the urgent problems in 
the U.S.-China trade and economic relationship. Certainly, the 
Administration needs to initiate WTO dispute resolution immediately in 
several areas to ensure that China meets its obligations in a timely 
and effective way--including illegal subsidies, currency manipulation 
and violation of workers' rights. The Administration should clarify 
without delay that countervailing duty remedies can be applied to non-
market economies.
    But Congress cannot wait for this Administration to act.
    Last week, Representatives Tim Ryan and Duncan Hunter introduced 
H.R. 782, the Fair Currency Act of 2007. This bill is an updated 
version of H.R. 1498, the China Currency Act of 2005 that was 
introduced in the 109th Congress and had 178 bipartisan cosponsors.
    This bill clarifies the definition of currency manipulation, 
identifies currency manipulation as an illegal subsidy, and ensures 
that countervailing duty laws can be applied to non-market economies. 
It does not apply exclusively to China, but is broadly applicable. It 
is a crucial first step in addressing the urgent economic problems we 
face today. We urge Congress to give immediate consideration to the 
Fair Currency Act.
A New Direction on Trade
    Last week President Bush called for the extension of trade 
promotion authority, or ``fast track.'' This was further evidence the 
president simply is not listening to the real and serious concerns of 
the American people regarding our nation's economic future. Extending 
``fast track'' authority would hamstring Congress's ability to fix our 
broken trade policy at a time when working families are in dire need of 
a correction in course.
    The 2006 mid-term election swept several dozen free-trade 
incumbents out of office, replacing the vast majority with candidates 
who campaigned pledging to oppose unfair trade agreements and tax 
policies that ship good American jobs offshore. Across the country, 
from Ohio to Iowa, from Florida to California, voters resoundingly 
rejected the President's failed trade agenda and demanded a change in 
course.
    Rather than admitting that current policies are not delivering the 
desired outcomes, the free-trade elite continues to insist that more 
free trade deals are needed to lift the Third World out of poverty and 
boost American competitiveness. It all sounds very appealing. The only 
problem is it does not work.
    We call on our elected officials to pause, review, and reform 
current trade, tax, and currency policies--rather than barrel along on 
the current path.
    We need to conduct a strategic review of the agreements we have 
already put in place. Such a review would re-examine the content and 
performance of current agreements to see where their strengths and 
weaknesses are and how we can do better in the future. Tracing the 
actual trade and investment patterns that result from new trade deals, 
as well as their impacts on living standards, social regulation and 
communities, would allow us to have a much more nuanced debate about 
the actual outcomes of trade deals--rather than their promised 
benefits.
    Absent an honest assessment, we will undoubtedly find ourselves on 
the same failed path.
    International trade is important and should be pursued, but it is 
essential that we get the rules right. Any future trade negotiating 
authority must require that the negotiators actually achieve the key 
negotiating objectives, not just ``give it their best shot.''
    Any agreement that is granted expedited consideration and an up-or-
down vote must include enforceable core international worker rights and 
environmental standards, subject to the same dispute and enforcement 
provisions as the commercial concerns in the agreement. It must also 
include rules on investment, government procurement, intellectual 
property rights, and services that strike the right balance between 
democratic accountability, development concerns and international 
obligations.
    Last November, working people voted for a new direction. They voted 
for a new process to ensure that Congress and the public have a greater 
say in our economic future. No longer should Congress be expected to 
take an up-or-down vote on a bad trade deal without proper consultation 
and participation at earlier stages of negotiation. Congress should be 
consulted throughout the process and should certify whether a proposed 
agreement fulfills the mandatory negotiating objectives. If not, 
Congress should send the President back to the bargaining table until 
the agreement is one that the American people can support--one that 
will ensure that the benefits of trade are more equally distributed 
rather than concentrated in too few hands.
    Finally, people who work every day (a) should not live in poverty, 
(b) should have access to quality health care for themselves and their 
families and (c) should be able to stop working at some point in their 
lives and enjoy a dignified and secure retirement.
    The increase in the minimum wage to $7.25 an hour recently approved 
by both the House and the Senate is desperately needed and long 
overdue. But this increase will still leave a family of three in 
poverty and dependent on public assistance. To allow low-wage workers 
to participate equitably in our country's productivity growth, we need 
to restore the minimum wage to its traditional level of one-half the 
average wage for non-supervisory workers in the private sector. Today 
that would be over $8.00 per hour.
    We must also reform our failing health care system to provide 
affordable, quality care for every American. There are a variety of 
approaches to health care reform that would cover the uninsured, 
without increasing our national health care expenditures. Many of these 
approaches would also provide better means for improving quality and 
restraining health care cost increases. They would also help reduce the 
burden on employers and improve their competitive position in global 
markets.
    Reforming our health care system and restraining cost increases 
would also contribute greatly to our ability to provide a secure 
retirement for American workers. There are an increasing number of 
voices in Washington calling for ``entitlement spending'' reform to 
address long-term costs of Medicare and Medicaid. Reforming our health 
care system should relax some of the pressure to cut retirement 
benefits and allow space for bolstering Social Security and our fragile 
pension system.
    We face especially daunting challenges in securing adequate 
lifetime retirement income for all American workers. We believe 
retirement security should be based on mutual responsibility, with 
financing and risk allocated equitably among government, employers and 
workers. Social Security is the cornerstone of our nation's retirement 
security. It must be preserved and strengthened for current and future 
beneficiaries. In addition, we must assure that retired workers receive 
a guaranteed retirement income that supplements Social Security, one 
their employers are required to fund. Retirement savings vehicles, like 
401(k) plans, cannot replace guaranteed pension income. However, they 
should be structured to be more effective and efficient and serve the 
interest of workers, not those of their employers or Wall Street. 
Finally, corporate abuse of the bankruptcy process, allowing employers 
to abandon pension and other retirement obligations, must be brought to 
a halt.
    The American economy can work for all Americans, but achieving this 
will require a change of course for our country's economic policies. I 
do not pretend to have all the answers to the many economic challenges 
facing the American middle class. But I believe workable policies to 
these challenges can emerge from a national dialogue that involves 
business, labor, and the public at large. I commend the Committee for 
beginning this dialogue.
    Thank you again for the opportunity to be with you today and share 
the views of the American labor movement on the economic challenges 
facing American workers.
                                 ______
                                 
    Chairman Miller. Dr. Feder.

   STATEMENT OF JUDITH FEDER, DEAN, GEORGETOWN PUBLIC POLICY 
                INSTITUTE, GEORGETOWN UNIVERSITY

    Dr. Feder. Thank you, Chairman Miller, Congressman McKeon, 
members of the committee. I appreciate the opportunity to 
testify before you today.
    Families, businesses and governments are struggling with 
ever-increasing health care costs. Forty-seven million people 
are without health insurance protection, and even people who 
have health insurance are seeing their benefits dwindle and 
health costs consume their wages. Increasingly, our health 
insurance system fails to protect us when we are sick.
    Given these conditions, it is good news that health reform 
proposals abound. As we consider these proposals and move 
forward, as we must, it is important to remember that there are 
many ways to get a fairer, more affordable, more secure health 
care system, but it is just as important to remember that not 
any way will get us there. Success demands that we know the 
difference between proposals that will achieve our goals and 
proposals that will not.
    There are three critical elements to effective reform that 
will actually guarantee all people coverage that gets them 
access to needed health care. A proposal that has three 
elements--adequacy, affordability and availability of 
benefits--get a triple A rating because of the concrete ways it 
expands coverage that works.
    The first element of reform would define a set of benefits 
that protect people when they are sick. That means it has to 
cover a full range of medical services, limit cost sharing to 
levels that are reasonable in relation to people's incomes, and 
cap out-of-pocket spending to what people can realistically 
afford. In assessing adequacy I urge you to beware of proposals 
that leave it to insurers to define what is covered and 
proposals with such high deductibles that they impede access to 
care.
    Element number two would create the subsidies that make 
adequate insurance affordable. Without subsidies, we can't 
expect low- and modest-income people to buy insurance 
voluntarily. Families with incomes below twice the poverty 
level, about $40,000 for a family of four, just don't have what 
it takes to spend $11,000, what it costs for comprehensive 
coverage. In assessing affordability I urge you to beware of 
proposals that require people to buy insurance without a 
subsidy. A mandate without a subsidy is either punitive or 
pretend. It either shouldn't happen or it won't happen.
    The third element would assure what we might call a place 
to buy, somewhere that makes adequate affordable health 
insurance available to everyone without regard to health 
status. That could offer a choice of health plans like Members 
of Congress have; it could be or look like Medicare; or, if the 
rules were changed, it could be existing private insurance 
plans. In assessing availability, I urge you to beware of 
proposals that send people shopping for insurance in a market 
where insurers deny coverage to people when they need care or 
charge more based on age, health status or otherwise cherry-
pick us when we are healthy and avoid us when we are sick. The 
proposal has got to work for us when we are sick.
    An effective health reform proposal can only deliver this 
triple A protection if it has sufficient financing behind it, 
whether from individual employer or taxpayer contributions or 
some combination thereof. And it can only sustain that 
protection over time if it includes a way to slow health care 
cost growth, not only for people who are now uninsured but for 
everybody, including those of us who depend on Medicare and 
Medicaid.
    We can all be better off and more willing to commit to 
universal coverage if we invest in research to determine which 
medical services work and which don't and in information and 
payment systems that help providers deliver the former and 
avoid the latter.
    As you well know, debating the merits of alternative health 
reform proposals is a daunting task. Our history is filled with 
debates that generate far more heat than light. For decades, 
instilling fear among those of us who have health insurance, 
even if it costs too much or covers too little, fear that 
political action will make us worse off, not better off, has 
taken health reform off the political agenda, but it may be 
that the worst cost and coverage get the harder, it will be to 
scare us away.
    Whether that happens will depend on whether we can trump 
fear with confidence that we can do better, and we can.
    Thirteen years ago, Harry and Louise--fictional characters 
in the health insurance industry's ad campaign--misleadingly 
but effectively picked apart the Clinton health reform 
proposal, asserting over and over there has got to be a better 
way. We don't need fictional characters today to tell us this 
system is broken. Our moms and dads, brothers and sisters, 
friends and coworkers fill that role every day. The time for 
debate and discussion was a decade ago. The time for action is 
now.
    Thank you, Mr. Chairman.
    Chairman Miller. Thank you.
    [The statement of Dr. Feder follows:]

    Prepared Statement of Judith Feder, Ph.D., Professor and Dean, 
       Georgetown Public Policy Institute, Georgetown University

    Chairman Miller, Congressman McKeon, members of the Committee, I 
appreciate the opportunity to testify before you today on the problems 
middle class Americans face in securing affordable health care. 
Families, businesses and governments are struggling with ever-
increasing costs of care. Every year about a million people are added 
to the rolls of the uninsured, now numbering almost 47 million. People 
with insurance are seeing their benefits dwindle and health costs 
consume their wages. Even people with insurance find themselves unable 
to pay medical bills and going without needed care.
    Increasingly, our health insurance system fails to protect us when 
we get sick. The following snapshot of the precarious state of our 
employer-sponsored health insurance system (based on the research 
literature) tells us why.
     Most people without health insurance are working. Four out 
of five people without health insurance are in families of workers, 
most of them working full time, primarily in jobs that do not offer 
health insurance.
     Fewer firms offer health benefits. Between 2000 and 2006, 
the proportion of firms offering health benefits fell from 69 percent 
to 61 percent.
     Growing health costs stymie growth in earnings. The cost 
of health insurance for those fortunate enough to have it grew 87 
percent from 2000 to 2006. In the same period, workers' earnings 
increased only 20 percent, barely more than the rate of inflation (18 
percent).
     Even insured families face substantial financial burdens. 
In 2003, almost one in five families with employer-sponsored coverage 
spent more than 10 percent of their incomes on health insurance 
premiums and health services. In other words, they were underinsured.
     Underinsurance places the greatest burdens on people who 
get sick. In 2003, one in six adults with private health insurance 
(almost 18 million people) reported problems paying their medical 
bills. People with serious health conditions experienced payment 
problems at almost twice the rate of the other privately-insured. 
Overall, over a quarter of people with payment problems reported that 
costs led them to skip medical tests, leave prescriptions unfilled or 
postpone care.
    Given these conditions, it is not surprising that calls for health 
reform--indeed, calls to secure meaningful health insurance for all 
Americans--can be heard in state houses from Massachusetts to 
California, in business board rooms as well as consumer caucuses, and, 
as evidenced here, in the halls of Congress. Even President Bush has 
joined the conversation. Health reform proposals abound.
    As we consider these proposals and move forward--as we must--it is 
important to remember that there are many ways to get to a fairer, more 
affordable, more secure health care system. But it is just as important 
to remember that not any way will get us there. Success demands that we 
know the difference between proposals that will achieve our goals and 
proposals that will not.
    There are three critical elements to effective reform that will 
actually guarantee all people coverage that gets them access to needed 
health care. A proposal that has these three elements--adequacy, 
affordability, and availability of benefits--gets a Triple A rating 
because of the concrete ways it expands coverage that works.
    Adequacy of coverage--The first element would define a set of 
benefits that protect people when they're sick. That means it has to 
cover the full range of medical services; limit cost-sharing to levels 
that are reasonable in relation to people's incomes; and cap out-of-
pocket spending to what people can realistically afford. An adequate 
benefit can't be a donut--with a hole like the Medicare drug benefit; 
and it can't be Swiss cheese--with all kinds of limits that expose 
people to unexpected costs. In assessing adequacy, we must beware of at 
least two other types of proposals: those that don't specify benefits, 
but leave it to insurers to define what's covered, and those that 
require deductibles so high they impede access to care. In short, a 
proposal with adequate benefits differs from proposals based on the 
premise that any insurance, being better than none, is good enough. 
That's simply not true if the goal is meaningful access to care.
    Affordability of coverage--Element number two would create the 
subsidies that make adequate insurance affordable. We have abundant 
evidence that without subsidies, low and modest income people will not 
buy insurance voluntarily. This makes intuitive sense. Two-thirds of 
the uninsured have family incomes below twice the federal poverty level 
($40,000 for a family of four). Do we really think it reasonable for 
families with these incomes to spend upwards of $11,000 (the average 
cost of reasonably comprehensive coverage in 2006)?
    In assessing affordability, we must beware of proposals that 
require people with low or modest incomes to buy insurance without a 
subsidy. Personal responsibility is important; and everyone should pay 
a fair share. But a mandate without a subsidy is either punitive or 
pretend; it either shouldn't happen or it won't happen. In contrast to 
such misguided mandates, proposals that provide significant subsidies 
(assuring coverage at no cost for people with very low incomes and 
requiring partial contributions that increase with income) establish a 
reasonable mandate--at a price people can afford.
    Availability of coverage--The third element would assure what might 
be called a ``place to buy''--somewhere that makes adequate, affordable 
health insurance available to everyone without regard to health status. 
That ``place'' could offer a choice of health plans, like members of 
Congress get; it could be or look like Medicare; or, if the rules were 
changed, it could be existing private insurance plans. In assessing 
availability, we must beware of proposals that send people shopping for 
insurance in a market where insurers deny coverage to people when they 
need care (like the current non-group health insurance market) or 
charge more based on age or health status, or otherwise cherry-pick us 
when we're healthy and avoid us when we're sick. The proposal has to 
work for us when we're sick.
    An effective health reform proposal can only deliver this Triple A 
protection if it has sufficient financing behind it--whether from 
individual, employer, or taxpayer contributions or some combination 
thereof. And it can only sustain that protection over time if it 
includes a way to slow health care cost growth--not only for people who 
are now uninsured but for everybody, including those of us who depend 
on Medicare and Medicaid. We can all be better off--and more willing to 
commit to universal coverage--if we invest in research to determine 
which medical services work and which don't, and in information and 
payment systems that help providers deliver the former and avoid the 
latter.
    As you well know, debating the merits of alternative health reform 
proposals is a daunting task. Our history is filled with debates that 
generate far more heat than light. For decades, instilling fear among 
those of us who have health insurance--even if it costs too much or 
covers too little--that political action will make us worse off, not 
better off, has taken health reform off the political agenda. But it 
may be that the worse cost and coverage get, the harder it will be to 
scare us away.
    Whether that happens will depend on whether we can trump fear with 
confidence that we can do better. We can. Thirteen years ago, Harry and 
Louise--fictional characters in the health insurance industry's ad 
campaign--misleadingly, but effectively, picked apart the Clinton 
health reform proposal, asserting over and over ``there's got to be a 
better way.'' We don't need fictional characters today to tell us the 
system is broken. Our moms and dads, brothers and sisters, friends and 
co-workers fill that role every day. The time for debate and discussion 
was a decade ago. The time for action is now.
                                 ______
                                 
    Chairman Miller. Mr. Archey.

   STATEMENT OF WILLIAM ARCHEY, PRESIDENT AND CEO, AMERICAN 
                 ELECTRONICS ASSOCIATION (AeA)

    Mr. Archey. Thank you, Mr. Chairman. It is a pleasure for 
me to be appearing before this committee on behalf of AeA's 
2,500 member companies that, as you suggested, spans the entire 
spectrum of the high-tech industry. I would like to just 
provide a little bit of context before I get into some of the 
details.
    Each year for the last 10 years AEA publishes a book called 
Cyberstates--well, depends on the year--but Cyberstates, and we 
are going to be publishing the latest version in another couple 
of months.
    I just would summarize we, by the way, have been accused of 
being too conservative, that the numbers are too low. I took 
the decision 10 years ago when we started this publication that 
I would rather be accused of being conservative than inflating 
the numbers, so we think the numbers are good because they are 
also entirely from the Bureau of Labor Statistics and it is a 
look at all 50 States in terms of high-tech employment, 
salaries, the trends in those, exports from each State, et 
cetera.
    As of now, there are 5.6 million high-tech workers. We lost 
a million workers between 2000 and 2004 when the high-tech 
bubble bust. The good news is, in 2005, for the first time, we 
had a net gain of 61,000 jobs and for the first 6 months of 
2006 we saw 141,000 net new jobs being added. We think that 
when we come out with our report in about a month and a half 
that we are going to be seeing over 200,000 net new jobs in 
high tech that occurred in 2006.
    But one of the things that I would like to talk about is 
that we are here to talk about strengthening middle-class jobs 
and middle-class way of life, if you will; and I would argue 
the key to achieving that is developing a highly skilled and 
educated workforce. Education is the most reliable path to 
high-paying middle-class jobs. I believe no other industry 
better represents the middle-class dream than high tech, which 
requires highly skilled and educated people and pays them well 
for it.
    The average high-tech worker earns 85 percent more than the 
average private sector worker, $72,400 a year versus $39,100 a 
year. In many sectors in the high-tech industry, the wages are 
even higher. The average worker in software services sector 
makes $80,600, the average worker in semiconductor 
manufacturing makes $89,400, and many of the people who work in 
the semiconductor manufacturing area are not college graduates 
but still very well trained in terms of math and in terms of 
problem analysis.
    These are the types of middle-class jobs that this industry 
would like to continue to create, but we are facing a number of 
challenges, and I would like to just cite a few of them.
    Not enough American kids pursue careers in science, math 
and engineering. America used to be the place where the best 
and the brightest came from all over the world, and 
particularly they came for a high-tech career. This is no 
longer true because our visa system is broken. It is difficult 
to obtain an H-1B visa for a foreign national, and once you 
have them it is even more difficult to get a green card to keep 
them.
    Between 40 and 60 percent of all graduate degrees in 
science, technology, engineering and math go to foreign 
nationals. We educate them, and then we tell them to go home. 
That is absurd. What seems to be constantly missed is that for 
the last 60 years the best and the brightest came to the United 
States, founded new companies, created literally tens of 
thousands of high-paying jobs, high-value-added jobs, mostly in 
high tech.
    Ironically, we live in a culture where our kids have many 
more options than science and engineering careers, but I would 
submit that it is the ones with those backgrounds of science 
and engineering that create the innovations that allow our kids 
to have all those other options.
    I would also like to note one other thing. Because some of 
the problems I have enunciated, the argument is it is primarily 
a problem for the big companies. I would submit that these 
problems probably more affect the smaller companies in high 
tech than they do the big guys.
    Two weeks, ago I sent an e-mail out to all of our 17 local 
councils and said, I would like to know what you would like me 
to talk about, what bothers you. And I would like to make a 
quote of a company from Dallas, Texas, with 52 employees, $4 
million dollars in sales. The CEO said, quote, we need to be 
eliminating barriers to finding and developing talented 
employees. If you do this one thing, we can figure out how to 
work around all the other system failures that stifle growth 
and the improvement of the human condition across our Nation, 
end quote.
    What I think he is really saying is, if we can find a way 
to develop, educate and have a talented workforce, we can deal 
with all the other crap. I think that is basically correct.
    I would like to end my testimony by saying one final thing. 
It is not like we don't know what to do. In the 109th Congress, 
we had the President's American Competitiveness Initiative, the 
House Republican's National Summit on Competitiveness, numerous 
bills in the Senate, mostly under Republican sponsorship, and, 
by no means last, the House Democratic Innovation Agenda. I 
would note that all of these proposals address the problem, we 
believe at AeA, none more comprehensively than does the 
Democratic Innovation Agenda.
    It is our judgment that time has come to act in the 110th 
Congress that didn't occur in the 109th Congress. It is an 
interesting issue. There is virtually no disagreement. It has 
just been a question of when the hell are we going to get it 
done.
    Thank you, Mr. Chairman.
    [The statement of Mr. Archey follows:]

 Prepared Statement of William T. Archey, President and CEO, American 
                     Electronics Association (AeA)

    Good morning. My name is William T. Archey, and I am the President 
and CEO of the AeA, the nation's largest high-tech trade association. 
On behalf of AeA's 2,500 members that span the spectrum of electronics 
and information technology companies, from semiconductors and software 
to mainframe computers and communications systems, I would like to 
thank you for this opportunity to testify before your Committee on the 
current and future educational needs of America's high-technology 
industry.
    Mr. Chairman, I would like to begin my testimony with a quote from 
the CEO of an AeA member company located in Dallas, Texas:
    ``We need to be eliminating barriers to finding and developing 
talented employees--if you do this one thing we can figure out how to 
work around all the other system failures that stifle growth and the 
improvement of the human condition across our nation.''
    AeA is unique as a high-tech trade association because we have a 
grassroots organization of 19 offices spread across the country. In 
preparation for my testimony today, I asked the directors of these 
offices to speak with executives of small- to medium-sized companies 
about the challenges they face in recruiting a skilled workforce. Many 
of the responses I received echoed the one I just read.
    I should also point out, Mr. Chairman, that the CEO who made this 
statement runs a company with just $4 million dollars in annual revenue 
and 55 employees.
    The debate on the need to improve the skills of the American 
workforce is often dominated by the big companies. But today I'm not 
here to talk about Intel or Microsoft. I'm here to talk about a small 
company struggling to become a large company. As you well know, small 
companies account for the majority of job creation in this country. If 
public policy does not work to help these businesses thrive, our 
economy suffers. If companies like these cannot access skilled workers, 
they cannot grow their operations or create high paying jobs.
    As we are here today to discuss strengthening America's middle 
class, I would argue that the key to achieving that is developing a 
highly skilled and educated workforce. Education is the most reliable 
path to a high paying middle class job. I believe no other industry 
better represents that middle class dream than high tech, which 
requires highly skilled and educated people and pays them well for it. 
The average high-tech worker earns 85 percent more than the average 
private sector worker, $72,400 annually compared to $39,100. In many 
sectors, the wages are even higher. The average worker in the software 
services sector makes $80,600. The average worker in the semiconductor 
manufacturing sector makes $89,400. These are the types of middle class 
jobs we want to create. If public policy does not support their 
creation, we are basically inviting companies to send jobs overseas.
    The high-tech industry is facing a number of challenges that will 
cast some doubt about our ability to create and sustain these high 
paying U.S. jobs. These challenges are:
     Not enough American kids pursue careers in science, math, 
and engineering.
     America used to be the place where the best and brightest 
came--and particularly they came for high tech.
     This is no longer true because our visa system is broken. 
It is difficult to obtain an H-1B visa for a foreign national, and once 
you have them, it is even more difficult to get a green card to keep 
them.
     Between 40 and 60 percent of all graduate degrees in STEM 
fields go to foreign nationals. We educate them and then we tell them 
to go home. That is absurd.
     What seems to be constantly missed is that for the last 60 
years these best and brightest came to the United States, founded new 
companies, and created literally tens of thousands of high paying, high 
value-added jobs, mostly in high tech.
     Ironically, we live in a culture where our kids have many 
more options than science and engineering careers. But it is the ones 
with that background that create the innovations that allow our kids to 
have those other options.
    With many of these issues, our companies are trying to deal with 
them and trying to solve them. But some of these issues--if not most of 
them--result from misguided public policy.
    In fact, the challenge of recruiting highly skilled workers is the 
most critical for small companies. The larger companies are much more 
likely to have operations abroad. If they need workers with specialized 
skill sets and cannot find them in the United States--or if they cannot 
bring them to the United States--they can staff that job overseas. The 
small guys can't easily do that. If they cannot find the workers they 
need, they have few if any options. But I would note that even our 
larger companies are frustrated by the problems listed above and their 
inability to hire the talent they need here in the United States.
    The fact is, difficulties in recruiting highly skilled and educated 
workers is a problem that is pervasive throughout the technology 
industry, across all sectors and in companies of all sizes. For 
example, the U.S. unemployment rate for electrical engineers is at an 
unprecedented low, 1.5 percent according to the most recent data from 
the Bureau of Labor Statistics. There are thousands of job openings in 
the tech industry in the United States.
    Last April, our Cyberstates 2006 report showed that U.S. tech 
employment was up in 2005 by 61,000 net jobs, the first increase since 
2000, for a total of 5.6 million. Even the high-tech manufacturing 
sector added jobs. This modest growth followed a four year period in 
which the tech industry lost just over 1,000,000 jobs.
    In September, we released our midyear tech employment update, which 
showed that the U.S. tech industry added some 140,000 net jobs in the 
first half of 2006, according to preliminary data. Next month, AeA will 
publish Cyberstates 2007, at which time we will report finalized 
numbers for tech industry job growth in 2006.
    Whatever this growth ends up being, we believe it could be much 
higher. The key to this growth is the skills of the workforce. These 
jobs are only available to those with the proper education and up-to-
date training.
    We as a nation need to address this critical shortage of homegrown 
high-skilled talent. We need to face up to the long-term challenge of 
our education pipeline, which is failing to prepare tomorrow's 
workforce for an economy that is knowledge based and driven by 
technology. We've got to renew the invitation to the best and brightest 
to come to the United States and develop the high paying jobs here 
rather than in some country overseas.
    Mr. Chairman and Members of the Committee, it's not like we don't 
know what we need to do. In the 109th Congress we had the President's 
American Competitiveness Initiative, the House Republicans National 
Summit on Competitiveness, numerous bills in the Senate, and last but 
by no means least, the House Democrats' Innovation Agenda. I would note 
that all of these proposals address the problem, though none more 
comprehensively than the Democratic Innovation Agenda.
    What each of these proposals offers is:
     A major new program to attract our young people to take 
more math and science;
     Programs to increase the number of teachers with the 
skills and background in these areas;
     Increases in the federal basic research budgets to once 
again put us in the forefront of innovation, which happened from 1958 
until recently;
     Various recommendations for how to address the problems in 
the visa system for high-skilled workers. Here there was no consensus 
on exactly what to do, but there was on the need to do so.
    There were also other proposals to deal with unnecessary 
regulations, in particular the problems that small businesses are 
having with Sarbanes-Oxley Section 404.
    The problem is that all of these proposals surfaced during the very 
partisan election year of 2006. So nothing happened. Yet there is 
virtually no disagreement about what should be done.
    Government intervention on these issues is not unprecedented. 
Eleven months after Sputnik went up, President Eisenhower and the 
Congress passed the National Defense Education Act. That act indeed 
spurred a whole generation of kids to take math and science and 
reinvigorated the emphasis on the importance of basic research to 
innovation. Mr. Chairman, for the next 40 years, the United States 
dominated the economic and technological spheres on the world stage.
    Mr. Chairman, and Members of the Committee, we can do that again.
    I thank you for your time.
                                 ______
                                 
    Chairman Miller. Dr. Karoly.

 STATEMENT OF LYNN A. KAROLY, SENIOR ECONOMIST, RAND INSTITUTE

    Dr. Karoly. Good morning, Chairman Miller, Congressman 
McKeon, and members of the committee. I am very pleased to have 
this opportunity to speak with you today about the forces that 
are shaping the future U.S. workforce and workplace as part of 
this committee's hearings on strengthening America's middle 
class.
    Since the largest source of income for most middle-class 
families is earnings from work, the well-being of America's 
middle class is closely tied to the outcomes of the U.S. labor 
market. So I would like to focus my testimony on the forces 
that are shaping the world of work and the implications of 
those trends for the U.S. workforce and workplace. 
Understanding these forces is critical for shaping policies 
that can serve to foster a strong and secure middle class well 
into the 21st century.
    My remarks today are based upon a recent study conducted at 
RAND at the request of the U.S. Department of Labor to provide 
policymakers with a look at the possible trends over the next 
several decades that might affect the Nation's workers, 
employers and other stakeholders such as education and training 
institutions. That study focused on three key factors that we 
identified as having the most potential to affect workers and 
employers in the next 10 to 15 years. Those factors are 
demographics, technology change and globalization.
    In assessing the demographic trends, the most striking 
shift in the workforce is that it is projected to grow more 
slowly in the future. In the 1970s, the workforce grew at about 
an annual rate of 2.6 percent per year. It has been steadily 
declining. In the next decade, that rate of growth will be 
about .4 percent per year, and it falls further in the decade 
after that.
    In terms of technological advances, we can expect continued 
growth and demand for a high-skilled workforce. That is the 
result of new technologies which favor non-routine skills such 
as flexibility, creativity, problem solving and complex 
communications. Complementary changes in workplace practice 
also increase the demand for workers with high levels of 
skills.
    The third factor is globalization, which can be expected to 
have equally important effects. In looking ahead, we can 
anticipate that globalization will affect industries and 
segments of the workforce that in the past were relatively 
isolated from outside competition. Ultimately, globalization 
and technological change have both aggregate effects and 
distributional consequences. They both generate gains in the 
economy as a whole from innovation and expanded markets, but 
they are also responsible for distributional effects as new 
technologies and overseas competition displace workers or alter 
the skill content of jobs.
    In our larger study we highlight a number of implications 
of the demographic trends, technology shifts and growing global 
integration. In my remaining time, I would like to highlight 
four key messages that flow from our work.
    While I am not going to offer specific policy 
recommendations, one conclusion that does follow is that 
policymakers at all level of government need to re-examine and, 
where needed, reform the institutional features of the U.S. 
labor market largely which develop to serve a 20th century 
economy, not the 21st century one we are in today.
    First, we foresee a redefinition of employer-employee 
relationships and work arrangements toward greater 
specialization and more worker entrepreneurs. Forces that are 
driving the reorganization of production are expected to shift 
toward more nonstandard work arrangements, whether that is 
self-employment, contract work, temporary help work, part-time 
work, freelance work and so on.
    One view of this trends foresees the evolution in some 
sectors towards numerous information-technology-enabled network 
entrepreneurs or, a term that is being used now, e-lancers. A 
great example of this model is eBay. Recent figures indicate 
that eBay has over 55 million active buyers and sellers, but 
even more pertinent is the fact that over 400,000 of those 
sellers consider eBay to be their primary source of income. In 
other words, if those individuals actually worked for eBay, it 
would make eBay the second largest employer in the country 
after Wal-Mart.
    Current data indicates that about one in four workers is 
engaged in some form of nonstandard work arrangement, in other 
words, a job that is not expected to deliver traditional 
workplace benefits; and to the extent that these type of 
nonstandard work arrangements expand in the future, one key 
issue will be access to and delivery of traditional workplace 
benefits such as health insurance, pension coverage and other 
things that employers are involved in, such as supporting 
education and training of their workers and other aspects of 
professional development.
    Second, the skills of the U.S. workforce will determine how 
competitive our economy remains in the global marketplace. You 
have heard already about issues related to training scientists 
and engineers; and, on this front, international comparable 
data indicates that the U.S. workforce does not stand up, 
whether we look at current students or workers today, to their 
international counterparts.
    The technological advances that are going to require an 
increase in a workforce that is skilled in the sciences and 
engineering is one where we have tended to rely, as was 
mentioned, on foreign students from abroad; and there are a 
number of indications to suggest that reliance is not something 
we can count on in the future.
    Third, while education and training prior to the start of a 
career will be important, the ability to retool and retain mid-
career will be essential at all levels, whether we are talking 
about older workers or younger workers.
    Finally, as the labor force grows more slowly in the 
future, employers are going to have to compete for new workers, 
particularly those that are underrepresented in the labor 
force; and two examples that we discuss in our analysis are 
older workers, where there is going to be a demand to increase 
their retention in the workforce, as well as underrepresented 
groups such as the disabled.
    Again, it is important that policymakers consider these 
trends and the implications that they have for the future of 
our workforce and workplace and the roles that policies can 
make in helping to ensure a strong and stable workforce in the 
middle class as well.
    I look forward to your questions. Thank you.
    [The prepared statement of Dr. Karoly follows:]

     Prepared Statement of Lynn A. Karoly, Senior Economist, RAND 
                              Institute\1\

                            INTRODUCTION\2\

    Mr. Chairman: I appreciate the opportunity to be here today to 
discuss this important topic. The well-being of America's middle class 
is closely tied to the outcomes of the U.S. labor market. The largest 
source of income for middle class families is earnings from work, 
either from current employment or as deferred compensation from prior 
jobs in the form of pensions or Social Security income. While the 
consequences of the current state of the economy on the fortunes of 
middle class families are one area for potential concern, there are a 
number of longer-term issues that are equally relevant in terms of 
their potential effects on U.S. workers and employers. Thus, I would 
like to focus my testimony on the forces that are shaping the world of 
work and the implications of those trends for the U.S. workforce and 
workplace. Understanding these forces is critical for shaping policies 
that can serve to foster a strong and secure middle class well into the 
21st century.
---------------------------------------------------------------------------
    \1\ The opinions and conclusions expressed in this testimony are 
the author's alone and should not be interpreted as representing those 
of RAND or any of the sponsors of its research. This product is part of 
the RAND Corporation testimony series. RAND testimonies record 
testimony presented by RAND associates to federal, state, or local 
legislative committees; government-appointed commissions and panels; 
and private review and oversight bodies. The RAND Corporation is a 
nonprofit research organization providing objective analysis and 
effective solutions that address the challenges facing the public and 
private sectors around the world. RAND's publications do not 
necessarily reflect the opinions of its research clients and sponsors.
    \2\ In this testimony, I draw on Lynn A. Karoly and Constantijn 
W.A. Panis, The 21st Century at Work: Forces Shaping the Future 
Workforce and Workplace in the United States, MG-164, Santa Monica, 
California: The RAND Corporation, 2004 available online at: http://
www.rand.org/pubs/monographs/MG164/index.html.
---------------------------------------------------------------------------
    To set the context, in the next section, I briefly outline three 
key factors that are expected to have important effects on the 
workforce and workplace in the next 10 to 15 years: demographic shifts, 
technological advances, and global competition. I then discuss the most 
salient implications of these trends for U.S. workers, employers, and 
other stakeholders such as our education and training institutions. 
While I do not offer specific policy recommendations, one conclusion 
that follows is that policymakers at all levels of government need to 
reexamine--and, where needed, reform--the institutional features of the 
U.S. labor market, as well as our educational and training system, in 
light of the changes we anticipate.

        FORCES SHAPING THE 21ST CENTURY WORKFORCE AND WORKPLACE

    In a recent study we conducted at RAND at the request of the U.S. 
Department of Labor, we focused on three key factors that we identified 
as having the most potential to affect workers and employers in the 
next 10 to 15 years (Karoly and Panis, 2004). Those factors are 
demographics, technological change, and globalization. The demographic 
dimension is relevant as the size and composition of the population, 
combined with patterns of educational attainment and labor force 
participation, determine the number and makeup of the people who want 
to work. Demographic trends will also affect the mix of jobs in the 
economy as a result of differential consumption patterns across 
different demographic groups. For example, older households demand a 
different mix of goods and services than younger ones, and the growing 
participation of women in the labor force has raised the demand for 
purchased goods and services once produced at home. Immigration 
patterns play an important role as well, affecting the mix of skilled 
and unskilled labor.
    Considering the recent pace of technological change, it is evident 
that our economy has been shifting from one based on production to one 
based on information. In the coming decades, technological advances 
promise to further shape what goods and services are produced by the 
economy; how capital, material and labor inputs are combined to produce 
those goods and services; how work is organized and where it is 
conducted; and even who is available to work. Finally, the extent of 
integration between the U.S. economy and the rest of the world in terms 
of trade, capital flows, labor mobility and knowledge transfers will 
also influence the U.S. labor market. In the decades ahead, the extent 
of globalization will affect the size of markets U.S. firms produce 
for, the mix of products the U.S. population consumes, and the nature 
of competition in the global marketplace.
    In assessing the demographic trends, the most striking shift is 
that the workforce is projected to grow more slowly in the future. The 
annual growth rate of the nation's workforce is expected to slow to 0.6 
percent in the 2010s and 0.4 percent in the 2020s (Toosi, 2002, 2006). 
That is a sharp decline from the 1.3 percent average annual increases 
seen in the 1990s and the 2.6 percent average annual increases 
experienced during the 1970s. The slowdown in labor force growth is the 
result of the retirement of the baby boom cohort and the end of the 
rise in women's employment rates. The influx of immigrants counteracts 
those trends to some extent but not enough to allow labor force growth 
rates to keep pace with recent decades. As a result of immigration 
patterns and differential fertility rates for minority groups, the 
trend toward a more ethnically and racially diverse workforce can also 
be expected to continue.
    In terms of technological advances, it hardly seems controversial 
to say that technology will continue to shape the economy in even 
greater ways over time, while the pace of those impacts can be expected 
to accelerate. One expected consequence of the technological advances 
is a continued growth in the demand for a high-skilled workforce 
capable of undertaking the basic R&D to develop new technologies, 
developing the applications and production processes that exploit the 
technological advances, and bringing the resulting products to the 
commercial marketplace. Beyond the high-technology sectors themselves, 
changes in technology in recent decades have been identified as an 
important source of rising demand for skilled workers in a wide range 
of industries and occupations (Karoly and Panis, 2004). New 
technologies favor non-routine skills such as flexibility, creativity, 
problem-solving, and complex communications. Computers and other new 
technologies complement workers with these skills. In contrast, 
information technologies tend to substitute for routine skills that can 
be translated into programmable steps for computers to execute. 
Complementary changes in workplace practices--such as more 
decentralized forms of business organizations and other aspects of 
``high performance'' work systems that give workers more authority, 
flexibility, and opportunities to work in teams--further increase the 
demand for workers with high-levels of skills (Bresnahan, Brynjolfsson, 
and Hitt, 2002). All indications are that such technological advances 
in the future will continue to place a premium on higher-skilled 
``knowledge'' workers who are responsible for analyzing, problem-
solving, and communicating information needed for decisionmaking.
    The third factor, globalization, can be expected to have equally 
important effects. While the pace and extent of the integration of the 
U.S. economy and other world economies depends in part on the outcome 
of future trade policies adopted by the United States and other 
countries, we can anticipate that globalization will affect industries 
and segments of the workforce that in the past were relatively isolated 
from outside competition, boosting trade, affecting capital flows, 
encouraging mobile populations, and causing rapid transfer of knowledge 
and technologies. The evidence to date of the effects of globalization 
on the economy suggests a future course that will comprise both 
aggregate effects and distributional consequences. For the economy and 
the labor market as a whole, trade has generally produced favorable 
outcomes: continued employment growth because of expanded markets, high 
rates of innovation and productivity gains as a result of more 
competitive markets, and rising standards of living due to lower prices 
and greater consumer choice (Burtless et al., 1998). At the same time, 
the distributional consequences are equally salient. For U.S. workers, 
that means job declines in some sectors of the economy, counterbalanced 
by job creation in others. Ultimately, globalization and technological 
change have similar consequences: gains in the economy as a whole from 
innovation and expanded markets but distributional consequences as new 
technologies and overseas competition displace workers or alter the 
skill-content of jobs.

      IMPLICATIONS FOR WORKERS, EMPLOYERS, AND OTHER STAKEHOLDERS

    By understanding the forces that are shaping the world of work and 
how those forces are likely to evolve over time, we can draw out the 
implications of those trends for the various stakeholders in the labor 
market--workers, employers, education and training institutions, and 
policymakers. In doing so, much of the exercise involves informed 
speculation. In the absence of a crystal ball, we are not in the 
business of making definitive predictions. However, we do believe that 
certain trends are more likely to occur than not. I'd like to highlight 
four key messages that come out of our work.
    First, we foresee a redefinition of employer-employee relationships 
and work arrangements, toward greater specialization and more worker-
entrepreneurs. The combination of technological change and 
globalization are propelling firms toward a model of greater 
specialization than in the past. The adoption of new technologies have 
shifted the ways firms are organized and conduct their businesses--both 
in ``old economy'' goods-producing sectors such as steel and machine 
tools industries, as well as services-producing sectors such as 
retailing, trucking and banking. This includes a trend toward the 
``vertical disintegration of the firm'': in other words, companies 
shedding non-core functions through outsourcing in order to focus on 
specialized products and services that define their core competencies.
    Decentralized business forms also go hand-in-hand with 
decentralized decisionmaking within organizations, and attaching a 
premium on knowledge-generation as a way of achieving competitive 
advantage. Shifts toward more participatory ``high performance'' work 
systems that give workers more authority, flexibility, and 
opportunities to work in teams as well as performance-based pay are 
also attributable to the power of information technologies and their 
associated networks to coordinate and control across and within 
organizations in a more decentralized manner. Increasingly, we can 
expect corporations to serve less of a ``command and control'' function 
and instead provide the rules, standard and culture that define the 
environment within which more autonomous workers operate.
    Technology also facilitates telecommuting and other forms of 
distance work such as long-distance teams. As of 2004, about 21 million 
workers or 15 percent of the workforce usually did some work at home 
(at least on day a week) as part of their primary job (Bureau of Labor 
Statistics (BLS), 2005b). As might be expected, about four out of five 
workers who worked regularly at home were managerial, professional, or 
sales positions, jobs with more authority and autonomy. Looking ahead, 
we can expect growth in homebased work and telecommuting, facilitated 
by technological change and demanded by workers looking for ease in 
balancing work and family commitments. As the location of the employer 
and employee become less geographically connected--particularly when 
state or national boundaries are crossed--it raises questions about 
which jurisdiction's work-related policies apply.
    Beyond telecommuting, the forces driving the reorganization of 
production are also expected to shift toward nonstandard work 
arrangements such as self-employment, contract work, temporary help, 
parttime work, and so on. One view of these trends foresees the 
evolution in some sectors toward numerous, IT-enabled, networked 
entrepreneurs, or ``e-lancers'' (Malone and Laubacher, 1998; Malone, 
2004). In this business model, individuals may compete in a global 
marketplace for project opportunities and work on multiple projects at 
a time. Teams continuously dissolve and reform as old projects are 
completed and new projects begin.
    According to BLS data as of 2005, about 1 in 10 workers was in an 
alternative employment arrangement, consisting of independent 
contractors, on-call workers, temporary help agency workers, and 
workers provided by contract firms (BLS, 2005a). When self-employed 
individuals and those working part-time are included, about one in four 
workers is currently in a ``non-standard work arrangement''--in other 
words, a job that would not be expected to provide traditional 
employer-provided benefits. Further shifts may be spurred by technology 
or by demand on the part of subgroups of workers such as older workers, 
the disabled, or those caring for dependent family members. A great 
example of the new business model is e-Bay. Recent figures indicate 
that eBay had over 55 million active buyers and sellers, but even more 
pertinent is that an estimated 430,000 of those sellers consider eBay 
to be their primary source of income. If eBay actually employed those 
individuals, it would make it the second largest private employer in 
the country after Wal-Mart (Malone, 2005).
    To the extent that nonstandard work arrangements expand in the 
future, one key issue will be access to and delivery of traditional 
workplace benefits. The traditional employment benefits associated with 
jobs that confer at least a middle class standard of living include 
health insurance and pension coverage, and often include other benefits 
as well such as life and disability insurance, and employer-supported 
education and training and other aspects of professional development. 
In the traditional employeremployee paradigm, workers might have 
expected such benefits as part of explicit or implicit employment 
contracts that confer long-term stable employer-employee relationships 
governed by the internal labor market of the firm. At the other extreme 
is an alternative paradigm where workers are independent of traditional 
employers, engaging in freelance or e-lance work that takes place over 
weeks or months--often as part of collaborative project teams that form 
and then dissolve--all governed by the marketplace and institutional 
rules.
    In the first case, the employment relationship offers both 
employment continuity and economic security, insuring the worker to 
some extent against fluctuations in the economy. There are 
opportunities for career progression and constraints on the 
distribution of wages based on the internal wage structure of the firm. 
At the other extreme, the individual is responsible for generating the 
demand for their skills and for riding out periods of slack demand. 
There is no well-defined career ladder and the rewards may be more 
extreme, with those who don't succeed contrasted with the ``winners who 
take all.''
    Second, the skills of the U.S. workforce will determine how 
competitive our economy remains in a global marketplace. The key will 
be whether the skills of the U.S. workforce can keep pace with the 
growing demand for skill and the extent of global competition. Overall 
educational attainment among the U.S. population increased rapidly 
throughout the twentieth century (Karoly and Panis, forthcoming). In 
1940, only about 4 in 10 persons age 25 to 34 (cohorts born as early as 
1905) completed high school. By 1980, more than 8 in 10 persons 
(cohorts born as early as 1945) reached this level of educational 
attainment or higher. During this 40-year period, the proportion 
completing a college degree or more rose from 6 percent to 24 percent. 
As a result of these large cohort differences in educational 
attainment, those workers retiring in the latter half of the twentieth 
century after a 40-year career were replaced by considerably more 
educated labor force entrants and larger absolute cohorts as a result 
of the baby boom. After 1980, there has been a slowdown in the trend 
toward higher educational attainment so that the difference in 
educational attainment between cohorts entering and retiring from the 
labor force is becoming smaller. While some scholars suggest education 
levels will continue to rise on average, others project stagnation in 
the educational attainment of the workforce (see Day and Bauman, 2000, 
and Elwood, 2001). To the extent that educational levels are projected 
to increase in the future at all, however, the rate of increase in the 
next several decades will be slower than what was experienced in the 
past several decades.
    Even if the education level of the workforce continues to grow, 
what is even more relevant is whether U.S. workers will have the 
capabilities that will be valued in the future, as technological shifts 
place a premium on such skills as abstract reasoning, problem solving, 
communication, and collaboration. On this front, internationally 
comparable data indicate that the level of skills acquired by U.S. 
students and workers are outmatched by their counterparts in other 
developed countries. In terms of proficiency in mathematics and 
reading, U.S. 15-year-olds rank at or near the bottom in comparison 
with 21 OECD (Organisation for Economic Development) countries (OECD, 
2004). When U.S. adults are compared with their counterparts in other 
developed countries on the workplace literacy skills relevant for 
functioning in white-collar jobs, they too rank in the bottom half of 
the distribution (OECD, 2000; Lemke et al., 2005).
    Technological advances will also require a workforce with training 
in the sciences and engineering in order to undertake the basic 
research necessary for scientific and technological innovations, 
develop applications from the advancements, and bring new products to 
market. However, the share of U.S. bachelor's degrees awarded in the 
sciences and engineering has fallen from 36 percent in the late 1960s 
to 32 percent as of 2001 ((National Science Foundation (NSF), 2004).
    At the graduate level, the United States has long relied on top 
students from universities and engineering schools abroad who receive 
their Ph.D.s in the sciences and engineering from U.S. universities and 
remain after they complete their degree. Recent estimates suggest as 
many as 70 percent of foreign-born U.S. Ph.D. recipients remain in the 
United States rather than returning to their country of origin 
(Bhagwati, 2003). Overall, estimates from the 2000 U.S. Census indicate 
that 51 percent of all engineers with doctorates were foreign born and 
the share was 45 percent for individuals with doctorates in the life, 
physical, mathematical, and computer sciences (NSF, 2004). Yet, more 
restrictive immigration policies in the wake of September 11th, coupled 
with increased competition from universities in other countries have 
led to a decrease, at least in the short-term, in the number of foreign 
students studying for advanced degrees in the United States (Dillon, 
2004). If this recent experience continues, the United States may find 
it increasingly difficult to attract highly skilled immigrants or to 
retain those who are educated at U.S. colleges and universities, 
thereby limiting the supply of scientists and engineers in the U.S. 
labor market (NSF, 2004).
    Third, while education and training prior to starting a career will 
be important, the ability to retool and retain mid-career will be 
essential at all skill levels. The present education and training 
system largely evolved to meet the needs of the early 20th century 
workforce. That system was predicated on the model of first obtaining 
education and knowledge through young adulthood, followed by entry into 
the labor market. Increasingly, this system is less relevant for the 
21st century workforce. Given the pace of technological change and the 
heightened competition from abroad, skills obtained early in an 
individual's career may soon become obsolete. Thus, individuals will be 
required to be re-educated and re-trained to respond to changes in 
skill demands and the requirements of jobs.
    The growing importance of skill in the U.S. economy, both for new 
labor force entrants and current workers, highlights the need of an 
education and training system that can prepare workers to enter the 
labor market and offer opportunities for skill upgrading throughout an 
individual's working life. At the primary and secondary level, a focus 
on improving educational outcomes in mathematics and the sciences is 
critical given the expected pace of technological change and the extent 
of global competition (National Commission on Mathematics and Science 
Teaching for the 21st Century, 2000). The need to expand the number of 
undergraduate and graduate degrees in the sciences and engineering was 
noted above, as well. There is also a need to develop opportunities for 
lifelong learning through formal and informal training programs, 
whether offered by employers or public or private educational 
institutions.
    While employers can be expected to support some opportunities for 
obtaining job-specific skills, they are less likely to invest in 
general skill acquisition as those skills are more readily transferable 
to another employer. Nevertheless, U.S. employers make substantial 
investments in training their workers, whether through on-the-job 
training, formal in-house education programs, or through partnerships 
with external training institutions such as community colleges. In some 
cases, opportunities for continued education and training may become an 
important fringe benefit used by employers to attract and retain a 
highly skilled workforce. One challenge is that opportunities for 
employer-provided training typically increase with education levels, so 
that less-educated workers do not have the same opportunity for 
upgrading their skills as their more-educated counterparts (Ahlstrand, 
Bassi, and McMurrer, 2003).
    The need for lifelong learning is one area where technology may be 
part of the solution. The Internet and other communication technologies 
have great potential for improving worker skills through 
technologymediated learning that is available any time, anywhere 
(Karoly and Panis, 2004). Such tools as computerbased instruction, 
Internet-based instruction, and other methods of customized learning 
are gaining ground in a number of settings, although their cost-
effectiveness remains unproven. Nevertheless, if lower-skilled workers, 
in particular, can take advantage of such technology-driven learning 
opportunities, it may allow for skill upgrading of the current 
workforce in response to the anticipated growth in demand.
    Fourth, as the labor force grows more slowly, employers will 
compete to attract new workers, particularly those currently 
underrepresented in the labor force. In light of the prospect of near-
zero growth in the workforce, employers are likely step up recruitment 
among subpopulations that are currently underrepresented in the 
workforce. While the current projections forecast a sizeable slowdown 
in the growth rate of the future labor force, the growth rate can 
exceed those projections to the extent that labor force participation 
rates can rise for groups not fully employed. For employers, this may 
mean focusing on benefits or other accommodations to encourage greater 
workforce participation on the part of older workers, women with 
children, persons with disabilities, and so on.
    Consider as an example, the labor force participation of those with 
work-limiting disabilities. Not surprisingly, labor force participation 
among persons with a disability is lower than among those without. In 
2002, the employment rate for non-disabled persons age 21 to 64 was 88 
compared with 56 percent for those with a disability and 43 percent for 
those with a severe disability (U.S. Bureau of the Census, 2006). 
Several technological and institutional developments are under way that 
may allow greater work participation among the disabled (Karoly and 
Panis, 2004). Medical technology is undergoing rapid change, so that 
some disabilities may be cured, prevented, or rendered more manageable 
in the future; progress in IT may help persons with disabilities 
perform tasks that they currently cannot, either by helping directly 
with the task or by enabling remote work from home; and the Ticket to 
Work program of the Social Security Administration aims to induce more 
Disability Insurance recipients to return to work. Countering these 
developments, however, is the prospect that the prevalence of 
disability may be on the rise due to general population aging and the 
increasing incidence and prevalence of such precursors to disability as 
diabetes, asthma, and obesity (Lakdawalla et al., 2003).
    As another example, older workers often point to a desire for 
greater flexibility in job responsibilities, hours of work, and pay and 
benefits at the end of their career. For a variety of reasons, older 
workers are already shifting toward longer work careers (Karoly and 
Panis, 2004). Yet, employer behavior and government policies may serve 
to further increase labor force participation rates among older 
individuals. Research has demonstrated that workplace flexibility and 
employers' accommodations of older workers can increase their 
anticipated work-life. When employer accommodations are not possible, 
the transition to retirement can be postponed for some older workers by 
shifting to self-employment as a type of bridge job (Karoly and 
Zissimopoulos, 2004). Indeed, in many sectors, information technologies 
have reduced the costs of entry into self-employment and the Internet 
provides an avenue for wider marketing of products and services.

                        IMPLICATIONS FOR POLICY

    These factors shaping the world of work in the next several decades 
are also relevant for policymakers at the federal, state, and local 
level who make decisions that shape the laws and regulations governing 
the workplace and other policies that affect the various actors in the 
labor market. Many of the institutional features of the U.S. labor 
market evolved in the context of the 20th century workplace, many 
dating to the first half of the last century. These features include:
     the regulations that govern employment, hours, wages, 
fringe benefits, and occupational health and safety;
     the tax treatment of workplace benefits;
     the structure of social insurance programs such as social 
security, disability insurance, and unemployment insurance;
     the organization and operation of unions and other worker 
associations.
    In light of the changes we can see coming, policymakers need to 
reexamine various public and private sector policies and institutions 
to determine whether (1) present policies introduce distortions or 
unintended consequences; (2) the market failures of the past are less 
relevant but new ones have emerged; or (3) there are distributional 
consequences that make a case for a government role in the marketplace.
    For example, as employers and employees are increasingly located 
across state boundaries, which state laws or state-based social 
insurance programs apply to the worker and employer? The rapid pace of 
technological change and shifts in demand due to global competition 
places workers at greater risk of displacement, with consequences for 
employment security, income and access to benefits. Which workers 
should be compensated for such losses and how? What is the role for 
government, if any, in supporting the need for workers to engage in 
lifelong learning and adjust to changes in skill demands?
    These are just some of the questions that merit greater attention 
as we navigate the future of work in the 21st century.

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                                 ______
                                 
    Chairman Miller. Thank you very much.
    Thank you to the entire panel.
    I would like to ask a question of Mr. Trumka and Mr. 
Archey, and I have a second question for Dr. Feder and Dr. 
Karoly.
    The question of health care, when I meet with labor unions 
and others and you are in negotiations, one of the things that 
happens is there is less and less, if you will, after-health 
care dollars to put in a person's pocket today as you negotiate 
wages and benefits. What would have gone to wages and would 
have gone home, the table money you would have brought home is 
now in that benefit.
    When I talk to small start-up companies in my district, the 
idea of how they struggle to provide health care is the other 
side of that picture. I just wonder what you are hearing from 
your companies, from your members, from the member 
organizations, more importantly, I guess on this one.
    Mr. Trumka. Simply no question, Mr. Chairman, that in 
negotiation after negotiation health care becomes a bigger 
issue. Some companies have become such a big issue that they 
declare bankruptcy as a preemptive way to get rid of legacy 
costs for retirees.
    It simply also should be stated that that problem cannot be 
solved at the bargaining table, because the process that is 
going on in the United States between employers and employees 
is a process where the costs get shifted from one to the other. 
The process is shifting more and more costs onto workers right 
now who simply can't afford that cost because of the stagnation 
of wages.
    There are employers, even good employers, that want to 
provide health care and are being disadvantaged because of the 
cost of that health care. We simply need a national solution to 
that, not a State-by-State solution but a national solution to 
the health care problem, one that reins in costs, one that 
brings health care to every American and provides a minimum 
level of benefits, a good level of benefits for every last 
American.
    Chairman Miller. Mr. Archey, obviously you are in a highly 
competitive industry where you are trying to attract the best 
of the best. I would assume health care is not optional. It has 
to be there for these workers and their families.
    Mr. Archey. I think that is true, but there has been a big 
change in the last 5 years. Five years ago, most of the high-
tech companies provided what used to be called a Rolls Royce 
medical plan. There is less of that.
    The other thing that is really starting to happen is the 
cost of health care for high-tech companies is becoming a very 
significant part of their cost structure, and the problem is 
they are also competing against companies in Europe and in Asia 
who don't have those costs.
    So I will tell you about our membership and about how 
seriously they think about it. We had a board meeting last week 
and had a very lengthy discussion on the top five priorities 
this year in public policy, and health care was number three.
    Chairman Miller. Thank you.
    Dr. Feder and Dr. Karoly, you described what we have to do 
to get a system that works, and you describe a very different 
workplace. Historically, a huge amount of this has been 
delivered through employer-provided health care. The employer 
may be the individual at this stage of this discussion. The 
system you described in terms of accessibility, I wonder if you 
might comment on these changes that are taking place 
demographically but also that are being driven by technology.
    Dr. Feder. Most of us rely on employer-sponsored insurance; 
and, as I listen to Dr. Karoly, we see growing numbers who are 
falling outside from that system. But we also know, from what 
we are hearing, even those inside are struggling. The employer-
sponsored system falls short of serving everybody, and we need 
something beyond it. We need to make sure there is access 
through jobs and access to those that are in other jobs.
    The key here, I would argue, is to be careful what we do 
with the employer-sponsored insurance system without making 
sure we have got something else that really works in its place. 
The President has put forward a proposal for taxes on high-
benefit plans--on high-cost plans, not necessarily high 
benefit--and creates tax credits to go outside employment. A 
big problem with that approach is that it undermines employer-
sponsored insurance and sends people out into what I describe 
as a market in which there is discrimination against people by 
health status. That is going to create more uninsured, not 
solve our problem. So I think we have to work with employers 
and more broadly to assure affordable access to coverage.
    Chairman Miller. Dr. Karoly.
    Dr. Karoly. I would add the kinds of trends that I was 
talking about, one of the implications for today's workforce 
for future workers is we won't expect to see the same stability 
in their job their parents might have had. So the notion you 
would have a stable access to a source of health insurance 
through an employer is no longer necessarily the case.
    So the consequences of changing a job voluntarily or 
involuntarily are tied to these issues of potentially losing 
health insurance, what do you do about pension benefits and 
other things that you qualify for.
    So the tie between these employer-provided benefits and 
jobs is something that in the future issues about portability I 
think are going to be more relevant or even divorcing some of 
these benefits from the employer----
    Chairman Miller. You see more writings taking place in 
terms of whether or not this lock--if you have health care, 
whether it is really sort of counter to the entrepreneurial 
spirit, that you find yourself locked in a place. Even though 
you think you can take your talents and go somewhere else, 
health care really is a major consideration, people making that 
decision in this flexible workplace.
    Dr. Karoly. There is certainly evidence of that kind of job 
lock, and some are able to adjust because they have a spouse 
who might be able to maintain insurance, and so one individual 
can go out on their own. It happens at older ages when workers 
are not quite ready to retire, but if they aren't Medicare-
eligible they risk losing health coverage.
    Chairman Miller. Mr. Trumka, I want to thank you for 
mentioning the Employee Free Choice Act. It is interesting as 
you read economists, whether they are conservative or liberal, 
all will cite the lack of bargaining power as one of the 
reasons that you have seen a stagnation or decline in wages, no 
matter what economic school they come from. That is just a fact 
of life in the American job system and American economic 
system. We hope to be able to work to remedy that.
    Thank you very much.
    Mr. McKeon.
    Mr. McKeon. Thank you, Mr. Chairman.
    Mr. Archey, what was one and two?
    Mr. Archey. One was getting the competitiveness package 
that I alluded to last year passed. The second one I don't 
remember--Sarbanes-Oxley for small companies.
    Mr. McKeon. Put it in or get rid of it?
    Mr. Archey. Make some changes, whether by regulatory action 
or even legislative action; and contrary to what the PCLB came 
out with last month, it is not going to solve the problem.
    Mr. McKeon. Very, very interesting.
    Dr. Karoly, in your testimony--and those are your little 
girls there behind you?
    Dr. Karoly. They are. My family is here with me today 
seeing government at work.
    Mr. McKeon. That is great. They are learning how the 
government works right at where it is happening.
    In your testimony, you state that U.S. employers make 
substantial investments in training their workers. Based on 
your research and experience, does private-sector investment 
and training outpace that of the public sector? And how can we 
encourage more private investment, such as public-private 
partnerships, to help assist with our increasing education and 
job training needs?
    Dr. Karoly. I don't--I haven't seen specific data that 
would tally up the private sector versus the public sector's 
investment in education. I expect it is going to vary by the 
ages at which you are talking about investing in skills. 
Certainly at younger ages the public sector investment is much 
larger than the private sector, and that gradually shifts over 
time.
    Although one of the things we do see is that, to the extent 
that employers invest in their workers, they tend to invest in 
workers who are better educated because they are the workers 
they are working hardest to retain and attract into their 
companies. In fact, more and more employers, I think, 
particularly looking for high skilled, highly qualified 
workers, are going to use education and training benefits as 
one of the tools to attract workers, whether that be through 
their own company provided programs or by subsidizing the costs 
to go outside the company to obtain education and training.
    But I think in the future definitely the notion of public 
and private involvement in education and training is key. The 
private sector knows where the demands are. The public sector 
often has the resources through things like community colleges 
and other programs that are available. So it is critical that 
those kinds of investments happen with the knowledge of both 
parties and the resources that are available.
    Mr. McKeon. Several years ago, I was asked by a 
manufacturing--small manufacturing company in my district, they 
were having trouble keeping their employees. As they got them 
trained to do certain things on the computer, Lockheed or 
Northrup Grumman would hire them away, within the same 
industrial center.
    So what we did, I went to the community college and the 
city and got the three of them together. And the company 
provided the space, the community college provided the 
instructor, the city gave them some seed money that they were 
able to set up a classroom. Now they have two full-time 
classrooms with full-time professors. And they don't care now. 
They train all their employees. And they train Lockheed's and 
Northrup's and others. It has become a real boon for the area. 
That is just one little thing where they worked out something 
together.
    Mr. Archey, you outline challenges that the high-tech 
industry is facing that cast doubts about our ability to create 
and sustain jobs in the industry, such as insufficient pursuit 
of math, science and engineering and an ineffective H-1B visa 
program. I talk to electronic groups over the years, and it 
seems to me that we have like a three-prong problem: An 
immediate problem that could be fixed by the H-1B visas that 
can take care of our short-term problem. Then we have an 
intermediate problem that if we can get more math and science 
students trained right now in college; and then we have the 
long range where our younger people that are going through 
elementary and high school, to encourage them to get into math 
and science more so. It is a multi-pronged effort that I think 
we need to work on from all three areas.
    No Child Left Behind I think was a good start in the one 
end, and we have talked a lot about illegal immigration, the 
thing we need to do there, but we need to also have reform of 
legal immigration and reach out to those that will help us.
    I have told people that we lose jobs because of low wages. 
We are also going to be losing lots of jobs because of 
insufficient trained workforce. In your opinion, how can 
current public policy in these areas--how are they ineffective? 
How can they be more effective?
    Mr. Archey. Again, I think in terms of what the Congress, 
both parties, came up with last year, there is all kinds of 
solutions inherent in some of those. I think that for us now, 
for our companies--and this has been a change in the last 
year--the emphasis has been on H-1B visas. I will tell you that 
in the last 6 months it has been an emphasis on the green card, 
because the problem is they have got workers who came with an 
H-1B visa, it is now up. They want to get them the green card 
so they can stay with the company.
    I think one of the misperceptions about all this is that a 
lot of these really highly skilled foreign workers who come to 
the United States, they are not a zero sum game in terms of 
American jobs. They have created thousands of jobs. And the 
point we are trying to say is that--you may have seen 
yesterday's New York Times. There was an article in there about 
America's visa program, and there was a survey of 2,000 
international travelers, 39 percent of whom said by far the 
worse entry system in the world is the United States.
    Now that is saying something, when you think about some of 
these other clunker countries.
    The second thing is that--I will just give you an example--
we have got a company that is based out in the far West. They 
opened up a plant in China about 2 years ago with about 100 
engineers. The CEO wanted to bring the engineers back to the 
United States in groups of 20 each, primarily to Americanize 
them and to get them--and some of whom would like to stay 
because they had very specific talents.
    They all applied. All 20 did not get a visa. He tried it a 
second time. Eighteen of 20 did not get a visa. So what did he 
do--and he said, Bill, it's not that big a deal, but, boy, 
there is a principle in this somehow. He now does his training 
for his Chinese workers in Toronto. And, as he said, that is 
only 12 to 15 jobs, but they ought to be in the United States. 
And he can't get answers on all this.
    And here is my last point about all this. At least every 
other week the State Department issues a press release about 
how everything is improved. I don't buy it. My companies don't 
buy it. It is still a monumental problem.
    Chairman Miller. We have had those discussions with 
California employers who are making decisions whether or not to 
build facilities in Canada because they can't get people across 
the border. It is very unfortunate.
    Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman.
    Mr. Chairman, I think our first hearing conclusively 
established that there is truly a middle-class squeeze that is 
affecting middle-class people in the country, and I think I am 
hearing from today's hearing the following points about what to 
do about it.
    One is to make our companies more effective by helping them 
deal with health care costs so they are paying not only for 
their own employees and their dependents but for other people's 
employees and dependents by cross-subsidizing the 15 percent or 
so in the workforce who are not insured.
    I am certainly hearing we need a thoroughly skilled 
workforce, not just coming out of the traditional school system 
but reskilled and retooled throughout one's career. I am 
hearing from Mr. Trumka and my constituents that we need to 
empower workers to decide freely whether or not to collectively 
bargain and bargain their fair share of productivity growth and 
growth in the economy.
    I want to touch with my questions on the health care and 
education points. Starting with education, Dr. Karoly, if I 
could ask you, you make a very persuasive argument that two of 
the three keys you identify are the skills of our workforce and 
the ability to retool mid-career.
    If I were to tell you that my proposal was to reduce 
Federal investment in education by 15 percent in the next 5 
years, how would you evaluate the wisdom of that proposal?
    Dr. Karoly. I guess I would want to know what specifically 
you would take the resources away from.
    Mr. Andrews. I would take them away from vocational 
education programs and the Perkins program and put them more 
toward K to 12.
    Dr. Karoly. I would argue you may even want to put more of 
the resources into pre-K. One of the things that we are seeing 
when we look at the K to 12 education systems in areas where it 
is not doing well is that many of the education gaps are 
actually present when children begin school.
    Mr. Andrews. What do you think about the notion of reducing 
by 15 to 20 percent what we invest in education?
    Dr. Karoly. Overall, when you talk about education and 
training, I think the issue is going to be whether or not there 
is a substitution toward other investments. I think, 
ultimately----
    Mr. Andrews. Let's assume there isn't.
    Dr. Karoly. Ultimately, I think that investments in 
education and training are key, and we have to think about 
those investments as coming from both the public and the 
private sector, and I think I would argue that now is not the 
time to be de-investing in that area.
    Mr. Andrews. I agree with you, and that is exactly what 
President Bush has proposed. In fiscal 2008, he has proposed 
$38.5 billion for Federal education programs. By fiscal 2012, 
that rises only to 38.6 billion nominal dollars, which is a 15 
to 20 percent real cut in education.
    I am astonished by that policy judgment, given what we have 
heard from the witnesses this morning, and I assure you we are 
going to work to reverse it.
    Dr. Feder, I want to ask you about the idea of subsidizing 
people who don't have health care. I think you have correctly 
identified the problem. One of the problems we have to identify 
is, if we have an employer-based health care system, which I 
favor, I think it works and I don't want to switch to an 
individual-based system. I think if people choose to do that, 
that is fine, but I think employer-based health care still 
makes the most sense.
    Do you agree with the proposition that there are some 
employers who cannot afford health care, that if they were 
forced to pay for it, they would go under, but there are other 
employers who could afford to pay for health care but have made 
a judgment not to? Do you think that is a fair description of 
the situation?
    Dr. Feder. I think that is fair to say that there are 
employers who could pay. They are hiring workers at low wages 
and giving them lousy benefits, and they are able to get away 
with it.
    Mr. Andrews. Would you suggest that we should consider a 
system where we mix a mandate for some employers who could 
afford to pay for health care together with a subsidy for those 
who can't afford to pay for it? And if we did such a thing, 
where we would draw the line between the two? What is your 
suggestion?
    Dr. Feder. I think that you are thinking along the lines of 
essentially sharing the responsibility for financing with 
employers and probably others as well.
    Mr. Andrews. I am.
    Dr. Feder. I think that that makes considerable sense. I 
think the area to pay particular attention when you require 
coverage and then provide subsidies is to look at the employers 
of low-wage workers, particularly small employers of low-wage 
workers. Because you want to be very careful that you are not 
undermining the ability to pay wages or to offer jobs.
    Mr. Andrews. What do you think of the use of measurement 
for net profit per employee as a way of drawing the lines 
between those who could afford to insure and those who could 
not? Do you think that is a reasonable measure?
    Dr. Feder. I would have to look forward, and I would be 
happy to. My biggest concern that I would have is that we not 
put burdens on low-wage workers or firms with low-wage workers 
and make them worse off, not better off. So that has been the 
way I have historically looked at it, but I am happy to work 
and explore other options.
    Mr. Andrews. I thank the panel very much. Thank you.
    Chairman Miller. Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman. Thank you for holding 
the hearing, and I thank the witnesses for being with us today. 
It has been fascinating in the last couple of hearings to 
listen to the sort of back and forth about what is going on in 
our economy and how we are doing. And, of course, we have seen 
large macro numbers about record low unemployment and the 
tremendous number of new jobs created and record homeownership 
and record high in the stock market, and yet we hear some 
compelling testimony, some anecdotal and some not, about some 
people in our great country that are feeling a squeeze.
    Let me turn to you, Mr. Trumka. We have got this issue 
coming up on the so-called Employee Free Choice Act, and it 
astounds me that you can testify that, ``The system has to be 
changed to give all working people the freedom to make their 
own choice about whether to have a union.'' and yet what you 
are proposing would take away from all of these union members 
the right to privacy and the right to vote with a secret 
ballot, which is pretty much engrained in the American system.
    Is it the position of your union leadership that this 
should be a process that is open to all and subjecting those 
workers to possible intimidation from other union members or 
organizers or their employers? Is that your position that you 
want to do away with the privacy of the secret ballot?
    Mr. Trumka. Implicit in your question is the notion that 
the current system actually works. The current system is 
failing miserably. It is not democratic for a worker to come to 
work and be put into a room with his supervisor and questioned 
inquisitively by himself without a representative about the 
union movement and about something he would like to do.
    It is not very democratic for one out of four employers to 
fire somebody because they would like to have a representative 
on the job. And it is not democratic for people, for 78 percent 
of the employers to force their supervisors to go and question 
all of the workers about their intention.
    Mr. Kline. Excuse me, if I could interrupt for a minute. My 
time is very limited, Mr. Trumka. I am sure that the chairman 
is going to hit the button when we go to the red light.
    I am looking at some statistics and trying to understand 
how you have reached this conclusion that it is in the interest 
of these workers to deny them the privacy of the secret ballot. 
I have some statistics here showing some polling, some from 
Zogby, going back as far as 2004 that 53 percent of union 
members nationwide state that the fairest way for workers to 
decide whether to unionize is for the government to, quote, 
``hold a secret ballot election and keep the workers' decision 
private.'' Seventy-one percent of union workers agreed that the 
current secret ballot process is fair. 78 percent said Congress 
should keep the existing secret ballot election process.
    So how are you reaching the conclusion that all of these 
union members are wrong and that they would be subject to less 
intimidation if they had to say in public whether or not they 
were going to support a union?
    Mr. Trumka. Many of those union members have never been 
subjected to an organizing drive. They had a union at the 
facility that was there when they came there.
    Second, I can pull out and show you the statistics that 
20,000 to 25,000 workers every single year are fired. Their 
crime, they wanted to have a union. They wanted to have more 
voice on the job.
    There is also statistic after statistic to show the 
imbalance of power between an employer. When an employer sits 
an employee down in the room and starts to ask them about their 
intentions about signing a union, that is not very democratic.
    It would be like me being able to take the average American 
off their jobs and say: Who are you going to vote for for the 
President of the United States? And by the way, I vote for this 
or that candidate, and I think you ought to do the same. There 
is a total lack of democracy.
    If the system worked as well on the job as the system works 
in the country, perhaps you could consider that, but it 
doesn't. Those workers when given the facts or when they face 
an organizing drive, those statistics shift dramatically.
    I would ask you to poll the people who have gone through a 
drive and have been intimidated, been harassed, been followed, 
been photographed, or been fired by their employer, and see 
what the statistics show then.
    They believe that the current system is broken; that it 
doesn't work and it needs to be changed dramatically. If you 
want to address the wage gap in this country and the growing 
share of inequality in this country, one of the fastest ways to 
do that is to sit down and let people have a free choice about 
having a union.
    I will tell you a story. My wife comes to me and says she 
wants to do something. And if I simply say no, well, you can 
imagine what would happen. My wife would do what she wanted to 
do because we are of relatively equal bargaining power. My 
young son comes to me and says I want to go to Jamaica, and I 
say no. He has no recourse. That is because the bargaining 
power is so disparate. What we are trying to do is equalize the 
bargaining power so you have a system that works for everybody 
and shares the benefits of a solid economy to every working 
American.
    Mr. Kline. How do you get to that agreement to unionize, 
and you are proposing that this be done in a way that could 
subject those workers to intimidation, perhaps by union 
organizers?
    Mr. Trumka. They are being intimidated now. Every single 
day.
    Chairman Miller. We will be able to continue this 
discussion in our hearing tomorrow.
    Mr. Kline. I am looking forward to it.
    Chairman Miller. I would just say, so the record is 
accurate, that the majority sign-up is allowed under existing 
law. It has been allowed since 1935, and it is the same way as 
if you petition for an election. You have to have 30 percent of 
the people sign for an election. The majority sign-up, same 
process. The only difference is that the employer today can 
veto it. It has been in the law since 1935. It has been used 
many times, but it is all out of whack.
    Mrs. McCarthy.
    Mrs. McCarthy. Thank you, Mr. Chairman.
    Let me state that I know everyone is concerned about health 
care, but after 10 years of being here, at least we are talking 
about it seriously. I think that is an important step.
    I have doubts whether the Federal Government personally can 
actually solve the health care crisis that is in this country, 
but I am excited that the States are actually looking at what 
fits for their individual State. I know the Massachusetts plan 
would never fit New York. I am hoping that the California plan 
might work out because we are more in tune to each other as far 
as population diversity. But it is a start. I think we have a 
long way to go. Let's hope maybe the best model will come out 
and then we can assist those States because looking at Medicare 
and Medicaid, I personally feel that New York and some other 
States are not getting their fair share. So we are being 
disadvantaged on that. So I am hoping we can solve that 
problem.
    But going back to the squeeze on the middle income 
families. I live on Long Island. I make a very nice salary 
working here, more than I made certainly ever working as a 
nurse. I can tell you that my son and his wife, they work. They 
make a decent salary, probably earn $120,000 between the two of 
them, and they are struggling. They don't go out. I baby-sit if 
they want to go to a movie once in a while. They go food 
shopping. And gas prices, heating oil prices, everything else 
has gone up tremendously. Their salaries have not kept up to 
what is going on.
    We just had a report which we do every year called the Long 
Island Index. Long Island is considered a very wealthy area. 
Our salaries are higher nationwide than some other areas. But 
with annual wages on Long Island currently only 5 percent 
higher than the rest of the country, and yet everything else 
has gone up higher, I am hearing from all of my constituents 
that they have the squeeze.
    But two questions. Mr. Trumka, with our unions, and full 
disclosure, my brothers are in unions. I came from a union 
family. Are you seeing even with your union families, even with 
the negotiations of your pays and health care, if their 
salaries are going up as far as inflation or cost of living for 
where those workers live?
    Mr. Trumka. Union families are feeling the same squeeze as 
everybody else. Their salaries have been stagnant even though 
their productivity has gone up. As the chairman said at the 
beginning of session, more and more money goes towards health 
care, a problem that is broke.
    More and more companies are using the bankruptcy laws in an 
offensive manner to get rid of health care costs that they have 
promised to people, and thus the dumping of a bigger load onto 
workers. More and more work companies are dumping their 
pensions or cutting the amount of pension that was negotiated 
in pension plans down and dumping that onto employers.
    So as I said earlier, we can't solve that problem of health 
care at the bargaining table. All it does is shift money around 
from one side of the table to the other. And normally in this 
situation the worker ends up with a whole lot less. We have to 
solve that problem. We have to solve the problem with pensions 
and the bankruptcy laws. And we have to bring a voice to more 
workers so they can negotiate and actually grow a company and 
help that company grow.
    Mrs. McCarthy. Ms. Karoly, I was interested, on page 6 of 
your testimony you had a couple of paragraphs that basically 
talked about college education going back from 1940 to 1980 
where competing colleges, those going to college rose from 6 to 
24 percent. And since 1980, there has been a slowdown in that 
trend, and that you expect the rate of increase in the next 
several decades to be slower than what was experienced in the 
past several decades. That doesn't sound good for our country, 
to be very honest with you.
    My question would be: Do you know why there was a slowdown 
that started in the 1980s? Why is there a slower rate of 
increase in the next several decades?
    We are going to be reauthorizing the Higher Education Act 
and Leave No Child Behind this year, and our focus will be on 
college access. How do we address your projections of slower 
rate increases? That is worrisome.
    We went to China last year, and we see these other nations 
investing in education. But I am going to stand up for my kids. 
I say yes, we are still behind in math and science, but our 
kids are still innovative and can think outside the box because 
they have a well-rounded education.
    Can you answer quickly?
    Dr. Karoly. Let me try to answer first about why things 
have slowed down. Partly why they grew so quickly during the 
period after World War II was as the baby boom cohorts began 
entering the labor market, they were one of the most educated 
cohorts compared to the cohorts they were replacing. So the 
workers retiring were much less apt to have a college 
education. The baby boom cohort was much more educated.
    So you had workers leaving with less education and workers 
coming in with more. That led to this boom toward a more highly 
educated workforce.
    What we are seeing today is that while it may be the case 
that the upcoming workers are somewhat more likely to have a 
college education than those in the past, the cohorts are not 
as big anymore, and the cohorts that are retiring are seeing 
that educated baby boomer cohort starting to retire. So things 
have evened out. There is not as much of a gradient over time 
in the proportion getting a college education and the relative 
sizes of these groups.
    So there are different projections. Some suggest a complete 
stagnation in the proportion of the workforce that would have a 
college education, others suggest a somewhat growing proportion 
but not nearly as fast as in the past.
    A key issue is what do we need to do to encourage more 
individuals up and coming to obtain the skills they will need 
for the workforce, whether that is through a formal college 
degree, it may be vocational technical training. And we need to 
look all the way through our education system, the K-12 and 
even preschool system. We need to look at what we can do along 
the way to foster skill development and to encourage continued 
education and training throughout the life course.
    Mrs. McCarthy. Thank you.
    Chairman Miller. Mr. Davis.
    Mr. Davis of Tennessee. Thank you, Mr. Chairman. I 
appreciate the opportunity to be here today.
    Just to let you know where I come from, I have been a small 
business owner for about 20 years. I have been in health care 
for almost 30 years. I am a registered therapist by training, 
and I have been in health care. I think that is one of the key 
issues facing America.
    Dr. Feder, I would like to ask about associated health 
plans. I know this committee is taking the lead. I don't think 
it is the total answer, but I think it is an answer to help 
small businesses band together.
    Most small business owners want to do the right thing. They 
want to have an educated, healthy workforce. What is your 
opinion on associated health plans? Don't you agree that they 
do have a place in the economy today?
    Dr. Feder. Mr. Davis, I definitely understand the desire of 
small businesses to find what I referred to in my testimony as 
a place to buy or a way to buy that enables them to participate 
in getting their employees health care coverage.
    The approach with association health plans is that it does 
so in a way that actually perpetuates and extends the ability 
of insurance companies to select the people to cherry pick, to 
select the healthy and avoid us when we are sick by eliminating 
the application of State insurance rules that in many States 
prohibit that kind of behavior.
    So I definitely share the concern about enabling more 
effective purchasing, but I am afraid that the association 
health plan approach is taking us backwards, not forward.
    Mr. Davis of Tennessee. So if the private economy is not 
the answer, what is your answer? Help me understand where small 
business owners and the employees which really make up about 70 
or 80 percent of the economy today are small businesses, where 
would you like for that health care to come from?
    Dr. Feder. I did not mean to say that I am not supportive 
of small employers' willingness and desire to participate in 
the system. But going back in the way in which we create it, I 
believe we need national policy action that creates that place 
to buy, along with appropriate subsidies for those employers, 
if we go that way, of low-wage workers, a place to buy that 
allows the employer to contribute, the individual to 
contribute, along with some public subsidies, but that does so 
whether through employment or any other kind of market for 
health insurance, does so in a way that makes insurance 
available to all of us regardless of our age or health status.
    Mr. Davis of Tennessee. You talk about significant 
subsidies for people to help them obtain health insurance, yet 
you also talk about establishing a reasonable mandate or 
requiring people to obtain health insurance at a price people 
can afford. That seems vague to me. You talk about broad 
issues. Can you elaborate what you mean by ``reasonable 
mandate''?
    Dr. Feder. What I was particularly concerned about in my 
testimony was to challenge the proposals that simply rely on 
mandates requiring individuals to buy coverage without adequate 
subsidies because I think the truth, to put it simply, you 
can't get truth from stones. And to ask low wage workers, just 
to require them without considering affordability is a very 
real problem.
    When I look at it, I was saying to expect people to pay 20 
percent of their income toward the cost of health insurance or 
even 10 percent toward the cost of health insurance is viewed 
by the experts in the field as a catastrophic expense, and most 
people haven't even gotten sick yet.
    So I think we have to look at obligations of capping out-
of-pocket obligations and premium obligations relative to 
income and keeping those obligations in reasonable realms.
    Mr. Davis of Tennessee. So you feel like these mandates 
should be set within the Beltway here on Capitol Hill?
    Dr. Feder. I wouldn't characterize it quite that way. I 
think we elect Members of Congress to represent us, and I am 
pleased to see we are moving toward developing a national 
health policy that will work for all of us, and I believe we 
can do that.
    Mr. Davis of Tennessee. You also talk about determining 
what people can afford. How do we determine that? How and who 
makes that determination?
    Dr. Feder. I meant to indicate that earlier in terms of 
looking at people's obligations, in terms of ability to pay. I 
think having obligations, whether it is premiums or limits on 
cost sharing, that are set and have some relationship to 
people's income. We can do that through subsidies and in a 
variety of ways.
    If we simply require what is generally referred to as an 
individual mandate to buy coverage and ignore people's incomes, 
we are expecting the impossible for many people.
    Mr. Davis of Tennessee. Thank you.
    Chairman Miller. Mr. Hare.
    Mr. Hare. Thank you, Chairman Miller.
    Mr. Trumka, I am a strong supporter of the Employee Free 
Choice Act. It is my opinion that this will allow ordinary 
people the right to be able to do what they should be able to 
do, which is vote, whether or not they want to join the union 
or not. And also, the most important thing is once they do, we 
will be seeing significant increases in their salaries, given 
what organized and different unions have been able to negotiate 
in health care and pensions. So it is my hope that this bill 
will come up soon and we will have an opportunity to let people 
have the basic right that they have.
    Let me tell you, I have been involved in organizing drives. 
You are right, they are brutal. Unless you have been through 
one, it is awful hard to relate.
    But my question is on trading. I was president of a 
clothing and textile workers local union, and a steward there 
for over 13 years. And as you know, we nationally lost 
thousands and thousands of jobs on trade. If you look at 
textile or steel or electronics, it is hard to have health care 
when you don't have a job.
    I was wondering if you could tell us from your perspective 
what we can best do to level the playing field? You talked 
about trade negotiations. What can we do to give Americans a 
fighting chance so we are not always left with the take it or 
leave it trade that comes to us where we know we are going to 
lose manufacturing jobs. People say I am a free trader. Well, I 
also want to see fair trade. Can you comment on that regarding 
what you would like to see us do in the issue regarding trade?
    Mr. Trumka. First of all, I would urge you to read my 
written testimony because there are several pages that deal 
with trade and what needs to be done with it. I think to 
summarize it very, very quickly, we need to have a strategic 
pause while we look at and review all of the trade agreements 
that we have gone through to see where they are working and 
where they don't work and what doesn't work about them, and 
then reform those processes.
    I think we also have to have Congress far, far, far more 
involved. The President asked for an extension of fast track, 
and his idea was to negotiate a trade agreement, bring it up 
here and put it in front of the Congress and say vote it up or 
down. However, many, many of the negotiating objectives urged 
and mandated actually upon him aren't fulfilled in those 
agreements.
    So we think you need to be far more involved in that 
process. We need to look at the agreements themselves. If you 
look at it currently, there are four or five sections that I 
mention in my testimony that need to be reviewed carefully. If 
you look at our labor advisory reports for each one of those 
bills, which we will be glad to submit to you, they talk about 
the shortcomings in every one of those bills and ways to remedy 
them.
    We think trade can be a good thing, but it is currently not 
working for American workers. We think those bills should 
include workers' rights provisions, environmental provisions, 
and they should have a mechanism that is equal to that of all 
of the other provisions in the trade agreement.
    Mr. Hare. One other quick question. I understand from 
talking to a lot of people in the labor movement that the 
toughest thing they have to negotiate when they go through the 
collective bargaining, and I know I had it, was the whole issue 
of health care. Employers are just absolutely saying this is a 
deal breaker for us. We are simply having a very difficult 
time. So it would seem to me that we better be doing something, 
looking at some type of a national health care system or 
reforming what we have. We get to the 11th hour of negotiations 
and it never seems to hinge on pensions or salaries, it always 
seems to be health care as the single most important issue that 
we have to try to struggle to get through.
    Mr. Trumka. There is no question that health care is the 
topic of bargaining between employers, and it is either for 
active or for retirees as well as legacy costs. You are right, 
it is part of the solution.
    Too frequently when we have a discussion like this, we talk 
about trade or bargaining. There are actually several solutions 
that need to take place. You can't solve the problem of wage 
stagnation if you don't solve the problem of unionization or 
giving people the right to join a union. You also can't solve 
the problem of wage stagnation if you don't do anything about 
health care and pensions, which brings in the bankruptcy laws 
and a number of other things that are being abused.
    It is a whole series of solutions. And if you look at the 
testimony that we have submitted in general, it tries to bring 
all of those together.
    Mr. Hare. Thank you, Mr. Chairman.
    Chairman Miller. Thank you. Ms. Clarke.
    Ms. Clarke. Thank you very much, Chairman Miller, and to 
the panelists. This is great substantive presentations that you 
have given to us today. I am a new member here, and I believe 
we are embarking on a whole new vision of what our Nation needs 
to do in order to sustain and build the next generation. These 
conversations are very, very important.
    My question is to Mr. Archey. I like your just-do-it 
philosophy. I think we spend a lot of time spinning out reports 
that really have the substance of what needs to be done, but 
the political will to do it is the challenge for us.
    I would like to ask about the attention that is being given 
to math, science and engineering. This is a no-brainer. We know 
that if we can build a workforce that is prepared in those 
areas, we can make strides.
    How do you do that in underserved communities, communities 
of color, in particular, where you have a reservoir of human 
resource, but you have a dearth of qualified teachers that 
don't spend enough time in the classroom for students to even 
get to know their names?
    How would you begin to get companies to see this reservoir 
of human resource as a way in which to build a stronger 
workforce going into the future? Do you have any suggestions on 
that?
    Mr. Archey. Well, first of all, Congresswoman, I think some 
of the problems of teaching transcends minority and poor 
neighborhoods. It is also a problem in white neighborhoods. 
There was a study by the Department of Education that only 41 
percent of teachers in high school who teach math and science 
ever majored in it. This is an issue.
    I think one issue has little to do with public policy, it 
has to do with the fact that we do a pretty good job as a 
society of making math, science, and engineering pretty awful. 
I have contended for many years that one of the reasons more of 
our kids don't take math and science is because it is hard.
    Secondly, not only is it hard, but we create this aura. 
Take a look at an engineering school's brochure or their 
catalog. You will see in probably about 40 percent of the 
engineering schools' catalogs bragging almost about how many 
people aren't going to make it through the program, and then we 
wonder why a lot of kids don't end up taking it.
    We have to do something, and I have said this many, many 
times before. When we had a national television program, L.A. 
Law, about 10 years, I contended what we needed was another one 
that was L.A. Geek. What we have to do is, and I think the 
chairman knows about this because he has a number of high tech 
companies, but the fact of the matter is what high tech 
companies do is really interesting stuff and it is a sexy 
career. But we make it into this drudge that makes it very 
difficult. We make that for people across the socioeconomic 
status.
    We have been doing some discussions with some people out in 
California about this whole notion of we need a national TV 
program, a situation program or a weekly program that really 
espouses the highs of working in high tech using math and 
science.
    People say how can you dare to make that interesting, but I 
think you can make it interesting.
    Ms. Clarke. I agree. As a young student in a public school 
in New York City, the science fair is what we used to look 
forward to. It is not that kids don't get into it, it is all in 
the presentation. We used to look forward to science fairs in 
my public school, and certainly that is what opened up the 
whole world of education for many of the students. I don't know 
if they still have science fairs any more.
    I want to thank you for your response, and I recognize 
where we have a challenge with our teachers, but I tell you it 
is compounded when you get to communities of color. It is 
really compounded. We have to look at how we are going to 
address that in a very substantive way.
    I would also like to address to you, Mr. Trumka, and I am 
running out of time, but we are really looking at the future of 
labor right now. We had an occasion this weekend just to come 
together as Democrats, and we had some wonderful presentations. 
Some of the challenges had to do with labor of yesterday and 
labor of today.
    I happen to believe that a lot of the challenge has been 
that those who benefited from the labor movement did not pass 
their history on to the next generation so that they truly 
understand what that has meant for building the middle class, 
for catapulting many young people into professions today 
because their parents were part of a labor movement that looked 
out for the entire family and hence the entire community.
    As we move forward to deal with the Employee Free Choice 
Act, how can we make it so that it becomes a public 
conversation, not just the worker and the employer, but the 
community as a whole? I believe if we are going to build and as 
we build the new dimensions of labor in this country, that it 
has to engage folks who are not even employed yet so they 
understand the value and the sacrifice in the building of labor 
in this Nation.
    Thank you very much, Mr. Chairman.
    Mr. Trumka. There is no question. The best kept secret is 
the war being waged on workers right now and their right to 
join a union and have a representation. We have failed to get 
that out.
    We failed because, one, labor is no longer taught in the 
schools. It has been cut out of the curriculum. We as labor 
members perhaps spend less time with our loved ones passing on 
that heritage, so some of the blame is with us as well.
    The public debate starts right here with this committee, 
with the television and the Internet. Here are the facts, let 
us discuss that, not pretending that a system that is broken is 
working perfectly when 25,000 people a year get fired.
    Chairman Miller. Mr. Holt.
    Mr. Holt. Thank you, Mr. Chairman.
    Mr. Trumka, thank you for your testimony. I too support the 
Employee Free Choice Act. I think it is a critical step in 
moving our Nation into a 21st century understanding of 
relations between management and workers to get to the point 
where unions are not the exception but the normal. We have got 
to overcome this idea that it is a zero-sum game and that if 
one side wins the other side has to lose.
    I have been involved in organizing. I have also sat in and 
seen the other side where the anti-union consultants come in 
and plan the strategy to demolish the very idea of unions. It 
is, I think, very damaging for our country.
    Certainly when you recognize the advantages that come to 
union workers of better wages and better access to health care 
and better access to pensions and better access to disability 
benefits and better workplace safety, although I am sure you 
will agree with me, in the case of mining we need to do better 
in workplace safety, I think we want to get to the point where 
collective bargaining units are the normal rather than the 
exception.
    There are a lot of issues rolled into today's hearing, and 
I would like to quickly get to two of them that I think really 
are related. One is how U.S. companies are at a competitive 
disadvantage with respect to providing health care, competitive 
disadvantage to other countries, and there has been some 
discussion of that.
    We clearly want to get away from and we soon will, I 
believe, restrictive employer based health care coverage. So 
many of the problems we face can be traced to that.
    The other is what we were talking about with regard to 
science education. As one who continually espouses scientific 
thinking as a scientist myself, and who is a sometimes judge in 
science fairs, yes, they still go on. I would like to address 
the lack of broad-based science education. This is how these 
two are related in being broad based. This is what I wanted to 
ask Dr. Feder and Mr. Archey: Is the lack of broad-based 
science education, the lack of broad-based health care coverage 
hurting our productivity and hurting our competitiveness? The 
idea of science education for all?
    Mr. Archey. You are talking about not a particular element 
or segment of science, but rather a general knowledge of 
science; is that what you are suggesting?
    Mr. Holt. Yes. It seems to me that productivity growth 
depends on all of the workforce having skills. It is not just 
getting 10 percent well educated to be internationally 
competitive; and similarly for health care, not just having 
some of the industries competitive, but having an expectation 
across our society. That is why we are talking about the middle 
class these weeks.
    Mr. Archey. I not only concur with what you are suggesting, 
but I have a son that is a sophomore in college and one of the 
points I used to make to him in high school was, son, when I 
was in high school if I knew a little bit about science and 
things like that, it was okay, but it wasn't particularly 
important because there were lots of other things I could do.
    I said the point for you is that you have to understand 
science to understand your life because of the way things are 
moving so rapidly in terms of changes in technology, 
innovations and understandings of science. So I think that is 
the case.
    The one point I would make which I alluded to earlier, you 
would be amazed now at high tech jobs the number of people 
without a college degree of what other skills they have to have 
in terms of mathematical reasoning skills, certain basic 
scientific skills. These are very well-paying jobs, many of 
whom by the way have an associate's degree from a community 
college.
    One last point on that, probably the most innovation going 
on right now in terms of education is at the community college 
level, and I have a feeling it is because of the fact that they 
are not hung up on all of that other stuff that 4-year schools 
are in terms of academic prestige and all that stuff. Mr. 
McKeon mentioned that about a community college in California.
    Middlesex Community College up in Massachusetts has been 
the contractor for Raytheon for their workforce for years; and 
last I knew, they were pretty pleased with it.
    So I agree, it has to be across the board. There are 
certain skills and areas in high tech that are going to require 
intense skills in physics and intense skills in terms of 
electrical engineering and things like that. But anybody now 
who is coming into the high-tech industry better have that 
broad-based science background.
    Dr. Feder. I will reinforce what you have said about 
everybody having to have it. We talk about the problem of 
health care costs creating competitive problems in a number of 
ways. But it seems to me what we want to highlight is that the 
problem of limiting health insurance to some jobs is what we 
referred to earlier as job lock, and the inability of people of 
all kinds to explore whatever job works best for them, or 
economic activity, including freelancing. My husband went from 
the CIA to the sausage business. He is a retired Fed so we have 
benefits, but what we want to do is encourage that kind of 
flexibility. That means everybody has to have coverage.
    Mr. Holt. I want to note that Mr. Archey could have equally 
well talked about Middlesex Community College in New Jersey.
    Mr. Payne. Mr. Chairman, as a matter of fact, my grandson 
attends Middlesex Community College in New Jersey, so it is all 
connected.
    I got nervous when I heard about Mr. Miller's Employee Free 
Choice Act. We have been getting so many free trade agreements, 
when this came across my desk initially, I wondered what was 
George doing. But then I looked at it again and saw it was an 
Employee Free Choice Act. That is a good change in my opinion.
    Mr. Trumka, your union has pretty good family leave, people 
could take off and they got paid. Health insurance is covered. 
They say it is not the Cadillac like those of us who have it, 
but it is enough to keep people going. How is it that they are 
able to continue to have pretty good wages and benefits and so 
forth in Western Europe when we cry about the fact that we 
can't provide health care to our people, the medical leave bill 
is shoddy, needs repair. Some people don't even respect it. 
What is the difference? I am not talking about Colombia or 
Indonesia, I am talking about comparing us to Europe.
    Secondly, I would like the educators, if somebody could 
answer the question about this business about vouchers. The 
only people that seem to be pushing vouchers in my community 
are people that don't live in my community. In urban areas we 
have poor schools. There is no question about it. My goal is to 
try to improve the schools. Like Ms. Clarke was saying, in her 
day they had science fairs and people were doing a better job. 
I am wondering, the voucher people all live in suburbia 
somewhere and are forcing this voucher business on people. 
People are so frustrated because the public schools are 
failing, we know that, and so they are willing to buy anything. 
However, this country was not built by private schools. We 
always had them, we always had parochial schools. However, the 
public school system is what made the United States of America 
different from any other country in the world. Once we scrap 
that for some of these hybrids, we are going down the tubes 
even more quickly than the statistics say we are going already.
    So Mr. Trumka first on the question about benefits.
    Mr. Trumka. I will try to answer a seminar question in 30 
seconds or less.
    First of all, those countries, most of them, health care is 
not part of the cost of the product. It is a national cost. It 
is supplied to every one of their citizens. So they don't have 
to add onto their product.
    Second, none of those countries had their legislative 
bodies pass a law that said that their government can't 
negotiate prices down from drug companies as our country did 
here, which allowed them to continue overcharging and we have 
the mess where you can go to Canada and get drugs for half 
price.
    Second, they focus on wellness, not just fixing a problem 
after it occurred. They focus on preventing a problem from 
happening, so they get better success rates than we do in the 
United States. They live longer. Our system is really broken in 
a lot of different ways. I would like to be able to continue 
on, but I will pass the baton in your short time.
    Mr. Archey. Congressman, I have no magic bullet answer. On 
the issue of vouchers, some of our companies think it is great; 
and some think it is not great. I have views as a private 
citizen about it, but that is for another discussion.
    Dr. Feder. As a dean of a policy school, not a health 
policy expert, I would say about education vouchers, and relate 
them to the discussion of health insurance, there is a 
similarity in the two of a desire that say we fix the system by 
sending people shopping, and when you send people shopping what 
you do, whether it is education or health care, you end up 
taking apart that ``all in it together,'' whether it is the 
public schools or employer-sponsored health insurance, or 
whatever it is that brings us, high income, low income, 
whatever color we are, whatever money we have, brings us 
together and you end up in a situation in which there is a risk 
of a lot of cherry-picking and discrimination and 
disadvantaging many while advantaging some. I think that goes 
across the board.
    Chairman Miller. Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    First of all, Mr. Trumka mentioned that it has been a 
secret, the attack on the American worker, and I think to some 
degree that is true. And it is hearings like this that focus on 
the middle class that I think are going to bring that secret 
out and tell the story. So I am excited about the series of 
hearings we are holding on the middle class. The middle class 
really is the story of America. That is the story of America, 
the story of the growth of the middle class in this country.
    I spent 18 years in the health care arena working with 
nonprofit hospitals and senior-living providers and others, and 
navigated the maze of regulations that apply to health care; 
and I have lived to tell about it, barely.
    I have a question about health care. I believe increasingly 
you are hearing a universal desire in this country for 
universal health care coverage. It is coming from all quarters. 
There is really a consensus there, and it is more about how do 
we get there, not whether we get there. There are two huge 
components to the puzzle, pieces to the puzzle. One is the sort 
of top heavy administrative structure that exists. It is 
different in the Medicare program, for example, Medicaid, but 
as you know, the high, high administrative costs in the 
commercial arena where there are whole divisions of companies 
dedicated to denying payment.
    The second is our system being weighted on the back end, 
and there is not enough delivery of preventive care on the 
front end, and that would save a lot of money. My question to 
Dr. Feder, addressing this chicken and egg problem, can we move 
to a more preventive care oriented system with all of the 
savings it offers before we establish universal health care 
coverage, or do you think we have to get the universal health 
care coverage and access first before we can really explore the 
potential for a system that is focused more on preventive care? 
Is it some combination? Where do we start with this?
    Dr. Feder. I think we can do them both together. I don't 
see any reason that we have to do one before the other, and we 
need them both.
    I talked about the adequacy of benefits when we talk about 
a universal coverage system or a proposal. Part of that is 
whether in the insurance package or in some other way we have 
got to have the benefits for preventive and primary care in 
order to keep people healthy and not have them get sicker and 
require more expensive services, and that there is no reason 
that that can't be part of a proposal for universal coverage.
    By the same token, you can't wait for universal coverage 
because we are all hurting, as you have heard, and you have to 
do them both together.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    Chairman Miller. Thank you. Ms. Shea-Porter.
    Ms. Shea-Porter. Thank you, Mr. Chairman. I apologize for 
being late. I had to be somewhere else at the same time.
    Mr. Archey, I have heard you talk about science and 
technology and the need for education. I absolutely agree with 
you, but I also know that we have problems with reading and 
writing and basic comprehension in this country. Everybody 
won't be able to go into science, but everybody has to be 
proficient in our language. Have you found that to be a 
problem? People who understand the science but are having 
difficulty with English and communicating inside businesses and 
if that is holding us back?
    By the way, I completely support community education. I 
think you are right where our focus needs to be for education.
    Mr. Archey. This has been a problem for some of our 
companies. A lot of our companies, and it is not for the 
immigrant community but for American high school graduates, 
there are remedial reading programs and some remedial writing 
programs that are sponsored by the companies themselves. That 
is not uncommon at all.
    I mean, I think when we talk about math and science 
education, I am certainly not suggesting that is to the 
exclusion of all of those others because you are not going to 
get very far if your reading skills are not very good, and you 
are not going to get very far in science if your reading skills 
are not good, either.
    Ms. Shea-Porter. Is that contributing to our problem of 
staying competitive? When we talk about being competitive with 
other nations, is our lack of proficiency and inability to 
communicate with written skills and organizations hurting us?
    Mr. Archey. It is a part of the same, if you will, schtick 
about making this happen. You know, I think the proficiency on 
the reading stuff has actually gotten better over the last 2 or 
3 years. I don't know if that is going to continue or not. You 
have to have it. It is fundamental to having a good job and to 
being successful.
    Ms. Shea-Porter. It is encouraging to hear you say you have 
seen an improvement.
    Community colleges are doing wonderful work. I worked in 
one myself. But I think a 4-year college, and I hope to see the 
emphasis, whether people go to a 2-year or 4-year, that it is 
necessary to round out somebody's education and somebody's 
understanding of the world by making sure that while we 
introduce the science and technology, and I am committed to 
this, truly committed so our kids can stay productive, but they 
also need to have an understanding of the world that they are 
in and analyze and extract the information they need. I 
encourage community colleges as well as 4-year colleges to put 
some of that extra stuff in.
    Thank you, Mr. Chairman.
    Chairman Miller. Thank you. Mrs. Davis.
    Mrs. Davis of California. Thank you, Mr. Chairman.
    I am sorry I missed the panel. I was managing a bill for 
the committee.
    I am going to take a totally different tact from what you 
have been talking about. I am very concerned about how we bring 
everybody to the table, an entire community and I am sure you 
have addressed this in some way.
    Do you have some thoughts about how we are able to transmit 
and support parents in the community so we can essentially be 
teaching them the skills that you would like to see in your 
workers, that you would like to see as students kind of tackle 
the complexities of science and math as well?
    We have seen repeated studies that the relationship early 
between parents and children is very important. I am tapping 
your expertise in a different area to see if there is something 
you would like to suggest that as we begin to work, whether it 
is No Child Left Behind, what is something you would say that 
is appropriate to really leverage the bounty that we have in 
people working with children at home and also with the 
community? We know about mentoring. What would you like to add 
to the discussion today?
    Dr. Karoly. Let me try to answer that. Since you are 
tapping some of our others areas of expertise, my research 
covers the age span.
    One area that we have been investigating at RAND for a 
number of years is looking at early childhood as an important 
period, to think about investing in children both from the 
standpoint of formal programs that children might participate 
in, but also the way in which we can work with families to help 
parents understand that important phase of development and 
improve the opportunities they provide for their children.
    We have looked at a number of different programs, including 
what you might call more formal parent training programs. Some 
of them are as simple as providing information to parents when 
they visit a pediatrician and providing them information about 
the importance of reading to their children or other ways in 
which to understand their behavior and development, and others 
that are more formal, bringing parents to specific classroom 
sessions to talk to them about aspects of development.
    And ultimately, all of those kinds of ways of thinking 
about investing in families, children and parents, are an 
important component of preparing children to enter school, to 
be ready to be successful. Those investments also I suspect 
will pay off in terms of parents' interaction with children as 
they continue at older ages, understanding the importance of 
their education and making those investments towards being 
successful workers.
    Mrs. Davis of California. I know it is a difficult and 
broad question.
    Mr. Trumka, how do we assist parents and assist community 
members and clergy, for that matter, to try?
    Mr. Trumka. First of all, whenever a family, a single 
mother, let's talk about a single mother or single father, they 
are working two or three jobs just to get by. I can promise you 
when they come home they are not going to be able to spend a 
lot of time helping their child do homework. They may, as my 
parents did, instill in them that an education is really a 
ticket out. But we have to look at the whole picture. We have 
to make it economically feasible for that parent.
    When you have a child whose parent is working a minimum 
wage job that hasn't been raised in years, and they are 
competing with other children who have a computer at home and 
they don't have a computer, they are disadvantaged. I think we 
have to look at the whole system, not just the parent because I 
think without the parent involvement, every study shows that it 
is far more difficult for the education, for the student to get 
the fulfillment and complete education they deserve.
    We have to look at the economic picture and figure out a 
way to help them, whether it is minimum wage, whether it is 
increasing their wages, whether giving them a secure 
retirement, health care, that ties into the overall problem.
    Mrs. Davis of California. I appreciate that. I am sure we 
would say that bringing people out of minimum wages and poverty 
level, even the middle class for that matter, lower middle 
class, would go a long way to helping young people be exposed 
to a whole range of opportunities.
    I am wondering is there a role in the workplace, even in 
teaching young people to be advocates of their own health care 
that could be pursued?
    Mr. Chairman, I am sure I don't have any more time but I 
wanted to throw that out and let you know I think it is an 
issue that we want to get our hands around. If kids are ready 
to learn and are learning, then all we try and do in math and 
science and other areas is not going to be applied.
    Thank you, Mr. Chairman.
    Chairman Miller. Mr. Platts.
    Mr. Platts. One or two questions to Mr. Trumka. I 
appreciate your statement, and I want to tell you on your 
comments regarding China, I share your concerns, especially on 
undervaluing the currency, and also the unfair trade practice 
of subsidizing by the Chinese government. In the last session 
we were successful in moving legislation through the House to 
allow us to impose countervailing duties on China for their 
unfair trade practices. Unfortunately, we couldn't get the 
Senate to take it up. Perhaps we will have better success this 
term, and also the currency legislation that you referenced.
    So I agree with you on China. I do want to raise a concern 
or question on the Employee Free Choice Act. I am a former 
Teamster member and worked my way through college and a little 
after college as a union member. I still have my withdrawal in 
good standing card, and I appreciated the opportunity that work 
and being a member of the union allowed me in college and 
after.
    My biggest concern about the piece of legislation is the 
decision of not allowing the employee's position on unionizing 
to be by secret ballot, in private. So it is an open system.
    I realize that the concern is about companies coercing 
employees and intimidating them not to vote in favor, but I 
think we have laws that if unfair practices are engaged in you 
can file a complaint to address that. Isn't the risk the same 
for the employee, the intimidation factor? If you know you are 
going to have to work side by side in this company, in this 
plant, and employees by your side know you were against 
unionizing, isn't that going to create a problem as well?
    Mr. Trumka. I wish you had been here earlier. We had a very 
good discussion on this.
    Mr. Platts. I do apologize. I have three hearings, and this 
is the third of three. I am trying to get to all of them.
    Mr. Trumka. We are figuring out ways to clone you guys so 
you can be everywhere at one time.
    Mr. Platts. My wife would tell you that would be a scary 
thought, to have more of me running around.
    Mr. Trumka. Implicit in your question is the fact that it 
assumes that the current system works, and the current system 
doesn't work. In one out of every four organizing drives a 
worker gets fire. You can imagine the dampening effect that has 
on free choice whenever one of your fellow workers who has been 
advocating a union gets fired and the only remedy they are 
going to get is their job back with maybe back pay in 4 or 5 
years. It is a great deterrent.
    They also get intimidated and harassed on a daily basis. 
But the weakness in your argument is you are willing to assume 
that the National Labor Relations Board can protect against the 
employers' harassment today somehow, but it couldn't protect 
against unions down the road.
    Mr. Platts. I am not addressing union misconduct, but the 
employee, the fellow worker on the plant floor and the 
warehouse floor where I worked.
    Mr. Trumka. You and I have both been on the floor. I grew 
up in the coal mines, and there are lively debates. People 
normally exchange information and they disagree but they work 
together every day. That is a normal process.
    That is just like whether they voted for George Bush or 
John Kerry. That same discussion happened every day. No adverse 
effects. They are probably better off for the discussion. 
Having a lively debate with your employees who can't fire you 
is a healthy thing, to say these are the good things about a 
union, and somebody says this is why I don't like a union. That 
is a healthy thing. People give information back and forth.
    It is far more democratic than the system we have today 
where the employer could call that same individual into a room 
all by themselves, sit them down in front of a desk with three 
or four supervisors and say: ``about this union stuff, what do 
you think? Now I'm not telling you what to do.'' they use all 
of the right code words.
    And then you have a National Labor Relations Board right 
now that is essentially a cadaver when it comes to protecting 
workers' rights. It has overturned scores of precedents that 
were designed to help workers. The system is stacked against 
those workers, and I can only say if you want real democracy, 
give us the Employee Free Choice Act. It is already authorized 
under the act. In 1935 it was authorized. But you want to talk 
about something undemocratic, the employer unilaterally has the 
right to veto whether you can use it or not.
    Make it so the employees can do something, have a voice as 
well.
    Mr. Platts. Having been on that plant floor and the minus 
10-degree ice cream freezer selecting ice cream and lively 
discussions, especially when you come out to warm up a minute 
or two, I agree that is a positive, including discussing 
whether to unionize or not, but do think it is different if you 
are discussing who you voted for or who you should vote for for 
President versus whether you should vote to unionize something 
that impacts you directly in that plant. I think that is a 
different type discussion. Those discussions should continue 
and are positive, but I think if there is problems in the 
system, we should be able to find a way to address the 
problems, and I would not disagree that there aren't problems, 
without taking away the fundamental process in a democracy, 
which is the right to vote in private, whether it be in an 
electoral of public officials or whether to unionize. My 
position isn't that we shouldn't look to improve and make sure 
the wrongdoing that is occurring in your opinion today and not 
being punished doesn't continue in the future, so we improve 
the labor laws but do so in a way that protects that 
fundamental right to privacy when you cast a vote, including 
the right to vote to unionize. I think we are kind of going to 
the extreme of taking away that in the name of improvement.
    Mr. Trumka. I would just add right now that the only people 
that have privacy in today's system is the employer. Employees 
have no privacy. They get spied upon, they get intimidated, 
they get harassed and they get fired and their only crime is 
they want do have a bigger say on the job so that they can have 
a little more dignity and little more respect, and they can 
approach a bargaining table as equals with an employer and make 
decisions that are ultimately good for both sides.
    Let me just say this because I think this is an important 
point, everybody espouses employee-employer cooperation. We 
need to work more carefully and closely with our employers in a 
global economy. And I have been an advocate of that over years, 
and I have put my bargaining power where my mouth was at as 
well when I did it. But under the current system the first 
encounter that we have is a knock-down, drag-out affair where 
the employer can harass, intimidate and fire people and then 
after having done that, say to you well, now let's cooperate. I 
would suggest there is a better way to do it.
    Mr. Platts. I would agree, and hopefully we can get to that 
better way without taking the right to vote in private. Thank 
you for your testimony. I apologize for my late arrival. Thank 
you, Mr. Chairman.
    Chairman Miller. Mr. Sestak.
    Mr. Sestak. I apologize. I also I had three, and I am sure 
these questions have been asked, but Doctor, can I ask you, 
when you talk about adequacy, affordability and availability, 
does the Massachusetts plan bode something for that? I have 
always been intrigued by it and I am watching it because of the 
various elements and theoretically, and I know it is unique 
State and what they are doing at all, it really might become a 
potential model. Do you think so? And if so, why and why not?
    Dr. Feder. I think you are right to be encouraged by it 
because it has got a model of shared responsibility of the 
employer participating, the individual, the taxpayer, 
everybody's doing it. It has got what I call in my testimony a 
place to buy, a way to get insurance without being 
discriminated against, and it has got the concept of adequate 
benefits and subsidies that make affordable coverage available.
    The difficulty that Massachusetts, you say it is a unique 
State, unique in a variety of ways, one is that they had 
Federal money on the table that not every State has, two, a 
more modest number of uninsured than other States have, but 
even given all that they are struggling to come up with the 
financing to make the guarantees of benefits and affordability 
to deliver on it. And I think it reflects a concern that we 
have to have of whether this is achievable on a State level. I 
think it is encouraging to see this development but I believe 
profoundly that if we are going to have this throughout the 
Nation, it is going to take Federal policy action.
    Mr. Sestak. And it was bipartisan.
    Dr. Feder. That was good too. We see that in California. So 
you are absolutely right, I think that whatever side of the 
aisle, people know that we need to get everybody health care 
coverage.
    Mr. Sestak. Thank you. Sir, one question is I come from a 
background that saw a lot of youth come to where I was for 31 
years, and I was always intrigued by the ingenuity and 
innovativeness of our youth. I saw them when they were 17, 18, 
19 years old. Do you think as you look around that there is 
something unique, something intangible about our system of 
education, that despite all its challenges, and gosh, there is 
challenges, that truly sets it apart, at least as I went around 
the world from other countries from as much as Britain to China 
of being rote versus something that makes our people think of 
how, not what, or do you think I have got that wrong, and all 
this effort to do things, is there something priceless we have 
here as you watch these engineers come back and forth from our 
countries and things like that?
    Mr. Archey. I think that I guess I would agree with you, 
except that I might disagree with what is the institution that 
is causing it because I would argue that no country in the 
world has yet replicated the kind of entrepreneurial and 
innovation of the United States. We are a very risking taking 
country, and I think that is kind of--it is in the DNA of a lot 
of people.
    I am not sure that sometimes the fact that we have got 
people who come out of our educational system who are 
questioning things and who have got that creativity, I am not 
sure that is a function of the educational system as much as it 
is a function of the larger societal values, and I think that--
I go all over the world because we have got a couple of offices 
overseas, and I have got obviously companies who are very 
involved in that, and I do think that when we are in a 
situation of comparing the United States, particularly, by the 
way, Silicon Valley, we were in Brussels a couple of months 
ago, the chairman of the board, and we were meeting with four 
members of the German delegation. They were talking about how 
important because the German president is going to be the 
president of the European Union for the next 6 months, and they 
were talking about how one of her biggest priorities is going 
to be competitiveness.
    They then proceeded to talk about a whole new set of 
regulations they wanted to impose. And we were wondering how 
does that connect. It is a very different system in Europe, it 
is different to some degree in Asia.
    One of the reasons I remain optimistic is precisely because 
of the nature of your question, which is that this kind of 
entrepreneurialism, creativity, this kind of not going along 
with all the program and all that stuff, I don't think we are 
in any danger that is going to be by the wayside. Thank you 
very much.
    Mr. Payne [presiding]. At this time we have Mr. Ehlers.
    Mr. Ehlers. Thank you, Mr. Chairman. First I have to 
apologize to my colleagues but especially to the witnesses for 
being here a brief time and then dashing out, but I was called 
to defend a couple of bills from this committee on the floor, 
and having successfully defended that with only minor blood 
strains, I am happy to return to this. I unfortunately missed 
most of your testimony and discussion. First of all, Dr. Feder, 
I just have to tell you that I have a topnotch legislative aid 
in my office and we were talking about you. She was on the 
floor helping me defend it. She commented that you were one of 
the finest professors she had ever had so I just wanted to pass 
that on to you.
    Mr. Archey, I am sorry I missed your testimony, but I did 
hear you testify once before, and afterwards I told my staff 
there is someone who gets it. As you all know, I have been 
fighting this battle in the Congress for 12 years now to 
improve math and science education, and we are making progress, 
but not nearly as much or as rapidly as we should. I think that 
is going to be a key factor in our competitiveness. But also 
just to comment on your statement of a few moments ago, Mr. 
Archey, I have often said the same thing, the reason we will 
win the competitiveness battle with other countries is not 
related to the differential in wage rates or anything like 
that, it is because we have a creative spirit both individually 
and collectively within this country, and I don't know if it is 
in the DNA or not, but it is there and I think it is because 
the people who came to this country from other countries have 
that spirit. They were adventurers. They made some very, very 
difficult choices to come here, including my grandparents. I 
could tell some incredible stories about the hardships they 
encountered, but that is what this country is made of. I just 
hope we don't go soft and end up the way many of our European 
ancestor countries are at this time, but that we keep 
encouraging that creative spirit because that is the real 
advantage we have over almost every country. Many countries, as 
you well know, the boss is supposed to have the new ideas, the 
employees are not. We are a country that thrives on ideas from 
the bottom going up and we reward people at the lowest levels 
for good ideas they get. I have a lot of manufacturing in my 
district, and I visit many of those factories. They are mostly 
UAW factories. But they are just brimming with ideas all the 
time as I tour the factory floor and talk to the employees.
    I think I can do this better if we can just do this. And 
that is what is going to help us within. So I apologize for my 
meandering comments, but I just wanted to verify what I heard 
in my brief time here. I think our country is on track, but we 
have got a real battle ahead of us because, for two reasons, 
first of all, the wage disparity you mentioned, but secondly, 
we play fair, most of the countries don't. And I have fought 
the administration on this, that we have to simply crack down 
on the manipulation, on the hidden tariffs which are not 
tariffs of money but tariffs of standards.
    I held a hearing on that a few years ago. Very interesting. 
Countries are setting standards for their imports so tough as 
Thailand is doing. Our cars can't get in there, but their cars 
couldn't if they applied them domestically. I think we need to 
crack down hard on that. Thank you very much for being here and 
putting up with my ramblings. God bless you and your continued 
work. Thank you.
    Mr. Payne. Thank you very much. We would like to recognize, 
the ranking member would like to have some concluding remarks.
    Mr. McKeon. Mr. Archey, the comments that you were making 
to Mr. Sestak, I took a CODEL to China last year because of--
the world is flat and all the talk and people from your 
industry and others have been telling me you have got to go to 
China, India and see what is going on and it was one of the 
best trips I have ever been on. We visited government leaders, 
industry leaders, education leaders, students, schools. It was 
very educational. And they agreed that their students do better 
in math, science. They have very high expectation levels and 
everything is do well in school because that is their only hope 
to get out of tremendous poverty and the problems they have.
    But they also said ours are better on entrepreneurial and 
the soft skills, our students. I said I think one of the 
reasons is that they have limited their families to one child. 
And I said a lot of those schools you learn come before--
sometimes you're still crawling and you're learning to compete 
with older brother, sister, younger brother, sister, and you 
learn that give and take and creativity and all of that at a 
very, very young age. I agree with what Vern said, a lot of it 
is the people that come here bring that spirit, but still I 
think a lot of that is learned there.
    So I think we will do well, we will continue to do well in 
those skills, but we also need to do better in our education 
because they are not sitting idly by, they are working hard to 
come at us.
    Mr. Archey. As the 9th of 11 kids, I can entirely concur 
with your statement. In fact, I have contended many times that 
once I left home the rest of this has been a cakewalk.
    Mr. Payne. Well, let me thank the panel. First of all, let 
me ask unanimous consent to enter the testimony of Governor 
Janet Napolitano of Arizona into the record. Without objection, 
so ordered. Let me--as a matter of fact, when I was in the 
fourth grade I was in a play, Columbus Day play and don't you 
know my lines were: The world is flat and that is that. I was 
the skeptic, I guess. I don't think the teacher liked me so I 
was the only one that said the world was flat.
    However, let me thank each of the panelists, Mr. Trumka, 
Dr. Feder, Mr. Archey, Dr. Karoly for your testimony. I think 
that you certainly have engendered a lot of conversation. That 
is what we are attempting to do in this beginning of this 
Congress, is to try to see how we can strengthen America's 
middle class. The only way we are going to find these economic 
solutions to help American families is to have dialog and 
conversation, and I think all of you certainly contribute to 
that.
    We are going to continue in this series because we do have 
to find a way to stop the squeeze on the middle class. That is 
what made this country great, people of lower classes attempt 
to move into middle class. And if we are shrinking the middle 
class and just having a two-tiered system as we have seen in 
countries abroad, we are moving in the wrong direction. And so 
I appreciate all of your contributions and we look forward to 
this continued debate. Thank you. With that, the hearing is 
adjourned. Thank you.
    [Prepared statement of Governor Napolitano follows:]

Prepared Statement of Hon. Janet Napolitano, Governor, State of Arizona

    Chairman Miller, Ranking Member McKeon and Committee Members, thank 
you for the opportunity to testify on an issue of great importance to 
all of us: the role of innovation in enhancing America's competitive 
standing.
    I testify before you today wearing two hats, one as the Governor of 
Arizona and one as the chair of the National Governors Association, a 
bi-partisan organization representing the nation's governors. My 
testimony today is both informed by the experiences of my fellow 
governors and my own work in Arizona.
The Issue
    Today's economy is increasingly global and highly competitive. 
While the United States remains the world leader in innovation, 
formidable competitors have emerged--and continue to emerge--as 
technology breaks down barriers and accelerates change. With 
demographic shifts, the rapid rate of technological advancements, and 
new methods of communication, Americans no longer solely compete 
against each other for jobs; they increasingly compete against well-
educated and cheaper labor abroad. The only way the United States can 
compete in this global economy is to out-innovate the competition. Our 
growth, and ultimately our success, will be driven by our ability to 
develop new ideas and technologies and translate them into innovations, 
and to create a strong, agile workforce that evolves with a changing 
marketplace.
The Challenge
    The challenge is upon us. In 2005, American companies received only 
four of the top ten patents worldwide. Finland, Israel, Japan, South 
Korea and Sweden each spend more on research and development than the 
United States as a share of GDP. China has overtaken the United States 
as the world's leading exporter of information technology products. In 
2006, the World Economic Forum's Global Competitiveness Report dropped 
the United States from first to sixth in rankings of national 
competitiveness.
    The quality of our workforce, moreover, is an even greater 
challenge. Businesses need employees who think innovatively and are 
capable of keeping up with the global economy. Yet, our country's 15 
year-olds ranked 24th out of 39 countries in a 2003 examination, which 
assessed students' ability to apply mathematical concepts to real-world 
problems. In 2005, in both mathematics and science, less than 2/5 of 
U.S. 4th and 8th grade students performed at or above a proficient 
level. These are startling statistics and we are feeling the impact 
now. In 2004, the United States produced 137,000 new engineers compared 
to China's 352,000. Simply put, our public education system is not 
delivering the workforce we need to compete. American students aren't 
measuring up to other students around the world, and our country is not 
producing enough skilled professionals to create tomorrow's 
innovations.
    The diminished ability to compete is reflected in real wages. The 
earnings of workers who have finished college have risen over the past 
20 years, while the wages of those with less education attainment have 
fallen. Too many Americans are falling behind in an economy that is 
more global and vastly different than ever before.
    Some look at these statistics and think not much can be done. I 
look at this as our nation's wake up call. This is our opportunity to 
reinvent our system of education and recapture our competitive edge. 
The answer is innovation, and the solution lies in our states. As 
governors, we believe states are the engines for change.
What is Innovation?
    ``Innovation'' is a term that deserves a new common definition. In 
the 1990's, innovation was about technology. Today, innovation is about 
reinventing strategies, products and processes, and creating new 
business models and new markets. It's about selecting the right ideas 
and executing at the right time. Innovation in the 21st century has 
moved beyond research laboratories, and today, reaches across 
disciplines. It requires talented people with the skills and resources 
necessary to compete and thrive in a global marketplace.
    But this new form of innovation cannot develop in a vacuum. It 
requires an education system that is better than those of other 
nations. It requires first class research facilities, and vibrant 
communities designed to retain and attract talent. It requires a 
business climate that encourages and rewards discoveries and 
entrepreneurship. It requires improved economic development that 
focuses on our nation's competitiveness. Most important, it requires 
committed leadership at all levels of government--working with the 
private sector--to make it happen.
Why States?
    States play a pivotal role in effecting change and creating 
innovative economies because they are major investors in the essential 
tools of that change.
    Look at any state budget and you will find that more than half of 
it is dedicated to education--from pre-K through post-secondary. The 
reality is that in the United States, education is carried out and 
predominantly funded at the state level. Actualizing change in our 
system of education will happen in the states.
    Likewise, states can be, and often are, the architects of the 
policies that cultivate innovation. Given the seriousness of the 
competitive challenge our country faces, it is critical for governors 
to develop strategies to accelerate innovative economies within their 
states.
    This is the impetus behind my National Governors Association 
Chair's Initiative, Innovation America. This initiative brings 
Governors, business leaders and higher education officials together to 
develop educational systems and economies that strengthen states' 
innovative capacity.
    The Innovation America initiative has three main strategies:
    1. Improving science, technology, engineering, and mathematics 
(STEM) education
    2. Enabling the post-secondary education system to better support 
innovation
    3. Encouraging business innovation through supportive state 
policies
K-12 Science, Technology, Engineering, and Mathematics (STEM) Education
    First, states must create the human talent that powers innovation. 
A workforce of problem solvers, innovators, and inventors who are self-
reliant and able to think logically is one of the critical foundations 
that drive innovative capacity in a state. Yet, as mentioned earlier, 
there is a growing consensus that American students are not attaining 
the basic knowledge they need to succeed, especially as it relates to 
science, technology, engineering, and math. These subjects are the 
foundation for innovation, and provide students with the skills needed 
to solve problems, experiment, and increase their awareness about the 
world around them.
    The Innovation America initiative seeks to improve the rigor and 
relevance of science, technology, engineering, and mathematics (STEM) 
education in grades K-12 to ensure all students graduate from high 
school with the core competencies needed for a 21st century workforce 
and to motivate more students to pursue careers in science and 
technology. At the end of this month, as part of the Initiative, we 
will release the ``Governors Guide to Building a K-12 Science, 
Technology, Engineering, and Mathematics Education Agenda,'' to support 
states' efforts in building a world-class K-12 STEM education system. 
We will also announce a new program to support state-level STEM 
education centers to build statewide capacity for improved STEM 
teaching and learning. Governors are uniquely positioned to address 
these challenges by establishing rigorous standards, expanding teacher 
training, and aligning curriculum with real world demands.
    In Arizona, we formed the P-20 Council in 2005 to align K-12 and 
higher education with the needs of the new economy. Our Council, 
comprised of educators, community college and university presidents, 
elected officials, and business leaders, is focused on developing a 
strong foundation in science, technology, engineering and mathematics, 
and strengthening curriculum and standards to prepare students for 
post-secondary education and a 21st century workforce. The result is an 
education continuum, with classes building on ideas that were taught in 
years prior, and students better equipped with industry-specific skills 
in high-growth, high-wage occupations that await them when they 
graduate.
    This year, at the Council's recommendation, I called on the Arizona 
State Board of Education to raise our standards to require four years 
of math instead of two, and three years of science instead of two. I 
also called on our schools to modernize our curricula, and bring 21st 
century skills into the classroom. We need technology embedded in our 
schools--to enhance learning and improve students' understanding of it. 
We need to move away from rote memorization and start teaching 
understanding and analysis. We need specialized environments for 
students interested in a particular area of study like Arizona's new 
Bioscience High School. Located just minutes from Arizona's bioscience 
hub, this school will connect students with tools, resources and 
experts from across the country. And we need more out-of-school time, 
hands-on activities--such as science fairs and robotics clubs--so that 
students can apply their learning in experiential ways.
    Take, for example, Arizona's Carl Hayden Community High School's 
Science and Technology Club, which brings STEM skills to life through 
an after school robotics team. The team entered their first competition 
in 2004, opting to compete against university vs. high school students. 
Their work paid off and they ended up winning the entire competition, 
beating top challengers like MIT.
Postsecondary Education
    While the American higher education system has long been a 
centerpiece of the U.S. economy, and the launching pad for the jobs of 
the future, the skills needed today are far different than the 
expectations of yesterday. In the past, being well-versed in a single 
subject made the cut. Today, integrating diverse subject matters is as 
important as mastering individual ones. Students not only need to be 
well-rounded, they also need entrepreneurial skills, and the capacity 
to imagine and adapt to the unknown. Providing students with new skills 
taught in a new way is the first step toward developing tomorrow's 
innovators.
    The second piece is equally important. Public universities are 
uniquely positioned to provide the pipeline of innovators for the local 
economies they surround. For example, the city of Tucson, Arizona has 
become the 'silicon valley' of optics because of its relationship and 
partnership with the publicly-funded University of Arizona.
    The Innovation America initiative provides strategies to bring our 
country to the next level of innovation and prosperity. It asks 
universities to align their work, both the programs they offer to 
students and their research and development efforts, with the needs of 
the state's high growth industries. For example, in 2003 when I became 
Governor, the number of health care providers graduating from our 
universities was simply not keeping pace with our soaring population 
growth. We worked with these institutions to address this shortage, and 
today Arizona State University has the largest public nursing program 
in the country, and we're opening Phoenix's first medical school this 
fall.
    In addition to more effectively matching graduates to high-demand 
careers, the Initiative seeks to showcase the great work of 
universities and bring their achievements to market. Some examples from 
my home state:
Arizona Telemedicine Program
    Its Arizona Telemedicine Program (ATP) located at the University of 
Arizona College of Medicine was created in 1996 with pilot funding from 
the state, and today, is recognized as one of the premier telemedicine 
programs in the world, providing telemedicine services, distance 
learning, informatics training and telemedicine technology assessment 
to communities throughout Arizona and beyond. Employing high-resolution 
interactive video imaging, digital photography, computer workstations 
and other technology, telemedicine allows physicians at distant 
locations to make diagnoses, conduct consultations and recommend 
treatment plans. Among its many initiatives, ATP piloted a virtual 
center for diabetes care that reaches out to medically underserved 
areas that have high incidences of pre-diabetes and diabetes. Its 
success is gaining national recognition. In 2005, ATP received $1.2 
million in federal funds for the new Institute for Advanced 
Telemedicine and Telehealth (THealth), to be located at the new 
University of Arizona College of Medicine--Phoenix. The institute will 
conduct research and develop medical simulations, robotics and the 
design of ``next-generation'' medical devices.
Biodesign Institute
    The Biodesign Institute at Arizona State University is focused on 
preventing and curing disease, overcoming the pain and limitations of 
injury, renewing and sustaining our environment, and securing a safer 
world. To accelerate the pace of discovery, the Institute merges 
formerly distinct fields of research, including biology, chemistry, 
physics, medicine, agriculture, environmental science, electronics, 
materials science, engineering and computing. In its short history, the 
Biodesign Institute has made measurable strides in delivering on its 
goals. This past year, Biodesign researchers received five patents, 
filed twenty new patent applications, and launched two spin-out 
companies. Among the research discoveries being translated to 
commercial endeavors are a drug with potential to save the lives of 
stroke victims; new tests to diagnose diseases more quickly and 
accurately; devices that rapidly detect explosives and biowarfare 
agents; the use of DNA forensics for law enforcement; and the design of 
next-generation flexible electronic displays with multiple applications 
in medicine, industrial processes and defense.
Sarver Heart Center
    The Sarver Heart Center at The University of Arizona College of 
Medicine has pioneered a breakthrough method of cardiopulmonary 
resuscitation that emphasizes chest compressions and eliminates the 
need for mouth-to-mouth breathing. Called ``continuous chest 
compression CPR,'' the innovative new approach has been shown to 
dramatically increase survival rates following cardiac arrest, and is 
easier to learn, remember and perform than standard CPR.
Growing Biotechnology Initiative
    The Growing Biotechnology Initiative (GBI) at Northern Arizona 
University focuses on technology platforms in cancer, neurosciences, 
bioengineering, infectious diseases and diabetes identified in the 
Arizona Bioscience Roadmap. The GBI integrates cutting-edge research in 
these platform areas with nationally competitive undergraduate and 
graduate degree programs aimed at developing a highly skilled workforce 
to meet the demands of the rapidly developing bioscience industry.
Critical Path Institute (C-Path)
    The Critical Path Institute (C-Path), an independent, non-profit 
organization located at the University of Arizona, was created in 2005 
to support the U.S. Food and Drug Administration (FDA) in its effort to 
implement the Critical Path Initiative (CPI). It serves as a ``trusted 
third party,'' working with the pharmaceutical industry to safely 
accelerate the development of and access to new medications. C-Path was 
recently awarded a national grant to evaluate genetic tests to improve 
treatment of cardiovascular disease.
InnovationSpace
    InnovationSpace is an entrepreneurial joint venture between the 
colleges of design, business and engineering at Arizona State 
University that teaches students how to develop products that create 
market value while serving real societal needs and minimizing impacts 
on the environment. Interdisciplinary student teams work to define new 
product offerings, develop and refine product concepts, build 
engineering prototypes, and create business plans and visual materials 
to market their products.
BIO5 Institute
    The BIO5 Institute at the University of Arizona brings together 
some of the world's best scientists across five disciplines to 
collaborate on complex problems such as how to diagnose, treat, or 
prevent disease; how to feed a hungry world; and how to sustain our 
environment. BIO5 provides researchers with state of the art equipment 
in a setting that allows interaction on important research issues and 
provides the infrastructure necessary to translate scientific 
discoveries into tangible human benefit, increased economic development 
and a better-educated society.
    The next step, and the goal of the Innovation America initiative, 
is to bring these new discoveries, innovations and cures to the 
marketplace. This leads to the Initiative's next strategy.
Business Innovation
    While we prepare our students for a global economy and build our 
universities as pipelines for innovation, we must also cultivate a 
culture of innovation in the private sector.
    The Innovation America initiative seeks to give states tools to 
develop policies that support research and development, enhance their 
innovation capacity and foster entrepreneurship. Specifically, the 
Initiative is helping governors promote business innovation by 1) 
assessing each state's economic performance and making policy 
recommendations for improving performance; 2) providing governors 
analyses of their state's most promising innovation clusters and a 
guidebook to cluster-based growth strategies; and 3) compiling and 
distributing best practices for the management of technology investment 
funds.
    By reducing regulatory barriers, eliminating policies that inhibit 
the transfer of new ideas from the lab to the market, and creating tax 
policies that support the growth of innovative industries, states can 
lead this charge. States can also help entrepreneurs establish linkages 
with researchers, target workforce training and research and 
development to the needs of fast growing industries, and enhance 
opportunities for entrepreneurs to obtain early-stage investments, on 
which innovative products depend. Enhancing a state's innovation 
capacity puts its businesses in a stronger position to exploit the 
opportunities presented by changes in technologies--opportunities to 
increase productivity, develop new products, and expand into new 
markets.
    States like Arizona have already started this work, accelerating 
prosperity through incentives for angel investment, which help small 
businesses and early stage companies attract much needed capital to 
expand operations and bring new ideas, products and services to market. 
Arizona's ``angel investors'' tax credits will spur $65 million in 
investment in life sciences and new technology development.
    We are also focused on growing Arizona's entrepreneurial companies 
into globally competitive enterprises through programs leading to the 
commercialization of the latest discoveries, innovations and 
technology. Arizona's Innovation and Technology Commercialization 
Accelerator is a ``virtual'' pilot program through our state Department 
of Commerce. This program is designed to assist early-stage technology 
and bioscience companies, as well as coordinate and effectively deliver 
technology commercialization services statewide. It offers grants to 
companies for technology assessment, commercialization feasibility, and 
assistance with marketing and licensing.
The Charge
    Together, the strategies proposed by the Innovation America 
initiative seek to recapture our nation's competitive edge. By 
maximizing the potential of our students, we will produce the necessary 
talent pool. Through targeted investments in research and development 
and better coordination with the private sector, our universities can 
develop the workforce and pipeline for innovation. Finally, by 
developing state policies that foster innovation and encourage 
entrepreneurship, we can bring new inventions and discoveries to market 
and ensure the fruits of our labor stay at home.
    In Arizona, these strategies are more than ideas on paper; they are 
our roadmap for success. Together, working with academia and the 
private sector, we are taking action to ensure that Arizona not only 
remains globally competitive, but is a world class leader in 
innovation. Take, for example, Arizona's bioscience industry. A few 
years ago, we determined that we were lagging behind the nation in 
bioscience research and needed to step up the pace. We developed a 
Bioscience Roadmap to assess our existing infrastructure and strengths, 
with the goal of making Arizona a national leader in the field within 
10 years. A small, but rapidly growing bioscience private sector 
already existed, and we built on these efforts through the creation of 
the Translational Genomics Research Institute (TGen), a non-profit 
organization focused on developing earlier diagnostics, prognostics and 
therapies through genetics.
    Since its founding in 2002, TGen has announced more than 15 new 
genetic discoveries including the identification of genes linked to 
Alzheimer's Disease, ALS, memory performance, prostate and brain 
cancer. TGen's success lies in both its biomedical research, and its 
impact on the Arizona economy. A report released in 2006, found TGen 
produces a nearly four to one return on state-invested funding and is 
expected to generate more than 3000 jobs and $202.4 million in total 
economic impact by 2025.
    Efforts like TGen are possible at the state level, because of our 
ability to bring diverse stakeholders together and leverage resources 
to make an impact. Modeled after Science Foundation Ireland, we 
recently forged an unprecedented partnership between government, 
universities and the private sector to create Science Foundation 
Arizona, a multi-million dollar non-profit organization designed to 
build and strengthen Arizona's scientific, engineering and medical 
competitiveness. Supported by seed funding from the state, Science 
Foundation Arizona is working to attract world-class researchers to 
Arizona to diversify and expand Arizona's high-tech economic sector. 
Its Small Business Catalytic Funding initiative will be a stimulus for 
technology development, company formation and high-tech job creation in 
Arizona. And its largest funding priority, Strategic Research Groups, 
will fund partnerships between the private sector and universities. 
Most importantly, organizations like Science Foundation Arizona give 
states the flexibility to adjust to new paradigms more quickly and 
efficiently, and stay competitive in a global economy.
    Our mission is bold, but we are on the path to success. In Arizona, 
we are building a premier education system from pre-school through 
college, and are working hand-in-hand with businesses to make sure our 
students can meet the demands of the 21st century economy. We made a 
$440 million investment in new research facilities at our universities 
to house world-class talent. We created technology commercialization 
programs to enhance Arizona's science and technology core competencies 
and promote entrepreneurship. We have maintained a low-tax, business 
friendly environment, signing a historic business tax relief package 
into law to spur investment and attract companies to Arizona from 
around the country and across the globe.
    The Innovation America initiative focuses on the actions states can 
take because, as I have demonstrated here, Governors are in the 
driver's seat when it comes to promoting innovation. At the same time, 
the federal government has a major role to play in addressing the 
challenges we face in this increasingly competitive global environment.
    As you know, several major reports in recent years have recommended 
specific changes in federal policy and funding levels. At the heart of 
the recommendations is the importance of innovation. I am eager to 
begin a dialogue about how we can engage in complementary activities--
maximizing our respective strengths--to enhance our economic 
competitiveness by creating an innovative nation.
    Thank you for giving me the opportunity to testify about an issue 
that is so critical to the future of our states and our nation. 
Ultimately, this is not just a local concern, not just a state 
priority, and not just a federal problem. It is a national challenge. 
Working together, the public and private sectors can make meaningful 
progress in identifying educational and economic actions that make life 
even better for the next generation of American families.
                                 ______
                                 
    [Whereupon, at 12:45 p.m., the committee was adjourned.]

                                 
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