59

Mr. Dow. Thank you, Mr. Chairman.

I would just say that you can see from his presentation that he
is very passionate about this program. Certainly he had a vision,
a long time ago, and I think he is to be commended for staying
with that vision, and not only havi | vision and starting a pro-
gram, but some 15 or 16 years later he is chairman of our founda-
tion, and still providing leadership.

I think that it is a wonderful opportunity to provide for Mr.
Weill, and for everyone else here, to come and talk about improving
the work force in this country.

You are right on target with what you are doing here, and I
certainly hope that you can continue the momentum.

Chairman CRANE. Thank you.

Mr. Rangel.

Mr. RANGEL. Thank you, Mr. Chairman.

Mr. Weill, you saw a need and you did not buck the system, you
became a partner with the system, and you showed them what the
needs were in the workplace, and how they could be partners in
doing what they have to do to fulfill their mandate, but at the
same time allow the graduates to be better prepared for a job
opportunity.

There used to be a time that I used to feel so proud to say, with-
out ridicule, “I am from the U.S. Congress, I am here to help you.”
But that is not accepted the way it used to be.

At the same time, we do get some things done. For example, we
have provided for benefits in certain areas, and I represent one
that has an empowerment zone, which provide tax relief in order
to Bet private sector people to do what you are doing, because it
is the right thing to do, for their business and for America.

But, if you did have the ability to have these additional resources
available, it would seem to me that your creativity and your imagi-
nation could serve as a broader blueprint for the corporate world
that. may not see the instant benefit for their company, their indus-
try, or their country, but they would see the instant benefits on the
balance sheets, as they see their tax liability being reduced, as
their participation in programs like this increases.

If we were to work with you and Dr. Dow, do you think that you
could up with a list of things that could be done to allow you to
increase and to spread the work you are doing for the country?

Mr. WEILL. I think there is no question that working together we
can come up with a lot of ways to really substantially increase par-
ticipation, and I think that that is really what is needed today, be-
cause, yes, we do have somet! that has proven that it can work
in 25 different States, in 170 different cities, across America, over
a decade and a half, and it has momentum.

So that sometimes, unfortunately, we need to have incentives to
get a lot of our associates to want to play the game and be part
of something, and I think that that would be a message to them,
that this is something that has to happen.

If we are going to look into the future and say our tax dollars
are going to pay it all, or we are going to leave it to the private
sector to do it all, without the cooperation of all parts of our soci-
ety, whether it is business, labor, or the public sector, I think that
is the only way it is going to work.


123

‘continuous learning. Numerous studies have demonstrated that providing workers the right to
participate in the decision-making process is a key element in the high performance workplace.
Other practices which bolster the training function may include organizing work through teams
in place of the assembly line; a system of gain-sharing or skill-based pay; an assurance of job
security; and a reduction of layers of supervision.

Although every company must meet its own special competitive circumstances, there
seems to be little controversy over many of these workplace practices. A number of studies,
by the U.S. Department of Labor, by numerous scholars at a number of universities appear 10
demonstrate conclusively that the introduction of high performance practices in the
organization of work produces improved productivity and financial returns. Statements by the
‘National Alliance of Business, which is focussed on workplace practices, by the American
Society for Training and Development (ASTD), the chief professional organization, and by the
‘AFL-CIO all endorse the need for workers and management to be "partners in change” (NAB)
in the high performance workplace.

In addition, numerous case studies have called attention to the success of individual
firms which have adopted some or all of these practices. Such companies as Motorola, Xerox,
‘Coming Inc, Hewlett Packard, AT&T and several of the regional Bells, Johnson & Johnson,
Eastman Kodak, Magma Copper have been studied and cited as examples of companies which
have reaped the rewards of workplace practices which have resulted in a workforce committed
to continuous learning. These and other companies which have organized workforces have
‘usually found that their trade union relationships have eased the transition.

But there is another side to this story--a record of companies which have failed to
recognize the challenges of today and have not instituted the practices, including training,
‘which underlie business success in our modern age. According to a study by the ASTD in
ppart based on a recently released study by the Bureau of Labor Statistics, in 1983 the U.S.
private sector spent $47 billion (in 1995 doltars) for formal, employer-provided training.

In 1995, the amount was $55.3 . The ASTD points out that with adjustments for inflation, the
‘amount employers spent on training rose a bit less that 20 percent, while the BLS reports that
the workforce has risen by 24 percent.

Business in general appears to be increasing its investment in training, but the increase
is slower than the growth of the workforce.

‘The decline has occurred not so much among large firms, but among small and
medium-size business. Firms with 50-100 employees spend about a third less per employee
than larger firms, The same studies disclose that workers with less education and fewer skills,
as in the past, receive less training. In other words, employer-provided training appears to
continue to be focussed more on management and supervisionusually employees with a
college education—-than on hourly workers on the shop floor.

‘The BLS/ASTD report occasioned little surprise. Six years ago, the Commission on
the Skills of the American Workforce, co-chaired by two former Secretaries of Labor (Bll
Brock and Ray Marshall) undertook an exhaustive study which demonstrated the failure of
‘most firms to adopt training and other high performance practices. That study has been
substantiated by a number of other studies by numerous university scholars, all testifying that
although a growing number of firms have awakened to the need to adopt best workforce
practices, there still remain a shockingly large number of companies which have not adopted
them at all, or have done so minimally that they are off the charts.

An international comparison, published last year by the Council in its Human
,, Substantiated the problem. The U.S. government spends a
far lower proportion of its GDP on job training than many other industrialized countries.
In Japan, the percent of workers who receive training is almost 3-5 times higher than it is in
the U.S. In Japan, training starts when a worker is hired and continues through his career; in
the U.S. training starts later and only increases with a worker's tenure.



25

cation that we will need. The demand for postsecondary education
will increase greatly as we move into the 21st century. As the num-
ber of high school graduates increases substantially over the next
decade, as we convince a larger share of those high school grad-
uates that they need to go on to Postsecondary education, and as
an increasingly larger number of adults are convinced, as they
should be, that they need to go back for life long continuing
education.

But financial constraints on the Federal and State governments,
and on families themselves, will make it increasingly difficult to
provide the quality educational services to all who need and desire

em.

Now, to respond to those challenges, this administration has
made a commitment to enhancing our economic competitiveness in
two major ways. First, by ensuring that all of our citizens have ac-
cess to postsecondary education, and second, by promoting pro-
grams that help these students better understand the world in
which we will be competing.

To accomplish this, we Fave pursued an aggressive agenda. We
have proposed a substantial increase in the maximum Pell Grant
Program for the most needy students. We have proposed substan-
tial increases in college work-study, and a new presidential honors
scholarship program.

We continue to promote the new direct student loan program, in-
cluding the income contingent repayment program that allows
students to pay back on the basis of what they can repay.

And, most recently of course, the President has announced the
America’s Hope Scholarship Program, the $1,500 tuition tax credit
proposal that Secretary Reich discussed. We hope to essentially
change the ethic college attendance in this country, making 14
years of education as common tomorrow as 12 years are today.

We like this, as a smart tax cut. We see it as a way for this coun-
try to invest in those people who are willing to invest in themselves
and their children. And through our School-to-Work Program we
are also promoting new ways of earning and learning, by develop-
ing intentional relationships between schools and businesses, and
between high schools and colleges.

But being successful in this global economy is going to require
more. It also requires an understanding of the world in whic!

ive.

To contribute to this, we offer a range of interrelated activities.
We support foreign language and area studies programs, inter-
national business programs, special initiatives to link America’s
higher education institutions with those in other countries in asso-
ciation with NAFTA and the European Union.

We are working hard to ensure that your investment in post-
secondary education ensures that all the citizens in this country
have the opportunity to benefit from a high skills economy, and to
gain greater knowledge about the rest of the world in which we
live.

We think that is a wise and a prudent investment, and we thank
you for the opportunity to be before you today. I would be glad to
answer any questions you might have.

(The prepared statement follows:]


COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois SAM M. GIBBONS, Florida

BILL THOMAS, California CHARLES B. RANGEL, New York

E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ANDY JACOBS, JR., Indiana

JIM BUNNING, Kentucky HAROLD E. FORD, Tennessee

AMO HOUGHTON, New York ROBERT T. MATSUI, California
WALLY HERGER, California BARBARA B. KENNELLY, Connecticut
JIM McCRERY, Louisiana WILLIAM J. COYNE, Pennsylvania
MEL HANCOCK, Missouri SANDER M. LEVIN, Michigan
DAVE CAMP, Michigan BENJAMIN L. CARDIN, Maryland
JIM RAMSTAD, Minnesota JIM McDERMOTT, Washington
DICK ZIMMER, New Jersey GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia

SAM JOHNSON, Texas LF. PAYNE, Virginia

JENNIFER DUNN, Washington RICHARD E. NEAL, Massachusetts
MAC COLLINS, Georgia MICHAEL R. McNULTY, New York

ROB PORTMAN, Ohio
JIMMY HAYES, Louisiana
GREG LAUGHLIN, Texas
PHILIP S. ENGLISH, Pennsylvania
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
PHILLp D. MosELEY, Chief of Staff

JANICE Mays, Minority Chief Counsel

SUBCOMMITTEE ON TRADE
PHILIP M. CRANE, Illinois, Chairman

BILL THOMAS, California CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida SAM M. GIBBONS, Florida

AMO HOUGHTON, New York ROBERT T. MATSUI, California
MEL HANCOCK, Missouri WILLIAM J. COYNE, Pennsylvania
DAVE CAMP, Michigan LF. PAYNE, Virginia

JIM RAMSTAD, Minnesota RICHARD E. NEAL, Massachusetts

DICK ZIMMER, New Jersey
JENNIFER DUNN, Washington

ap


119

education by increasing the focus and engagement of students, and the hours that they work on
their own or with their parents, has much less impact on taxpayers. Our job as policy makers is
to make those more modest investments needed to promote the greater engagement and
motivation of our students.

How do we do that? One important way is to hold all students to high academic
standards. This has already received a great deal of attention.

Case studies that we are carrying out in schools and workplaces are beginning to suggest
that we can also do a better job of connecting school and the school experience to the adult
world, to the broader community, and to the world of work. Through this we can exploit student
interests and aspirations to enhance their academic learning. Why is it in almost all cases, outlets
for student interests and passions are found outside the classroom on the athletic field,
extracurricular activities, or in activities with their friends. A key objective of education in
general, and the school-to-work approach in particular, should be to try to connect those
interests to academic leaming.

Of course, many students have not the slightest idea what their interests or aspirations are.
Certainly if we are going to try to connect student interests to learning we also have to help them
think about where they are going and what might interest them, Students with a coherent plan
and goals do have higher academic achievement.

When we talk to high school students who are involved in internships, we often find that
they get a tremendous amount out of the opportunity to take responsibility and to be treated like
an adult. In our society we prepare students for adult life by isolating them in youth enclaves,
and often by giving them little to compete with a youth culture that does not value academic
achievement.

Coherent-education, well connected to the adult world can have many benefits. We are
conducting a rigorous evaluation of career magnet schools in New York City, many of which
have significant similarities to the school-to-work model outlined in the legislation. We found
several important effects. Among other findings, the project concluded that two years after
graduation, career magnet graduates were more likely to have declared a college major and
earned more college credits when they went to college than their counterparts at area
comprehensive high schools with no career focus or exposure. Attendance at a magnet school
also had positive effects on social behavior including reductions in teen pregnancy and alcohol,
drug, and tobacco use.

Increasing productivity and improving education are closely linked, but a key to both is to
engage the energy, imagination, creativity, and commitment of both workers and students. By
failing to do so, we waste human resources on the job and prevent their full development in
school. A growing body of research, including our own, suggests that the school-to-work model
and other types of education reforms can improve that crucial motivation and commitment of
students. But this is an extremely difficult task because we are asking that the entire community
be involved in education.

Mr. Chairman and Congressman Rangel, thank you again for this opportunity to discuss
this important issue, I would be happy to elaborate on any of the points that I have raised or to
discuss the role the Congress could play in the types of changes that I think are necessary.


68

dents to work on independent projects through the use of tech-
nology and distance learning.

In Dallas, Texas, we are working on a program that will combine
the teaching of math and science in a technology base, so that we
will not have to segment the school day in a 45-minute math
period, or a 45-minute science period.

And through technology, in the Philadelphia schools, we are cre-
ating electronic teacher mentor programs, so that teachers can
have steady and regular access to experienced teachers, who can
advise them, work with them, and sharpen their classroom
techniques.

In this way, through a program that we call reinventing edu-
cation, we have identified 25 million dollars’ worth of IBM talent
and technology, to be able to create these systems, and then make
them available to school systems and states around the country,
who want to reach high standards, but need the technology and the
help to be able to do that.

We would agree that we are never going to attain any level of
achievement unless we have an agreed upon set of high academic
standards, a regular system of measuring and assessing how we
are going, and some way of holding people accountable for the
results.

The question was asked earlier about the status of grades
kindergarten to 12. In some cases we are doing all right, in some
cases we have lost ground, and by and large we have been treading
water, while many other countries are improving dramatically.

And if we want to improve, there is no way that is going to get
us there faster or better than by having a system of high academic
standards, quality assessment, and some measure of accountability
for performance, that holds people accountable for results.

Now, we have extended our work in grades kindergarten to 12,
working with adults and those people who are out of school, be-
cause the challenge is to see to it that technology is not something
that creates a gap between haves and have-nots, but closes the gap.

So, we have identified 12 projects around the country where we
are using IBM technology to simulate work experiences, so that
people can be trained through technology, that connects training
sites to work sites, so that people can have access to the high qual-
ity training materials that they need, and that we can use tech-
nology to create a network of programs that can help meet people’s
educational needs, and skills training needs.

IBM is a company that offers its technology to paying customers.
In our philanthropy we are treating school systems and adult train-
ing providers as if they were valued customers. We are sitting
down with them, with our resources, and we are designing the
systems that can help take them to the next level.


19

professionals is growing. Technological change leads to a shift in favor of workers with
higher levels of education.

Shortage of Skilled Workers

‘The supply of techno-professional workers, however, is insufficient, sometimes
dramatically so. For example:

+ Twenty percent of our adults are functionally ilfiterate, compared with only
‘one percent in Japan.

+ Four in ten business executives say that they can not modemize their
equipment because their workers do not have the appropriate skills

‘+ Many employers have to work their way through 40 to 60 interviews to fill a
single position.

+ The lack of basic job skilis also compels firms to invest heavily in remedial
training, leads to higher wastage rates, and increases downtime.

‘This gap has grown so wide that many companies havo given up on the school
system the tational soutce of preparedness for ety level workers

+ A 1992 study by the National Association of Manufacturers, based upon a
series of 14 CEO-level focus group meetings across the U.S. concluded that
"school systems have filed groups felt thatthe school systems are
providing neither adequate basic skills nor an adequate understanding of
business and the necessary work ethic.”

+ The 1993 report of the Competitiveness Policy Council concluded, "we will
have to dramatically improve the education and training for new, young labor
force entrants if we hope to compete effectively.”

The Root Problem: Wide Gap Between School and Work

‘The root cause of this shortage of techno-professionals is the yawning gap between
‘what schools are teaching and what the workplace is demanding.

Many of the nation’s high school graduates move to low paying, low skills stop
gap jobs, usually in the retail and service sectors, and have to wait several years before they
are even considered for a job with decent prospects. It is with reason that this large
population of the nation’s youth has been dubbed “the Forgotten Half.”

‘The problem of transition from school to productive work is not confined to
secondary school graduates. Many college graduates also finish schoo! without a clear
career direction. Large numbers drift into assorted jobs, experiment with postgraduate
Courses, remain living at home, and postpone family responsibilities until they are in their
Tate 20s and early 30s. According to recent research findings:

+ Even seven years after high school graduation, less than half of our young
adults can correctly predict the occupation they will be in five years later.

+ Twelve years after high school graduation only 28 percent of young adults
followed a patter of either full-time school followed by full-time work or had
‘worked the entire 12 years.

+ By age 30 only a third of working adults in the U.S. have been in theie jobs for
‘more than one year

‘A very substantial research challenge would be to assess the enormous cost and
‘productivity toss to the national economy and to our global competitiveness

* the years spent by both secondary schoo! and college graduates between the
completion of their studies and entry into theit principal place of Future
employment

* the cost fo employers of remedial training needed to educate entry level
workers in basic math and communications skis that they should have learned
in K-12


15

Chairman CRANE. Thank you, Mr. Secretary.

Mr. Secretary, with regard to government training programs for
our work force, are there any of those programs that you think no
longer have validity? In other words, should be terminated?

Or do you have any thoughts on transferring those responsibil-
ities over to the private sector? And, if so, could you elaborate a
little more on how private sector initiatives might be helpful in
creating and developing our work force in this country?

Secretary REICH. Mr. Chairman, there are several things that we
have tried to do, and we are on the way to doing. One is to consoli-
date the myriad of Federal job training programs into one pool, and
providing people with vouchers that they can cash in for the kind
of training they need, when they need it, at community colleges or
technical institutes.

And it is also providing those people with good, high quality in-
formation about which community college, which technical insti-
tute, is doing the best at placing people. So we create a market—
a real market—in training.

Now, people need this.

The second thing that we are proposing, and have already begun
to do, is enable people, through low-interest student loans, to get
the kind of training they need—not just people who are going to
a 4-year college, but people of almost any age.

The third thing we are proposing is to provide each family with
a $10,000 a year tax deduction for education and job training. Now,
if companies can deduct the cost of business meals and expenses,
and all kinds of other things, at the very least we should allow
American families to deduct the cost of education and job training,
which is the most important kind of investment anybody can make.

Fourth, we are proposing—the President has proposed—a spe-
cific, refundable tax credit which will allow anybody in this country
to afford—indeed, to make virtually free—2 years of community
college, in terms of the average tuition of community college.

We think that everyone—and it ought to be the norm in this soci-
ety—every single person in this society ought to have a 13th and
14th year of education, beyond 12 years, and that ought to be
affordable.

In fact, literally, it ought to be a refundable tax credit, in terms
of average tuition.

Now, there may be many other things that we could. The School-
to-Work Program I talked about—every one of these initiatives in-
volves the business community, involves the private sector.

We have, with your help, and with Congressman Rangel’s help,
reformed, and have a new reformed version of the targeted jobs tax
credit, which I think is going to work even better than it does right
now. Again, making sure that the business community has an in-
centive to hire people who are the most difficult to hire, and who
are the poorest and most in need of jobs.

Again, I want to emphasize, every one of these initiatives relies
upon the private sector, and also relies upon individuals to take
initiative. These are not handouts; this is the way we have to go.

thairman CRANE. Thank you, Mr. Secretary.

Mr. Rangel.

Mr. RANGEL. Thank you, Mr. Chairman.



128

But that does not mean that you should just give up on your job,
or your clients, or your members, because we are going to do some-
thing to make certain that you can continue to be productive.

Mr. Samuel, I do not know what that something is, but in the
course of your work and study, has that question ever come up?

Mr. SAMUEL. Mr. Rangel, I spent 45 years in the labor movement
before I retired in 1992, and | can tell you that even by that time,
much less by this time, I do not believe there is a single responsible
trade union leader in the country who is not fully aware that global
competition and technological advances have changed the work-
place forever.

My own union—it used to be called the Amalgamated Clothing
Workers, and it is now called UNITE, Union of Needletraders, In-
dustrial, and Textile Employees—in 1975 started a program with
Professor John Dunlop of Harvard University, to improve the tech-
nologies in the apparel industry, which for years had been consid-
ered to be immune to technological change.

And the leadership of my union understood that if we did not
bring technology into that industry, even though we knew it would
cost jobs, that eventually there would be no jobs at all, there would
be no industry.

That is true in every single major industry today, whether it is
a service industry or a manufacturing industry. You will find in
many of the major ones, like communications and auto and ma-
chinists and others, that there are joint training programs under-
taken to ease the change of workers from an old fashioned sys-
tem—the old Taylor, scientific management, assembly line sys-
tem—to the system of today and tomorrow, which involves organi-
zation of work into teams, employee involvement, employee
information.

That is happening throughout the labor movement, and inciden-
tally, has been endorsed by the AFL/CIO itself—I think it was back
in 1991.

Mr. RANGEL. I am going to staple you to some of these trade
bills, because my mother was a member of International Ladies
Garment Union, which united with your union, which became
UNITE, and it was a door for all immigrants. It is a low-skill job,
it provided to hope—you could send your kids to CCNY, and now
those low-skill jobs are not there.

What would you tell Jay Mazur today?

Mr. SAMUEL. What could I tell whom?

Mr. RANGEL. The president of UNITE. The question is, that the
jobs are going to go, and it is a question of time, in competing with
the Caribbean and China and the rest of the countries, can we not
offer a cushion, a transition or something, so that those who are
working, and young, can be trained to do something else?

Mr. SAMUEL. Oh, by all means, and I think you will find——

Mr. RANGEL. What should we do?

Mr. SAMUEL. As you well know, the labor movement has been in
these halls of Congress for many years, urging the strengthening
of our unemployment insurance system, of our dislocated training

rograms, and trade adjustment assistance; urging the strengthen-
ne even of such laws as the minimum wage, which just took place
ere.


184

Dr. Murphy has provided management development, executive selection, labor
relations, crisis management, and operational reengineering advice to such Fortune 500
companies as IBM, General Motors, AT&T, Sears, Xerox, Johnson & Johnson, and
McDonald’s. He has also been retaine 4 by a number of financial institutions (¢.g., Chase
Manhattan Bank and Chemical Bank}, and has consulted utilities (e.g., Bell Telephone,
Mlinois Bell), transportation companies (e.g., American Airlines, Amtrak), federal, state,
and municipal government (¢.g., Defense Intelligence Agency, U.S. Centers for Disease
Control, City of New York), insurance agencies (e.g., Massachusetts General Life),
professional organizations (¢.g., The American Management Association), and
institutions of higher learning (e.g., M.LT., Syracuse University, and George Washington
University).

eek ee

To gain an understanding of how American businesses, and in particular the
healthcare industry, can become more cost-efficient and competitive globally, while
advancing levels of quality and productivity, B.C. Murphy first analyzed the inherent
work inefficiencies of several hundred organizations through statistical analysis. It then
developed tools to correct those work problems and finally, implemented a solution that
involved a continuous improvement strategy,

‘The results of an October 1993 study conducted by B.C. Murphy indicate that
hospital downsizing may increase patient mortality. Although these findings are not
‘unusual, the subsequent analysis found that hospitals that downsized their staffs without
redesigning the work functions of employees actually had the potential to increase patient
mortality and morbidity (emphasis added).

The study compared the staffing structures of 281 general acute care hospitals
nationwide with Medicare mortality and morbidity data from the Health Care Financing
Administration for 1990, Staffing !eyels (using the standard industry measure of full-
time equivalent employees per adjusted occupied bed {FTEs} and the methodology used
in downsizing, if any) were identified through interviews with 502 financial and
operational executives in these hospitals,

The study determined that hospitals that made across-the-board staff reductions of
7.75 percent or more in response to financial pressures - 9.5 percent of the sample size -
were 400 percent more likely to experience an increase in patient mortality and morbidity
than other hospitals.

A second part of the study examined the work practices of 72,250 healthcare
workers to evaluate the relationship between the organization of work and tho
consequences of restructuring.


76

Our basic feeling is that the only way we are going to begin to
close the gap between what schools are providing and what the em-
ployer community needs is far-reaching structural reform—a
change in priorities, a change in philosophy—that goes well beyond
individual programs, that goes far beyond individual tax credits.

It is a fundamental change in priority.

To illustrate that, let me very briefly go over the four principal
recommendations in our report. The first, in the area of priorities,
is the Charlottesville Education Summit—you may remember that
in 1989, between the President and the 50 Governors.

They put out a communique that said the purposes of education
are threefold. First, responsible citizenship; second, further learn-
ing; and third, productive employment.

We would submit that these priorities should be reversed, that
productive employment should be put at the head of the class. Our
view is perhaps too much of a business oriented view, but it is a
practical one, and I think it goes back to another point Mr. Rangel
made earlier this morning.

Without a good job, it is very difficult for an individual to dis-
charge the responsibilities of citizenship, or to afford further learn-
ing. It really is the starting point.

The next recommendation we have is that, again, to close the gap
between what schools are doing and what the employer community
needs is to place much greater emphasis on the development and
use of standards—skills standards—for people coming out of the
school system.

The key to the success of skills standards—and we hear a lot
about skills standards these days—is they must be employer driv-
en. The starting point has to be the employer community. They
first have to use those standards themselves in their own work-
place, and when they do that, then they can communicate effec-
tively to the broader community what they are seeking.

Our third recommendation is to place much greater emphasis on
beginning career awareness and preparation at a much earlier
stage in a student’s development. Begin even in the primary grades
to get people used to developing some of the skills they need in the
workplace, and to begin to think at a much earlier age about future
career directions.

In our perspective, the whole dialectic about college-bound and
noncollege-bound and work-bound is entirely wrong. There should
be only one question, namely whether all individuals—not an ex-
clusive, but inclusive approach—whether all individuals graduating
from school or leaving school, are prepared for productive employ-
ment.

If they can get that preparation in grades kindergarten through
12, so much the better. The idea that everybody has to go into 2
more years of school, misses the point. That is a process point.

The substantive point is that everybody should be prepared for
productive work, and should be thinking much earlier in life about
their careers. They should not be going to college just for its own
sake, but to go to college to get additional skills they may need for
special areas of employment.


32

crease the quality of education of all Americans, from border to
border and the possessions.

And that you should be working with the private sector saying,
I do not have any money, I do not have any constitutional author-
ity, but I am an American, and I want to get a better work force.

I do not know how long I am going to be around here, but I am
not going to accept the fact that, if Presidents want people to go
to the moon, or my country is going to lose out with foreign coun-
tries, that you are going to send me back to my local school board.

I have been down here for a quarter of a century, and nobody has
seid more honestly and convincingly what you have said, and I
dare not try that back home.

“Mr. Rangel, why are our children failing, why are our classes so
large, why do we not have equipment, why is it that they are in-
vesting more in prisons than they are in our school system, and
police more than our teachers?”

And I would say, it is because constitutionally that is a problem
for the local government, and that while we in the Federal Govern-
ment do provide incentives, we have a very limited role, and a very
small contribution to make. But we hope, for the interests of our
great country, that we can improve it.

No, Mr. Secretary, if people—if my friends want constitutional
amendments, we may cut a deal, because there is no way to ex-
plain how we can have this great Republic in jeopardy as it is
today because the Federal Government has no authority.

So, we will work together. Put me down for the amendment of
the Constitution, but I think that when the businessmen get to-
gether, and your office is going to be involved, and it is going to
happen soon, maybe we can find out what they are doing, and see
whether or not constitutionally we can be partners with them.

And so that we could have throughout these counties and con-
gressional districts everyone saying, we have to do more together,
and have the Federal Government to be a bigger partner in provid-
ing the leadership on this issue, and I look forward to working with
you.

Have we met before?

Mr. LONGANECKER. We have met, but not in this capacity.

Mr. RANGEL. Well, we are not going to forget each other.

Mr. LONGANECKER. You bet.

Mr. RANGEL. We have got to work closer together, and I invite
you to attend the conference of the businesspeople, who are so
proud of what they are doing, and maybe we can have a better
working relationship, since a lot of them, most of them, are
national and international, and we can get the benefits of their ex-
perience, at very little cost.

Thank you, Mr. Secretary.

Mr. LONGANECKER. You are welcome.

Chairman CRANE. Mr. Coyne.

Mr. Coyne. Thank you, Mr. Chairman.

Mr. Secretary, would you give us an evaluation of how well we
are doing in educating people in the elementary and secondary
education levels, based on the collective experience of those present
today.


103

Aid to Families with Dependent Children (AFDC). Of the total authorization, 93 percent will be
distributed to the states and the remaining 7 percent will be reserved for national activities.

States must meet four conditions in using the block grant funds: (1) a minimum 25
percent of funds be used for workforce employment activities and 25 percent be used for
workforce education activities; (2) job training centers must be based on the one-stop-shopping
centers; (3) school-to-work activities must be supported; and (4) performance benchmarks must
be developed.

Both the original House and Senate versions of the bill called for repealing the training
component of TAA beginning July 1, 1998, while maintaining the program's cash benefits. The
full Senate adopted an amendment maintaining the program at current funding levels as a
separate initiative and not be consolidated with the other programs ($119 million was
appropriated for TAA in FY 1995, and that would decrease to $92 million in FY 1999).

Under the legislation JTPA will be repealed as of July 1, 1998, along with the Adult
Education Act, the Carl Perkins Vocational Education and Applied Technology Act, the School-
to-Work Opportunities Act, the Wagner-Peyser Act, Title V of the Older Americans Act, and
Title VII of the Stewart McKinney Homeless Assistance Act. According to the block grant
formula, a minimum of 25 percent of funds would be devoted to work force employment
activities. Training activities covered under the JTPA would be covered under the block grant.
For FY 1996, Congress has appropriated $3.2 billion for JTPA, a reduction of $750 million from
FY 1995 appropriation and a reduction of $2.3 billion from the administration's request. Final
Congressional action on this consolidation proposal remains in doubt.

One-Stop Centers

In addition to the problems of eligibility and inadequate programs and funding, workers
are also confronted with a maze of state and federal programs. Many of these programs, while
aimed at addressing the same problem, actually work at cross purposes, and end up only serving
to further confuse the worker in serious need of assistance. This cacophony of programs is
particularly unfortunate during times of limited public funds for such efforts.

One idea that has been circulating is to use federal funding to encourage states to develop
“one-stop” centers which bring together all government programs to one location, making it
easier for workers seeking assistance. In order to establish such centers, state governors would
be asked to submit a plan to the Secretary of Labor detailing how they intend to bring together
(or have already brought together) the various resources available to unemployed workers. This
could range from establishing actual centers housing representatives of all relevant state and
federal program to creating a automatic bank teller-type system of providing written material on
various programs to a phone-information system. This coordination effort would be jointly
financed by the Pubic Employment Service (ES) and the JTPA/EDWAA funds. In those states
where these centers already exist, the Labor Department would review their effectiveness and
make recommendations of how they may be improved.

These "centers" would bring Unemployment Insurance (UI), ES and JTPA in-take
services and program information and referral under the same roof. Most people who receive UI
intend to retum to work and they should have access to ES and JTPA services.

Employment Services would include skill assessment, job search assistance, including
resume writing and interview skills and identification of employment. JTPA should focus on the
need for and availability of training. In order to provide these services, these offices must have
access to qualified counselors and the adequate information concerning potential jobs and
training programs. Centers could choose to contract out for counseling services.

In addition to UL. ES and JTPAVEDWAA (which in some states are already combined),
these “centers” would also bring together representatives from other worker-oriented programs,
including EDWAA, TAA. all defense convergence programs and other targeted programs (Clean


39

try are areas in which we are currently, as a country, reducing our
investment.

Now, that may make a lot of sense, but it is having the second-
ary effect. The Department of Defense—and normally you do not
hear an official from the Department of Education arguing the case
for the Department of Defense, and I do not intend to do that—but
the fact that we are not investing in the kind of resources in
defense research.

Much of that research was being done in our colleges and univer-
sities, in our science and engineering programs, and was providing
support for students in those programs.

, our disinvestment in various areas clearly takes a toll on the
highest levels of achievement in our country.

I think one of the other dilemmas that we have is that the mar-
ket really does work, in this country, and students go where they
believe the jobs and opportunities are going to be and have been.
There has been a tremendous amount of interest in business edu-
cation at the postsecondary education level over the last decade,
and a declining interest in science and engineering.

As the market requires and demands those services, and remu-
nerates people appropriately for them, we will see a return in in-
terest in those science and engineering programs.

They are relatively expensive programs for colleges and univer-
sities to provide, so unless there is a clear demand from the mar-
ket, it is not one of those areas they are going to jump into without
pretty strong evidence that student demand will be there.

You cannot support the program for long without a strong
student demand component.

Mr. Payne. Thank you very much.

Chairman CRANE. Thank you, Mr. Secretary.

Mr. LONGANECKER. You are welcome.

Chairman CRANE. And with that we are going to recess.

Mr. RANGEL. Let me——

Chairman CRANE. You had another question, Charlie?

Mr. RANGEL. Yes, I just have one. This marketplace thing—some
of our communities cannot compete in this market thing, and that
is where my colleague and I have some major problems.

If those schools that we were talking about, that are operating
at a substandard level, those districts—I guess that is the best way
to describe them—is it possible that you could locate, geographi-
cally, where they are? Do they come up in clusters, and are there
other indicators that would show why these schools are not being
productive, the District of Columbia being one?

Would they be basically inner-city schools?

Mr. LONGANECKER. Mr. Rangel, I really—I do not know the
answer to that.

Mr. RANGEL. Well, I never mentioned race or Hispanic or any-
thing—I did not think there was any need to—but when we talk
about the marketplace, certainly you are not talking about these
places, that are not productive.

Mr. LONGANECKER. No, that’s the—

Mr. RANGEL. And you would agree that there are clusters that
have other characteristics besides unproductive schools.


What

64

New jobs require more education. Job growth in the past decade has been concentrated
in sectors requiring high education attainment, which outpaced job growth in less-
demanding sectors by about 3 to I. The trend shows no signs of abating, Sixty percent of
all jobs created by 2005 will require some postsecondary education, according to the
Bureau of Labor Statistics

Better knowledge of job requirements is needed. Due to the accelerating rate of change
in needed skills and workplace structures, far more explicit information about worker
knowledge and skill requirements is needed. We need a common, clear language of
quality and expectations for everyone -- employers, employees, job seekers, educators,
students, and human resource managers. Initiatives that develop voluntary, industry-based
skill standards are necessary to improve training and to inform people seeking jobs and
promotions about employer's needs

New employment options and flexible benefit packages emerge. As skill demands
escalate and the competition for labor intensifies, we are seeing a host of new employment
relationships, including full time, part time, contract, or contingent workers. This calls for
a new relationship between employer and employee which is rooted in building
employability To cultivate the long-term employability of their employees, and to
increase loyalty, companies are restructuring benefit packages to provide: portable health
insurance and pension benefits, family friendly workplace policies, more dependent care
options, and flexible education and training for all employees, including education aid for
additional knowledge outside of the person's specific job requirements, In addition, firms
are participating in the development of portable skill credentials, Employers that provide
these things have the best chance at winning skilled employees and gaining their loyalty

for Workforce

rs are Doi

The rapid changes in the labor market have made employers far more attentive to human resource
development issues, because their competitive advantage relies on workforce quality. Companies
are investing more in workforce development, because new data directly links the value of
education and training to the bottom line of business

More is spent on education and training. Corporations are increasing their investments
in education and training. In 1995, corporate training budgets totaled about $52 billion
That represents a 15 percent increase from the level reported in 1990 Over 60 percent of
companies surveyed are increasing training investments, and only 2 percent are decreasing
investments, More employees are receiving training. Over 41 percent (approximately 46
million employees) reported receiving skill training from their employer in the most recent
data (1991), a 36 percent increase over the prior 1983 figure

Corporate programs for educational remediation are increasing. The number of
companies providing remedial education programs has increased five-fold, rising from 4
percent in 1989 to over 20 percent in 1994. For example, MCI Communications
Corporation, which spends about $75 million per year on training, devotes 10 percent of
that total to basic educational skills

Corporate universities are increasing. We are seeing a dramatic growth in corporate
“universities." There are now over 1,000 company universities, up from a level of 400 in
1989, These institutions commonly train the employees of suppliers, contractors, and
service companies in addition to training their own employees. Some better known
examples include: McDonalds, Motorola, Xerox, Disney, Intel, General Electric, and
Sprint

Business involvement in community coalitions for education reform is up. Business
has increased its involvement in community partnerships to improve local schools. The
number of formal state and local coalitions of business, educators, public officials, parents,
and administrators has increased to over 240 nationwide that the Alliance has been able to
document so far


35

READING

4th Grade 9th Grade
Country Overall Mean Score Country Overall Mean Score
Finland 569 Finland 560
United States $47 France 549
Sweden 539 Sweden 546
France 531 ‘New Zealand 545
Italy 529 Hungary 536
New Zealand 528 Iceland 536
Norway 524 Switzerland 536
Iceland 518 Hong Kong 535
Hong Kong 517 United States 535
Singapore 515 Singapore 534
Switzerland sil Slovenia 532
Ireland 509 Germany (East) 526
Belguium 507 Denmark 525
Greece 504 Portugal 523
Spain 504 Canada (BC) $22
Germany (West) 503 Germany (West) $22
Canada (BC) 500 Norway 516
Germany (East) 499 aly 515
Hungary 499 Netherlands 514
Slovenia 498 Ireland sil
Netherlands 485 Greece 509
Cyprus 481 Cyprus 497
Portugal 478 Spain 490
Denmark 415, Belgium 481
Trinidad/Tobago 451 Trinidad/Tobago 479
Indonesia 394 Thailand 477
Venezuela 383 Philippines 430

Venezuela 47

Nigeria 401

Zimbabwe 372

Botswana 330


67

Chairman CRANE. Thank you, Mr. Jones.
Mr. Litow.

STATEMENT OF STANLEY LITOW, PRESIDENT, IBM
FOUNDATION, ARMONK, NEW YORK

Mr. Litow. Thank you very much, Mr. Chairman and Congress-
man Rangel. I am delighted to be here.

You have our written testimony. I would just like to highlight a
couple of points, because IBM is one of those companies that thinks
education, and education and adult training included, are the
primary issue that we should focus our attention on.

And we came to that conclusion after doing a fair amount of our
own research. We asked our employees, since IBM is the leading
company in terms of corporate social responsibility in the country,
what issue do you think is most important in your community?
Where would you like to see the IBM company involved?

They identified education as issue number one. In five cities
around the country where we did surveys of community leaders
and our customers, we asked them what issue they felt was most
important, where should we focus our effort and our attention; they
said education, kindergarten through 12th grade.

We looked at the ‘CNN poll that demonstrates that Americans
overwhelmingly believe that the quality of our schools is the major
issue facing the country today.

So, we have focused our contributions program within the IBM
company on energizing our people, our cash, our technology and
our technical assistance in finding ways to use technology to
improve our schools.

We have moved beyond join-a-school and adopt-a-school to work-
ing in two States and eight cities around the country to identify
ways where technology can eliminate some of the key barriers that
have stood in the way of reaching those high standards that we
want to achieve.

So for example, in Charlotte, North Carolina, we have put our
technical ability to work on the gap that exists between home and
school. Many parents cannot or are not involved in their children’s
education.

IBM has designed a system, grounded in IBM technology, that
will permit parents in the Charlotte school system to view their
child’s academic records and portfolios, to talk to their child’s
teachers, electronically, through access points at public libraries
and community centers, and housing authority projects, so that
they can be involved in their child’s education on a day to day

asis.

It does not have to be between the hours of 9 a.m. and 3 p.m.,
it does not have to be once a year at a parent-teacher conference;
it can happen on a regular and steady basis.

We think, by this example, not in one school but an entire school
system, we can demonstrate to other school systems some construc-
tive ways to involve parents in their child’s education, and it does
not have to depend upon technology in the home to be able to do
that.

In Cincinnati, Ohio, we are experimenting with a system that
will extend the school day and the school year, by allowing stu-


104

Air and Spotted Owl, where applicable, and NAFTA, etc.) Initially, representatives from each
of these programs would be on hand to provide information and possibly assist eligible workers
to apply for benefits. Eventually, state counsellors would each become informed of these
programs so that a worker need only speak with a single person to learn about all of the programs
available to him.

In addition to waditional worker-related programs, representatives from other public
assistance programs should eventually be brought into these "centers." This includes Aid to
Families with Dependent Children (AFDC), Veteran's benefits, state economic development
programs, etc. Centers could choose to provide information on each of these programs, or in
some cases provide in-take services, Federal and state guidelines would be reviewed to
encourage maximum coordination of benefits into a single package. States could choose to train
individuals to represent several programs, in order to prevent having one person for each
program at these centers. This would be particularly important in smaller localities.

States would also choose to house representatives from the school-to-work programs and
National Service program at the centers. In addition, centers could also provide information and
assistance to employers and employees on taining programs for active workers.

Under the current JTPA program, Private Industry Councils (PICs) are responsible for *
developing the strategy and overseeing its implementation. Each Service Delivery Area (SDA)
has a PIC, established by the lead elected official in that SDA, made up of representatives from
private business, unions and public assistance agencies, including the ES, welfare, and education.
The responsibilities of the PICs would be expanded to oversee the coordination of these various
programs as well as setting priorities and managing these centers. Membership on the PICs
would also be expanded to include at least one representative from each program participating in
the centers.

In addition to bringing together all job-related services, these "one-stop centers” would
also be conveniently located, accessible, and have hours which meet the needs of employed and
unemployed workers.

States could include private service providers in the “centers.” One primary candidate
would be to contract out to private companies to provide career counselling services. These
contracts would be competitively bid, based on some kind of outcomes-based performance
record. A voucher system could be used to help measure customer preferences and outcomes.

‘As with all programs, adequate provision for proper evaluation should be written into
any program changes. This should include short-term evaluation of response and
appropriateness of services. In addition, attention should be given to evaluating the long-term
effects of such programs. This means tracking workers through the program as well as how they
are faring three or four years after. These evaluations are probably best performed by private
consultants.

Private Efforts

Anecdotal evidence suggest that those firms which invest in their workers, primarily
through training and the creation of "high performance workplaces,” tend to outlast and
outperform firms which do not. Unfortunately. it appears that only a minority of firms seriously
invest in training. One of the by-products of this under-investment is a lack of credible data
about how much training takes place, who does it, and what is the return.

The American Society for Training and Development estimates that US companies

currently devote approximately $55 billion annually for format training." Although the private

“Laurie Bassi, "Expenditures on Employer-Provided Training,” American Society for
Training and Development, mimeo, July 1996.



126

any, the Federal Government policymakers can be of more assist-
ance to them.

And also to make certain that they have a forum to applaud
what is working, and to share with us any of there own accom-
plishments.

This is really a beginning. We are going to have the opportunity
to get together with educators, as well as producers in the private
sector, and if I said it a million and one times, it is that I am con-
vinced that it will be the voice of the private sector that will be far
more effective than those of us who have to be concerned about 2-
year terms, and whether this vote appears to be fair for all of our
constituents, as opposed to, what does our Nation specifically need,
and how can we provide that service.

Mr. ROSEN. Mr. Rangel, I would like to offer all of the resources
of the Council to help you in your efforts, in the meetings that you
want to hold in the fall.

We are certainly prepared, because this is exactly what we are
all about.

Mr. RANGEL. Accepted.

Mr. Rosen. And anything we can do to help you, we would be
more than happy to.

Mr. RANGEL. Accepted.

Mr. Rosen. But if you were to ask me what the government
should do, I would say “be consistent.” The problem has been that.
the government steps in and then steps out, in and then out. For
example, we heard a big cry about a “Nation At Risk” in 1984.
Nothing has really changed since that report was published, and
yet the policy has gone back and forth since then.

Mr. RANGEL. Mr. Rosen, you are the only person here that is
more excited than I am. I am not concerned about what we have
tried to do and have failed, because you and I are agreeing that we
are doing a political thing.

What I want is for businesspeople—I mean, it is just like with
research and development—I want it to be that important that
when you plan what you have got to be there for you.

But I would want—I am a politician, so I want all of the voices
in business to be saying this, and not just you and not me.

Mr. Rosen. Right.

Mr. RANGEL. And I am convinced that when they know it is not
only good for their balance sheet, good for their company, good for
the industry, but good for the country, that we will find what you
are talking about—consistency—because their voices will not only
be in the education community, and talking with administrators, it
will be here, where tax and economic policy is set.

So, I welecome—

Mr. RosEN. But my point is that they are not getting a consistent
message. Right now we are being told that the economy is doing
well, and we do not have any problems. So why would we need to
do anything if we do not have any problems? The message keeps
changing. The challenge of raising living standards is a continuous
challenge. It is not something that will go away tomorrow, so we
have to keep working at it, and always keep improving ourselves.
That is the message we should be sending out.


45

THE NATIONAL ACADEMY FOUNDATION: A LESSON IN LEARNING

When high school students understand and confront the challenges of their lives beyond the
classroom, their dedication to learning is transformed, Equipped with knowledge, skills and
practical experience to solve real-life problems, young people acquire a sense of direction
and resolve.

The National Academy Foundation (NAF) offers students academic opportunities and
practical experiences within their own high schools through a two to four year Academy
program. The Academy model consists of a comprehensive, exciting sequence of courses
that focus on a particular industry and supplement regular curricula. Classroom leaming is
reinforced by oh-the-job experience acquired through paid summer intemships - a
combination that bridges the gap between the classroom and the workplace while offering
students a chance to explore career interests.

In 1988, after several years of success with the Academy model, the American Express
Company created an independent foundation, NAF, to reach out to more students and
respond to growing interest from the private sector to become involved in the education of
America's youth. Today, NAF combines the resources of business, government, schools
and communities to bring high school students a multifaceted, relevant educational
experience. In addition to the American Express Company, the Travelers Group, the
Corporation for National Service, the Bankers Trust Company, and the Fannie Mae
Foundation, more than 750 corporations, civic agencies, non-profit organizations and small
businesses have joined NAF in its drive towards integrating the real world into the
classroom and offering students a choice about their futures.

The NAF Academy programs include the Academy of Finance, the Academy of Travel &
Tourism and the Academy of Public Service.

NAF continues to replicate its Academy programs in new sites and will adapt the Academy
model to new industries. NAF's Academy of Finance is a member of the US Department of
Education's National Diffusion Network (NDN), which disseminates exemplary educational
programs across the country.

A school principal or superintendent is often the first to contact NAF to request information
about planning and developing an Academy. If the school system decides to request
funding and other support services to establish an Academy, a proposal describing start-up
plans must be submitted and approved by NAF.


87

tive employment. So far that is really not happening, and we are
very far from that.

So, I just want to reemphasize the importance of that point.

T shy a little bit away from the fact that people place a lot of this
blame at the feet of teachers and say that schools are “failing.” I
do not really think so. I think that most of our teachers really do
want to teach young people, knowledge and skills they will need for
their future.

I do not think we have some kind of an evil school bureaucracy
out there, that is really trying to undermine our young people at
all.

I think one of the larger failings comes from the fact that the em-
ployer community has not addressed this question effectively
enough, and has not made clear enough to the schools what it is
they are seeking, and we hope that the standards movement will
help to close that gap.

Mr. HouGHTON. Could I just ask one more question, Mr.
Chairman? I know my time has run out.

You know, there are many issues out there that you cannot quite
tie together, the many different solutions to those issues, and I
suppose we have just got to peck away at it, and the greatest ex-
ample, probably, is better than a lofty sermon or a set of principles.

But there is one approach that has been used in the area in
which I live, Upstate New York, It is the relationship—and maybe
you have talked about it, and I am sorry if you have, and I missed
it—of businesses and secondary schools, high schools—summer pro-
grams for people to come in—coming in and understanding what
the manufacturing, retail, or the service process is.

So that the business leaders in the community have this sense
of responsibility, and all of a sudden opened up to many others who
never would have that opportunity, other than just going and
knocking on the door and asking for a job—an introductory expo-
sure to what the business is all about.

It seems to be working, and I do not know whether that is so in
other parts of the country, or what your experience has been.

Mr. JONES. There are several programs, Congressman Houghton,
around the country that are designed to bring teachers and admin-
istrators into the workplace during the summer, on a rotating
basis, and vice versa—bringing businesspeople into the school
system.

It is a piece of this equation, there is no question about it. It
helps a great deal. Standards become more real if they can relate
them to such an experience, but the standards issue still is at the
heart of the debate.

There is no question that putting these together, along with the

ition that standards are not created for the final outcome.
Twelfth grade is a little late in life to solve this problem.

The standards movement is really designed because the major
impact on education in this country, with young People, is up to the
fourth grade. If we do not keep them at stan by the fourth
grade we lose them; it is hard to ever recapture it after that fact.

Putting teachers in workplaces together, getting this message
across to them, in that place, but the real meaningfulness of stand-


8

Now, what does that mean for all of us? It means that the pri-
vate sector has a huge stake in a skilled work force.

I just came back 2 days ago, from the Midwest. I was in Ohio,
and Minnesota, and several other places. What did I hear from em-
ployers there? Over and over again, the same lament: “I can’t find
the skilled people I need,” they said.

“The major thing that is constraining growth and productivity in
my business,” they said, “is the lack of skilled people; I can’t find
them.”

Now, when we look at the entire debate over growth that is
occurring in this country, how fast can we grow without igniting
inflation? Again, let us go back to basics.

If we have more skilled people, if we have more educated people,
we can be more productive, and more productivity is the key to
greater growth. Investments in our people in education, job skills
and job training are the key investments the private sector or the
public sector needs to make.

And the irony of the trip I just made to the Midwest, when I
heard from business leaders that they cannot find skilled people,
the irony is that I also met with a lot of people—blue-collar, poor—
who said to me, “Yes, we have jobs, but we’re having trouble
getting ahead.”

There are jobs now available, many more jobs than ever before.
In fact, the unemployment rate in many of those States is now 2,
3, or 4 percent—terrific. “But,” say these people who do not have
the adequate education and skills, “we are faving a hard time.”

Technology is your friend if you have the right skills; technology
is your enemy if you do not. The global economy is your friend if
you have the right skills; it enhances your marketability. It may
not be your friend if you do not.

Business and the public sector have a huge stake in an educated
and skilled work force. When I say these things to business groups,
I almost invariably find myself in front of people whose heads nod
in agreement.

This is not a controversial issue, this is not a partisan issue, this
is not a Democrat versus Republican issue, this is not a conserv-
ative versus liberal issue. We all understand this basic principle,
but where we get into tugs of war is over how we do it.

Unfortunately, cooperation and good news are not the most excit-

ing things to appear on the evening news. When the business com-
munity, when public policy makers, when government with commu-
nity-based organizations, when we work together to make sure that
our people are better skilled, that does not make for a lot of excite-
ment, but it is going on.
People do not know about it, they do not hear about it; it is going
on. The School-to-Work Apprenticeship Program started 2 years
ago. We now have 150,000 businesses involved. We have almost a
million young people in grades 11 and 12 who are learning skills,
they are also learning their academics.

They are going on after grade 12 to get additional skills, even if
they may not go on to college.

fe are seeing businesses all over this country beginning to take
more and more interest in community colleges, helping people get
training at community colleges that fit what those businesses need,


U.S. TRADE COMPETITIVENESS AND WORK
FORCE EDUCATION AND TRAINING

THURSDAY, JULY 25, 1996

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,
SUBCOMMITTEE ON TRADE,
Washington, DC.
The Subcommittee met, pursuant to notice, at 11:28 am., in
room 1100, Longworth House Office Building, Hon. Philip M. Crane
(Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]

a)


42

and just sweeping at McDonald’s. It is important in their seeing
that they can have a future, because they are the future of this
country.

Our program really operates in inner-cities throughout the whole
country. The population of our program is 70 percent black,
Hispanic, and Asian, so it is really a good representation of the
people in this country.

And it is a program where, when the young people work on it,
they realize the benefits. The participating industries see that
these young people are really terrific. We teach them how to inter-
view, proper manners, and we teach them how to dress.

We teach them how to feel good about themselves, the value of
education, and the value of the future, and I think that our goal
in the Travelers, and in America really, should be that we have a
program here that is replicable.

It has been copied, it works everywhere, and we would like to go
where we are teaching 1 million students a year, and have 1 mil-
lion summer internships, because that is the future of this country,
rather than the 12,000 that we now have.

I love to preach on this subject. I know I do not have much time,
but I really want to say that I am thrilled to be here. I can talk
about this all day, and if you give me the opportunity I will.

I would like to introduce John Dow, who is the chief executive
officer of the National Academy Foundation, who is sitting in the
back there, whom I work with. I am not sure who is whose boss,
but we work pretty well together.

And this is a program that I think has worked, not only in the
financial business, but it has been replicated in the travel and tour-
ism business and can work well in other industries, with the
cooperation of business and the public sector.

So, Mr. Chairman, thank you very much for giving me this
opportunity.

{The prepared statement and attachments follow:]


15

Chairman CRANE. Thank you, Mr. Litow.
Mr. Reddy.

STATEMENT OF LEO REDDY, PRESIDENT, NATIONAL
COALITION FOR ADVANCED MANUFACTURING, WASHING-
TON, DC

Mr. REppy. Thank you very much, Mr. Chairman.

I would like to congratulate you and your colleagues for having
the insight to recognize the direct relationship between our trade
competitiveness and the importance of having a skilled work force,
able to produce the goods and services we need to compete globally.

It is a connection that people have needed to make more firmly
than in the past.

For our part, our organization, which represents a broad coalition
of companies, trade associations, and technology centers around the
country, focuses on introducing advanced technologies into our fac-
tories. Our coalition has taken a very close and hard look, in the
last year, at what the public policy climate should be to accelerate
the movement and transition of our industrial base into the third
wave, if you will—into the information age.

We will distribute our report, which we published this year, sep-
arately to all the Members of the Subcommittee. The report is
called “U.S. Industrial Strength for the 21st Century.”

I can confirm Mr. Rangel’s observation earlier this morning that,
indeed, work force training and education is now up front on indus-
try’s agenda, and I think you have already heard that from my
colleagues here at the table.

The reason for that is quite evident. Companies are facing a
growing shortage of the kind of work force they need to be competi-
tive, and it is hitting the bottom line.

As one example I could give you—there are many examples—I
am going to distribute to the Members of the Subcommittee a chart
which one of my members just gave me, which describes the advan-
tages of a career as a precision machinist or tool maker, where
many experienced tool makers are making in the $40,000 to
$60,000 range annually.

And basically they are no longer working in gloomy rooms and
on greasy machines. They are working with computers and high
technology machinery.

It is a wonderful career. The problem is, there are now 20,000
jobs in this particular area that cannot be filled, in a $25 billion
industry. There is a real problem. Our data show that 4 out of 10
companies are unable to adopt advanced technologies to improve
their productivity because they lack sufficient skilled workers.

After looking into and debating this issue carefully, we came to
the conclusion that the Federal Government indeed plays an impor-
tant leadership role. The government can act as a catalyst. It has
done some excellent things. I think the skill standard projects that
Mr. Jones mentioned are a good example.

We certainly support School-to-Work, Tech Prep, and other pro-
grams—Job Corps, JTPA—these are all worthy programs. How-
ever, the Federal Government is limited in its resources in this
area,


82

‘Another requirement for effecting a basic shift in school priorities towards
productive employment is to place much stronger emphasis on career guidance. Most
students are not well informed about the world of work and have few guideposts to steer
by. As a Competitiveness Policy Council report observed, “Students not immediate!
‘bound for college get litte in the way of occupational counseling or know anything about
career opportunities and requirements and their rights and responsibilities on the job.”

Career orientation and preparation for work in an Information Age economy should
start should start in the primary grades and continue throughout secondary school--nat be
postponed until graduation time,

‘An effective system of career orientation would require that teachers also become
‘more familiar with the employer community in their areas. Teachers and employers should
‘create increased opportunities for teacher summer training within local firms and for
‘company experts to offer instruction at schools. Teacher interning, job shadowing and
career mentoring are invaluable tools in furthering student leaning and workplace
awareness, Provision shouldbe made to fund the release te fr teachers to engage in
ese activities.

‘Some of the same practices described above could also be applied to good effect at
the college and university level. In particular, these institutions are weak at helping.
students with job placement and tracking their progress after graduation (except for alumni
contributions). Industry-university ties should be greatly strengthened for this purpose,

In sum, meaningful career preparation requires a seamless web of orientation from
the early grades through technical schools, community colleges and higher education
through which youths and young adults can obtain information about:

+ careers and the qualifications needed to enter them

+ the academic and occupational skills needed to enter the field

+ post secondary systems that offer more advanced programs, and

+ employer programs that offer opportunities for greater expertise.

This continuum of opportunity will provide students a chance to “be all they can

be”-2 slogan that the military did not choose by accident.

NACFAM Recommendation 4: Increased Employer Engagement and
Leadership

‘The work-based school system described above would require a major culture
change in most schoo! disincis. Yet even employers who take a direct interest in the
schools fee! that their ability to change the system is limited.

Perhaps the most effective way for employers to increase their influence over the
schools is to become actively involved at the community level, following the lead of
‘employers that already do. A more vigorous role by industry underpins all these
recommendations in the field of workforce education

‘The employer community must communicate its needs in specific terms through
leadership in creating skill standards, preferably benchmarked against national standards.
‘They should strongly support those educators and trainers who undertake change to meet
those needs, and insert the concept that “all students can lear” into every discussion. Most
importantly, when individuals who have met employer-driven specifications are prepared
for work, employers should give them good jobs.

‘An investment of human resources and leadership in helping to re-direct the schools
towards preparing individuals for productive employment will provide companies with
‘workers with the skills needed to increase productivity, improve quality. and response to
customer needs.

This investment will also enable companies to enjoy substantial cost savings in
recrating and screening entry-level workers. remedial raining, and re-training of
incumbent workers. In addition to helping students find rewarding employment, employer
leadership will also assist schools and teachers in gaining the support of the employer
‘community in meeting their resource needs.

For these reasons, NACFAM is highly encouraged by the meeting this spring in
Palisades, New York, organized by industry leaders. The focus of responsibility was
correct: on employers and state governors. The strong emphasis on standards was also
right. The key requirement is follow through to ensure that those standards are, in fact,
‘employer driven and that the schools use these standards as the foundation for curriculum
atthe classroom level,

Mr. Chairman, the challenge of educating and training the American workforce to
meet the pressures of the global competitiveness challenge of the 21st Century is vast. As
the recommendations Ihave cited suggest, the starting poit for nsing 1 ts challenge iso
make productive employment for all of our students the first priority of the nation’s
schools.


US. TRADE COMPETITIVENESS AND WORK FORCE
EDUCATION AND TRAINING

HEARING

BEFORE THE

SUBCOMMITTEE ON TRADE

OF THE

COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
SECOND SESSION

JULY 25, 1996

Serial 104-88

Printed for the use of the Committee on Ways and Means

ce

U.S, GOVERNMENT PRINTING OFFICE
43-962 CC WASHINGTON : 1997

For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC. 20402

ISBN 0-16-055727-5



108

Competitiveness Policy Council

Appointed by the President:

Robert E. Nelson (Business)
Chairman
Nelson Communications Group

Claudine Schneider (Public Interest)
Senior Vice President
Energia Global, Inc.

Albere Shanker (Labor)
President
American Federation of Teachers

Laura D'Andrea Tyson (Government)
Assistant to the President for Economic Policy
National Economic Council

Appointed by the
Bipartisan Leadership
of the US Senate:

Rand V. Araskog (Business)
Chairman and CEO
ITT Corporation

John Barry (Labor)
President

International Brotherhood
of Electrical Workers

William Graves (Government)
Governor
Stace of Kansas

Bruce Scott (Public Interest)
Professor of Business Administration
Harvard Business School

Appointed by the
Bipartisan Leadership of the
US House of Representatives:

C. Fred Bergsten, Chairman

(Public Interest)

Director

Institute for International Economics

Donald V. Fites (Business)
Chairman
Caterpillar, Inc.

Edward V. Regan (Government)
Former Comprroller
State of New York

Lynn R. Williams (Labor)
Retired President
United Steelworkers of America


131

Center for the Study of Economics

2000 Center Plaza, #238
Columbia, MD 21044
Tel. (410) 740-1177
Fax (410) 740-3279

WRITTEN TESTIMONY OF STEVEN CORD
BEFORE THE
SUBCOMMITTEE ON TRADF OF THE COMMITTEE ON WAYS & MEANS
7/25/96, 11 A.M., 1100 LONGWORTH RLDG.

STEVEN CORD has no clients and is appearing on his own
behalf and that of the Center for the Study of Economics.

The global trade competitiveness of the U.S. work force
will be much improved if the price of American exports is not
increased by taxes. That is clear enough, but if taxes on
producers are reduced, how then shall the federal government
support itself? By taxing more something of value which is
not humanly produced - i.e., the locational value of land.

In fact, if land values are taxed more, land owners will
be encouraged to develop their land-sites more, thereby providing
new jobs and economic growth. Here, then, is a revenue source
which promotes not hinders economic grovth! Tt is tax-free
economic development (tax-free because only a tax shift from
produced goods and services is shifted to something which is
not produced).

Why vould land owners be encouraged to develop their
land-sites more efficiently? Fecause that is the only vay
they could get enough income to pay the higher land value tax
(plus a profit for the enhanced improvement).

It is possttie for the federal government to levy such a
tax to replace taxes on producers, and it is also possible
for state and local governments to levy a land value tax.
But implementation problems are best handled by contacting
this organization directly; we have closely studied the
problems of the philosophy and implementation of land value
taxation for many years..

T€ we truly want U.S. workers to be more productive and
if ve truly want to enhance U.S. trade competitiveness, then
we shouldn't tax production. We should tax the locational
value of land instead, So also say seven recent American
Nobel Prize winners in economics (see attachment).




109

Table 1
Government Expenditures on Labor Market Programs

(Percent of GDP)

Country Unemployment | All Labor
Compensation | Market Programs

Canada 1.58 2.09

France 0.28 pers 287

Germany 023 130 232

Japan NA 036 082

United 022 094 1.62

Kingdom

United States 0.10 038 0.2

Source: Organization for Economic Cooperation and Development, Labor Market Policies for the 1990s,
Paris, 1990. Table 14. Data refer to the period 1988 to 1990. (US data inelade Perkins Act vocatiousl

training)


30

accessible system; we also are getting an increasingly expensive
system.

By and large, higher education is still a pretty good deal. The av-
erage baccalaureate degree in this country at a public institution,
tuitionwise, would cost about $12,000 over the life of that edu-
cation, and that is a pretty good deal. That is a heck of a good
investment, compared to most other things.

So it is a mixed story. We need to be concerned about it, we need
to make sure our Federal policies do not contribute, unintention-
ally, to the escalation of costs. That is probably our strongest role.

Chairman CRANE, Thank you.

Mr. Rangel.

Mr. RANGEL. Thank you, Mr. Chairman.

Thank you for being with us, Mr. Secretary.

Mr. LONGANECKER. It is good to be here.

Mr. RANGEL. I gather from your testimony, and certainly my
friendship in working with Secretary Riley, that you would con-
sider education in America to be a very serious issue, that we
should be seeking ways to improve the overall quality of that edu-
cation as we move into a high-tech era.

Mr. LONGANECKER. Very much so, and in my specific area, post-
secondary education. I mean, you can see that in our elementary
and secondary initiatives—Goals 2000, School-to-Work—those
initiatives.

Mr. RANGEL. Now, having said that, our businesspeople are shar-
ing with us what they think, it is a pretty serious thing, if they
are going to maintain the high level of competitiveness they have.

Mr. LONGANECKER. Absolutely.

Mr. RANGEL. And then, of course, when you hear Secretary Reich
talk about the relationship between those dropping out of schools,
and not having jobs, and the tremendous social problems that that
creates, and the hundreds of billions of dollars that are involved in
not stopping it but containing it, I cannot think of anything that
could be described more as a Federal issue than this.

You would agree?

Mr. LONGANECKER. Well, yes, but it is one that we clearly do
share with the state and local governments, in part because of the
Constitution, but also simply because our investment, although it
is fairly substantial, is still a modest portion of the overall invest-
ment in education.

So we have to find a way to partnership effectively—I would sug-
gest more effectively than we have in the past. Those Federal dol-
lars, instead of being the tail, ought to be wagging the dog now.

Mr. RANGEL. OK, now, if I understand you correctly, Mr.
Secretary, you are saying that, while it is a national issue and a
Federal crisis, and could involve our ability to maintain inter-
national leadership, that historically and constitutionally we really
do not give much money to it, and we have to be in partnership.

And if I was to exaggerate, I would say that this national crisis
basically will be resolved by local school boards, with contributions
from us.

Mr. LONGANECKER. Well, that is the way the system certainly
works at the elementary and secondary level.


89

Once a company sets its standards, they will have a much clearer
idea and be able to define more systematically the skills they are
seeking from the work force.

Then we will collate these skills, and discuss them in com-
munitywide groups, in order to try to find commonalities that
schools can deal with. But it is really a bottoms-up approach.

By the way, I should mention that when we do factory floor
standards, those standards are defined by the workers, not man-
agement. People actually using the skills define the standards.

Then that gets interpreted back into the community, and through
meetings with school boards and teachers, then it is up to the
schools to reexamine their curriculum, reexamine their classroom
instruction, and make sure that there is a greater correlation be-
tween those requirements and what the schools are actually doing.

I am not just talking here about the factory floor, by the way,
I am talking about the work force generally. This would apply as
well up through white collar, up through management—the same
kinds of principles. We are thinking of doing the same thing with
engineers, for example.

With the concept of employer driven standards being the driver,
the schools then would adjust their curriculum appropriately, and
then there is an obligation back on the employer community to give
those people jobs.

The key thing is that employers use the standards themselves,
so that when people come back prepared with those skills—which
have to be revised | continuously, by the way, to make sure they are
still relevant—then they will get the work.

But if that happens, then you can see a very close correlation be-
tween yrhat people are getting at school and what they are taking
to work.

In drafting this part of our report, we got involved in a very vola-
tile argument, with people who thought that we were taking a
grossly utilitarian approach, and were attacking the whole concept
of liberal arts, that we were attacking the whole concept of learn-
ing for its own sake.

Of course we are not really saying that. However, I think we
would agree with the observation, from my friend from IBM, that,
when you really look at it, the way our school structure and philos-
ophy is currently organized, it is a very old kind of philosophy.

It has its roots in a society where people really did not need to
get an education for a job. They already had wealth. I mean, they
had aristocratic lineage, or they were the gentry, they did not need
to work. Therefore learning for its own sake, and dabbling in var-
ious areas of knowledge was enough, and perhaps appropriate for
that particular time in history.

But at a time when our work force is in a globally competitive
environment, where their skills are being tested every day, by
countries that are fiercely competitive in the global marketplace,
we think we are not doing a service to our own people unless we
much more consciously prepare them to be prepared for the work-
place, using the kind of approach we mentioned.

I am sure there are other approaches, but that is really more or
less what we mean by structural change.


84

And, since I am 65 years of age, and I was a traveling salesman,
a university professor, a headmaster of a private school, and then
a politician, I am going to have to go back to school before I make
that next shift.

I thank you for your presentation.

Mr. Rangel.

Mr. RANGEL. I knew today was going to be one of the most excit-
ing days in my legislative career, and your testimony has proven

it.

I would hope that before I set up this conference that I would
have the opportunity just to meet with the three of you, to make
certain that we do not have a waste of time. And when you said
that your firm, IBM, was doing this for the company, you meant
the broader community, and that there has to be change.

What is really working against us is the system that allows local
property owners, and state legislators, to fund the schools. The
schools are not funded according to need, they are funded according
to equality.

And so each legislator has to go back home saying he got just as
much as someone else did, or the bill is not going to pass. And
since the majority of the legislators do not have the same problems
that a few of the districts have, we do not have a system that is
based on the needs of our country, it is based on the political needs
of our legislators.

One of the things that has been missing is that the private sec-
tor, recognizing this, could not find a forum to express the issues
in the way that the three of you have today.

If we met with the people who set the policy, and if indeed this
Subcommittee, that not only deals with tax policy, can provide in-
centives, we can provide ways that in every town and every village
it would not be just the local legislator, it would be people saying,
“Well, what about America?”

And so, as you said, Mr. Jones, so eloquently, I am out of doing
social work. I am with Mr. Crane, I want to broaden the economy;
economic wealth is the only answer, and reducing our national defi-
cit, and reducing taxes, and providing more incentives for those
people with money to invest with little or no risk, so that we'll be
more productive.

And while we are doing those things, you will be also a part of
the national group that are saying, “And do not forget that invest-
ment in human productivity, because we need them both.”

d so, I am out of social programs, and I think what we say
is three things. One, we have to find out from you what your speci-
fications are going to be, not just for your balance sheet this year,
but for the decades after, and what you need.

Two, we cannot just merge our companies, and say that we do
not need this human machinery, and so you are just dismissed. We
have to find a way to make certain that these people are going to
be trained for something, because they have mortgages, they have
families, they have responsibilities, but for God’s sake, do not let
them lose hope.

Because there are some people who depend on taking advantage
of their hopelessness, they do not make a positive contribution.


12

Skills have always made a difference in income, but today
that difference is enormous. Earnings for men without college
degrees -- three out of four working men -- have fallen by 12
percent since 1979. And, over the same time period, the income
gap between men with coliege degrees and those with high school
diplomas has widened from 49 percent to 96 percent. For women.
the disparity has gone from 44 percent to 84 percent.

One study, reported in the newspaper the other day, says
that this gap may be levelling off. But whether it's 70 percent
80 percent or 90 percent, it's a substantial difference, And
other research indicates that the least-educated are unlikely to
improve their skill levels over the course of their careers.

Americans whose skills are out of date, or out of sync with
the economy, risk falling farther behind

According to the Bureau of Labor Statistics, about half of
the new jobs that will be generated over the next decade will
require Some post-high school education, and many will require
advanced technological skills

Left unchecked, the wide disparities in income and
opportunity can undermine the coherence of our society. A
society too sharply divided between winners and losers cannot win
in the global competition of the 2ist Century

So what do we do about it?

Getting the economy moving again -- creating a framework for
businesses and working families to succeed -- has been the first
order of business in this administration. Under our watch,
unemployment is down, interest rates are down, inflation is low,
and the economy has generated 10 million new jobs

But there's a second challenge, and that is restoring wage
growth and economic security for the majority of working
families, and making the American dream of opportunity for all a
reality for all who are willing to work for it

And central to the task of meeting that challenge is to help
Americans get more education and build their skills. Doing so is
important to working families. It's important to our industries
It's important to our future competitiveness.

That's why the President has proposed to make the 13th and
14th years of education as universal to all Americans as the
first 12 are today. He would do that by giving families a tax
credit of $1,500 for each of the first two years of full-time
post-secondary enrollment. The credit would also be available
for students who study at least half-time, and it could be used
for job training and re-training.

Or, families could ge: tax deductions of up to $20,000 a
year to help them offset cullege tuition costs

The President has also consistently favored the exclusion
from taxable income of employer-provided educational assistance
under Section 127 of the IRS Code. And he has called for a new

ema] hyeiness Fay credit far 1A errant Af phe amannte noid fae

employee education and training.

We're working to change our unemployment system into a re-
employment system that will help dislocated workers get the
training they need to move them into new and better jobs.

We have begun the process of working with the states to set
up "One Stop Career Centers." Any job seeker can go to these
centers and get information on where the jobs are, where the
training is, and how to get it.


54

NATIONAL ACADEMY FOUNDATION

NAF PROGRAM EXPANSION

Number of 1982 - 1996
Programs 202
200. pan — ‘

150

|
|
{
|
|
|
|

—_—-- fe
OO ASEE TOES I9H4 1985 1986 1987 “19881989
Year

1982 1983 1984 1985 198619871988 1989 1990 19911992 1993 1994 1995 1996

cris $s # oo @ » 8 4S 0 8 0 % 8 1S
A0TT 272 2 8 BP WD 8 08 Ow 7
APS ros 6 § §&§ © 9

jor 5s 8) BoM OSs? «202



96

It is not enough to just acquire skills in order to enter the workplace; itis also important
for workers to maintain a high level of skills in order to continuously contribute to improvements
in productivity and facilitate labor force flexibility. Thus the next stage in the lifetime learning
continuum is ongoing training for active workers. The final stage of the continuum is training to
assist workers who move from job-to-job, from occupation-o occupation.

THE WHAT, WHEN, WHY, WHO AND WHERE OF TRAINING
WHAT

Training is undertaken in order to improve workers’ skills with the aim of increasing
productivity and economic efficiency. Consequently, training is seen as an investment in the
workforce, i.e. an investment in “human capital.”

There are both private and public retums to training. By improving workforce skills,
raising economic efficiency and contributing to the creation of wealth, benefits from training are
expected to be widely shared throughout the economy. Accordingly, investment in education
and training is viewed as a classic "public good.” Training also produces private returns to both
firms and individuals, By improving worker productivity, training should result in reducing
costs and raising profits for firms (holding everything else constant) which in tum should lead to
higher wages for workers.' Thus training has qualities of both public and private goods.

WHEN

Training has traditionally been viewed as primarily acquiring skills for a new job and has
concentrated on people either entering the labor force or voluntarily or involuntarily changing
jobs. In recent years, a more comprehensive view of investment in human capital has
emphasized the role of training in the system of lifetime learning. This broader view of human
capital development includes basic education, the transition from school to work, active worker
training to improve skills, and training for dislocated workers in order to assist them move from
job to job, This understanding of training has expanded beyond acquiring skills to also include
skill enhancement.

WHY

Training is usually undertaken for five reasons*: (1) Training is viewed as a response to a
labor market failure. Individuals are physically constrained from diversifying their knowledge
base, thereby constraining labor flexibility. Publicly supported training is seen as a means of
offsetting this market failure. (2) Training facilitates labor market flexibility, which in turn
contributes to improving economic efficiency and increasing economic growth. (3) Investing in
human capital is believed to improve the marginal product of labor (raise labor productivity) and
enable workers to warrant higher wages (higher living standard). (4) Training is sometimes
provided to compensate for lower wages or job loss. For example, as a response to massive
layoffs, the government or individual firms may provide some training to assist workers find
new jobs. (5) Training is simply undertaken as part of one's quest for more knowledge.

WHO

According to the lifetime learning model, training should be seen as part of an ongoing
process, for which everyone is eligible and continuously participating in order to expand their
skills and knowledge. Retums to training are based on an individual's potential for using the
newly acquired skills. Basic education is geared toward children and adolescents, school-to-

* Under conventional free market economic models, the price of labor is set at the marginal
product of labor (the change in labor productivity).

* This list is not intended to be comprehensive.


73

students to leam at their own pace. Software training applications will be based on the most
current industry requirements, and will be developed in close consultation with industry
experts and with the MIT Media Lab.

Michigan Career Technical Institute (Plainwell, Mich.) - MCTI will coordinate the Michigan
Workforce Support and Development Network, which is a collaboration of six non-profit
organizations. IBM technology will be used to create on-line training and employment
systems for Michigan's workforce, especially workers with disabilities. It is anticipated that
this program will enable persons with physical disabilities to gain access to quality training
and appropriate services regardless of where they are located. Emphasis will be on training
for the automotive, pharmaceutical and food service industries.

National Center for Adult Literacy (Philadelphia) -- Based at the University of Pennsylvania,
the National Center for Adult Literacy with technology from IBM will significantly expand
the national capabilities of the Adult Literacy Technology Innovation Network, which will
provide hands-on taining, as well as on-line training and technical support to the adult
literacy community.

Rebuild LA/Los Angeles Trade-Technical College (Los Angeles) -- IBM technology will be
used to create a "teaching factory” model for technical training of students studying the
apparel, fashion and textile industries. A high tech apparel production line and simulated
work environment will help students leam to operate in a real-time computerized production
mode. The program, based at Los Angeles Trade-Tech College, will also offer seminars and
courses to employers interested in learning about technological developments in the fashion
design and production industry.

SER Jobs for Progress National (Dallas) -- SER Jobs for Progress, the largest Hispanic
service-oriented non-profit corporate in the United States, provides extensive employment
training. SER will use IBM's technology to create new instructional English-as-a-Second
Language (ESL) and Adult Basic Education (ABE) training materials and distance learning
programs geared specifically to high-growth occupations such as those found in health care,
insurance, travel and pharmaceutical industries.

Tennessee Urban League Affiliates (Memphis, Chattanooga, Nashville, Knoxville) ~ Working
in partnership with the Tennessee Valley Authority and the University of Tennessee-
Knoxville, the Tennessee Urban League Affiliates will use IBM technology to develop a
model to analyze local economic data to identify industry-specific job opportunities, profile
local industry requirements for these jobs and then develop computer-based training for staff
and clients. Using on-line communications, all offices will be involved in project design,
development and testing of an industry- specific career path training program which moves
from entry level through advanced skills. It is expected that distance learning programs will
also be established to provide training at the workplace and at multiple training site.


36

SCIENCE
9 Year-Olds 13-Year Olds
Country Average Percent Correct Country Average Percent Correct
Korea 68 Korea B
Taiwan 67 Taiwan 16
United States 65 Switzerland 14
Canada 63 Hungary B
Hungary 63 Soviet Union 1
Spain 62 Slovenia 70
Soviet Union 62 Israel 70
Israel 61 Canada 69
Slovenia 58 France co)
Ireland ST Scotland 68
Spain 68
United States 67
Ireland 63
Jordan 37
GEOGRAPHY
13 Year-Olds
Country Average Percent Correct
Hungary 70
Slovenia 65
Canada 63
Soveit Union 63
United States 62
Spain 60
Korea 60
Ireland 39

Scotland 38


48

FROM THE CLASSROOM TO INFORMED CAREER DECISIONS

‘Thousands of students participate in NAF's Academy programs in communities across the
country. Students applying for admission must meet a minimum grade point average, have
a good attendance record and a positive attitude towards learning. Some students who enter
Academy programs are at risk of dropping out of school, or are not realizing their full
potential, but by the time Academy students graduate, virtually all are high achievers and
motivated to succeed in higher education or their chosen career.

PROGRAM ELEMENTS

Specialized Courses
‘Academy students take specialized courses designed by industry leaders and educators in
addition to their regular high schoo] curriculum.

A Chance to Establish Personal Career Goals
‘Academy students get to know the people and organizations involved in their respective
industries. ‘They visit banks, tourism facilities, real estate offices, goverment facilities,
attend industry meetings, hear guest speakers in the classroom, and meet business leaders
who serve on the Advisory Board for their Academy.

Paid Internships
Afier successfully completing the Academy requirements in their junior year, students are
screened and interviewed for paid summer internships. Each student is hired for a position
that assumes entry-level responsibilities. Many interns later work part-time or full-time for
the companies at which they interned.

Special Graduation and Scholarship Awards
Students attend a special Academy graduation ceremony and are often eligible for hundreds
of thousands of scholarship dollars.

Encouragement to Pursue Higher Education
Academy courses are developed to give students strong academic experiences at the high
school level. When possible, students take college-level courses in their home schools or at
local colleges. Success with these programs encourages many students who had not
considered continuing their education after high school to include college in their future
plans. More than ninety percent of Academy students go on to college.

Teacher Training

Academy teachers strengthen their credentials and abilities through participation in industry
training programs, local university courses, and staff development activities at NAF-
sponsored conferences.


17

to have declared a college major, and earned more college credit,
than their counterparts who went to regular area high schools.

What is particularly important is tt we found that magnet
schools had a positive effect on social behavior, including reduction
in teen pregnancies, alcohol and drug and tobacco use.

We often ask what schools can do to enhance business, to en-
hance our competitiveness? We also have to ask, what is it that
business can do to enhance education?

Schools and colleges can only be effective in preparing a skilled
work force if they have a strong partnership with employers.

I will end here. I would be happy to talk about how I think that
can be brought about.

Thank you.

[The prepared statement follows:]


53

NATIONAL ACADEMY FOUNDATION

hem et

NAF GRADUATE HISTORY
1984 - 1995

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
AOF 35 134137 196267458 S47 639_—-757_—«926 10281112
AOTT 5274 82_—*187 248384654
‘APS 96 3136
TOTAL 35 134 137 (196 267 S10 621 721 944 (12701525 1902

[_TOTAL NUMBER OF ACADEMY GRADUATES = 6262 |



138

JEFFERSON
WATERMAN

TWATIOWAL

Statement by
Stephen E. Lamar”

Before the House Ways and Means Trade Subcommittee
in response to its request for comments on

US Trade Competitiveness and
Workforce and Education Training

‘Thank you for providing an opportunity to submit a statement on the
relationship between US Trade Competitiveness and Workforce and Education
‘Training.

Clearly, workforce training programs play an integral role in maintaining and
enhancing US sklls to meet international competitive pressures. Whether
supported by the federal government, by individual states, or by private
companies, education and training programs serve as a tangible investment in
human capita} that is often among the most important investments made.
When properly administered, training programs serve as a catalyst for
entrepreneurship and provide the flexibility necessary to help firms and
individuals adapt te the marketplace.

Unfortunately, a lopsided provision of US trade law --- the Trade Adjustment
Assistance (TAA) program, which provides training for workers displaced by
trade -- actually undermines US competitiveness by distorting the public
understanding of the benefits of free trade. If left unbalanced, this provision
could upset the trade agenda for years to come.

To understand why, the TAA has this effect, one has to look at the character of
the trade debate in recent years. Assessments on the North American Free
‘Trade Agreement (NAFTA) and the renewed debate over China's most-favored
nation (MFN) trading status have focused considerable attention on the
relationship between trade liberalization and the creation of American jobs.
Although this relationship has long been accepted as the basis of a bipartisan
trade agenda, it has also been soundly criticized by those who disagree with the
notion that free trade is in the US national interest.

During the past year, for example, NAFTA critics led by Pat Buchanan and
Ross Perot, have angrily denounced that trade agreement by pointing to job
losses, factory shut downs, and Mexico's growing trade surplus with the United
States. NAFTA proponents have countered by making equally anecdotal claims
of jobs that NAFTA has saved or created, factory openings, and Mexico's
irreversible commitment to market-oriented economic reform.

Both sides have often backed up their claims with a well-used Reagan-era
‘equation which holds that $1 billion in new exports generates roughly 20,000
US jobs. NAFTA proponents look at in increase of roughly $5 billion in exports
to Nizxico since NAFTA took effect and see 100,000 new American jobs.
Applying the statistic in reverse, which is not entirely accurate since Mexico's
exports to the United States can displace imports from other countries as well
as domestic production, NAFTA opponents look at an increase of $22 billion
worth of imports from Mexico during that same period and see 440,000 lost
American jobs.

Fair enough. But NAFTA critics have been able to employ another statistic
with surprising effect. The NAFTA implementing legislation contains a

Mr. Lamar is Vice President at Jefferson Waterman International, a government
relations consultancy firm that advises foreign and domestic clients on US and
imternational trade policy.


49

ACADEMY OF FINANCE

‘There is more to the financial services industry than money in the bank. Over six million people
research, analyze, and buy or sell commodities, stocks, bonds, foreign securities, credit, real
estate, insurance and other financial products. Hundreds of thousands more people work in
accounting, computer programming, telecommunications and other industries that support the
activities of the financial services companies.

Experts predict that there will be almost 1.86 million new jobs in the field by the year 2000,
coupled with a simultaneous decline in the number of young people entering the workforce.
Preparing students to enter the financial services industry is essential to maintain the continued
growth and strength of America and to secure its leadership role in the world economy.

‘The Academy of Finance is a program that gives high school students an opportunity to learn
about, and prepare for, careers in financial services. It is one of several model programs
established to promote educational excellence by the National Academy Foundation (NAF).
This partnership links the resources of business, education, government and community.

The Academy of Finance bridges the gap between the classroom and the workplace. It helps
students develop career skills, evaluate their own potential for success and establish personal
goals through an enriched, two-to-four year comprehensive academic program housed in public
high schools.

In addition to required academic high school courses, students at the Academy of Finance take
two or three specialized courses per semester developed by NAF in collaboration with leading
educators and industry experts. These include: Economics and the World of Finance, Financial
Operations, Banking and Credit, Financial Planning, International Finance, Real Estate
Practices and Principles, English for Finance, and Mortgage Banking.

The June 1992 US Labor Department's SCANS (The Secretary's Commission on Achieving
Necessary Skills) Report, “SCANS in the Schools,” cited NAF's Academy of Finance
curriculum as exemplifying the manner in which SCANS competencies might be successfully
integrated into schools. The report also noted that “NAF curriculum has a wide range of
activities to foster interpersonal skills needed in the world of work.”

The recently enacted School-to-Work Opportunities Act validates that the Academy model and
the Academy of Finance have been cited by many independent agencies and organizations as
prototype programs for this new federal initiative.


78

U.S. TRADE COMPETITIVENESS AND WORKFORCE EDUCATION
AND TRAINING

Before the Subcommittee on Trade,
‘Committee on Ways and Means
US.House of Representatives - Longworth Buil
July 25, 1996, Washington, D.C.

Mr. Chairman

I would like to congratulate your committee on its foresight in organizing this
important hearing on U.S. trade competitiveness and workforce education and training.

You have recognized that global competitiveness and growing exports exert added.
pressures on the American workforce.

‘The only way in which our workforce can withstand those pressures 1s t0
continuously improve the skills it needs to produce globally competitive products and
services.

No sector of our economy understands this better than manufacturing.
Manufactured durable and non-durable goods represent over 80% of our nation’s exports.
Employment in the manufacturing sector together with nonmanfacturing industries directly
related to manufacturing accounts for about 41 percent of the nation’s workforce.

| would like to focus my remarks, therefore, primarily on the manufacturing
workforce--although much of my analysis and recommendations could apply equally to the
services sector.

Industry Perspective

‘The National Coalition for Advanced Manufacturing is a non-profit, non-partisan
‘organization of companies. technology and training centers, and national trade and technical
‘education associations that are working on and around the factory floor to improve the
‘quality and competitiveness of products made in America. We are committed to developing,
and helping to implement national programs and policies designed to accelerate the use of
advanced: Information Age technologies by all ers of the US. domestic industrial base

This year, NACFAM published a comprehensive White Paper, U.S. Industrial
Strength for the 21st Century, that represents our industry-led view of the public policies
‘measures needed over the next five years to maintain the U.S. lead in global industrial
competitiveness well into the next century. We will distcibute copies of this paper to all the
‘members of the Subcomrmuttee.

‘One of the principal sections in that White Paper is on workforce education. I will
use the analysis and recommendations in that paper as the basis for my testimony today.

Changes in the Workplace

‘The aggressive development and deployment of Information Age manufacturing
technologies offer immense opportunities for expanded economic growth and
‘competitiveness. Yet the key to the practical use of these technologies is the availability of
a highly skilled workforce.

‘The pace of technological change is transforming the manufacturing workplace.
‘Advanced production technologies have replaced large quantities of unskilled, low-skilled
{Jobs and single-craft jobs with positions requiring mult-skilled “techno-professionals” able
to deal flexibly with information-based, computer-integrated technologies and to participate
in decisions related to process and product improvements and scheduling

Ina flatter, “high performance manufacturing environment, these workers must
have the personal attributes, communications and business knowledge to work in teams,
accept responsibility for customer satisfaction, and be fully accountable for their own
actions,

Industry is discovering that it can not enjoy the full flexibility offered by advanced
manufacturing technologies without a skilled workforce. The demand for tectno-


88

ards and assessments and impacts—and it is not just teachers, it
is administrators——.

Mr. Houcuton. OK, let me interrupt you for a minute. I mean,
let us cut to the chase for a minute. Is this something business
should do? Is it something government should do? Should we do it
together?

What has to happen in order to make your vision come closer to
the goal?

Mr. JONES. Business has to take the leadership for stepping up
in these communities to do what we talked ——

Mr. HouGuTon. OK, so is that going to happen by spontaneous
combustion? Do we do something about it? What happens?

Mr. Jones. It is happening now, almost by spontaneous combus-
tion. It is growing at a rate that we cannot even keep up with
across the country, these kinds of programs, and it is growing be-
cause, if you will, of the bankruptcy of the debate in Washington.

This is a real, underlying economic issue in communities, in fam-
ilies and companies, and it is happening out there, in business
leadership and school leadership, and we have all said to you,
teachers are not the problems, even schools are not the problems—
it is getting people together to sit down and understand what is
going on, what its impacts are, and then how you do business.

Now, it happens that there is a role for the government, in the
sense that there are a lot of things that need to be supported and
put into this system that are not there, that can help in the new
way we are going to go.

But you cannot dictate that from here, in terms of behaviors of
people; It has already moved far beyond where the Congress is.

Mr. Houcuton. OK.

Thank you very much, Mr. Chairman.

Thank you.

Chairman CRANE. Mr. Coyne.

Mr. Coyne. Thank you, Mr. Chairman.

I thank the panelists for all your testimony; it was very inform-
ative.

Mr. Reddy, you called for structural changes if we are to address
the problem of matching training for job opportunities.

Mr. REDpy. Yes.

Mr. Coyne. I wonder if you could expand on that. Where would
you make these structural changes?

Mr. REDpy. Mr. Coyne, the concept we would have is that—and
we are working in some communities to try to develop this con-
cept—is that using the concept of standards as sort of the keystone,
if you will—the core idea.

‘We would start with a series of companies and have them use
national standards as a benchmark to draw upon, essentially to de-
velop standard-based work force skills. We are actually working in
some factories right now.

We think the starting point has to be to use standards in your
company. I mean it is easy to come to the Palisades and talk about
standards; it is different, however, to actually use those standards
in your company, and to use standards as the basis for your work
before they are conveyed to the school system.


43

STATEMENT OF

SANFORD L WEILL
CHAIRMAN AND CEO
TRAVELERS GROUP
NEW YORK, NEW YORK

Introduction:

Mr. Chairman, thank you for the opportunity to speak to the Ways and Means Committee
Subcommittee on Trade today. 1 am Sanford 1. Weill, Chairman and Chief Executive
Officer of Travelers Group.

Today, I want to describe to you a truly unique - and successful - program between the
private and public sectors. ‘The program is the Academy of Finance, which provides
‘education, college counseling and summer jobs to mostly inner-city high
school students. Ihave attached a more detailed description as Attachment 1. The
‘Academy of Finance has program sites in over 25 states nationwide (see Attachment 2).
By 1995, we had a total number of Academy graduates of over 8,000 (see Attachment 3).

History of the Academy of Finance

The history of the Academy of Finance began in 1980 when I approached the then-
Chancellor of New York City schools and the head of the New York City teachers union.
As an employer in the financial services industry, we had trouble obtaining qualified
employees and experienced high tumover of those we did hire. I believed that this was
largely the result of a lack of proper education and training.

‘As a result ofthese shortages, many employers in our industry were less competitive and
were considering leaving New York City. This would result in a vicious cycle: a lack of
qualified employees resulting in fewer and fewer jobs. In order to stop this cycle of job
loss and lowered skill levels, I believed we needed to match the needs of the students
with the financial services expertise of New York corporations. This was the original
“charter” of the Academy of Finance, By producing well-qualified employees, the
Academy of Finance has helped young people and has increased the competitiveness of
the financial services industry.

The first Academy of Finance started in 1982 at John Dewey High School in Brooklyn
with 30 students. There has been a major expansion of the program since 1982, For the
1996 school year, we now have 202 programs (see Attachment 4) throughout the U.S.
with over 12,000 students enrolled (see Attachment 5 —- 1995 numbers). In 1989, The
National Academy Foundation was created as an umbrella organization for the Academy
of Finance and other specialized academies of instruction.

Ele of | if

‘There are certain elements of the Academy of Finance which I believe have been key to
its success. First, specialized courses developed with financial industry experts have
been offered as part of the regular high school program. In addition, career-oriented
courses are offered at a participating college at no extra charge. Second, the Academy
places a strong emphasis on technology in order to give participants the skills needed to
Gonrpete globally as well as interpersonal kilt elp them in busines nd oa

we provide six to ten week paid internships which give students
practical vel life experience, Most importantly, the summer internships show the
students that there are opportunities beyond the entry level positions. They learn that
‘education is the path to reach those higher levels (see Attachment 6). Fourth, the
‘Academy gives students access to successful, helpful mentors who can guide the students’
careers. And to provide the proper background, the Academy offers college counseling.
May of the students who have participated in the Academy and continue on to college
and careers are very motivated. The mentoring and college counseling programs help to
provide them with direction,

‘acceptance into an Academy of Finance are also important. The criteria
inode! 1) a desire to learn about the financial industry; (2) a good attendance record;


129

So, I think there are a number of ameliorating factors which can
take place. And as a matter of fact, in looking at trade, although
this meeting does not deal with trade, we have also made sugges-
tions regarding allowing the industries to adjust to major changes
in trade, a major loss of internal markets.

And we have also urged very strongly that we take stronger ac-
tion to open up foreign markets, which are closed to our products,
to improve exports.

Mr. RANGEL. My time has expired. Are you in New York or in
Washington?

Mr. SAMUEL. Most of the time I was in New York; I came here
20 years ago.

Mr. RANGEL. I mean, where—you live in Washington?

Mr. SAMUEL. Yes, I live in Washington now.

Mr. RANGEL. OK. I would like to make an appointment with you,
because I am going to need your advice. If I am going to be as ag-
gressive in promoting world trade, I know that we are going to lose
a lot of jobs in the transition, as the newly created jobs are there.

And you having thought it out from the union’s point of view,
and now from the Nation’s point of view, I am going to need the
benefit of your thinking as to how we can best do that.

Mr. SAMUEL. Well, I will not spend too much time at this point.
I would suggest to you that the Congressman who is sitting next
to you and I have been—we used to be associated for many years
in an organization called LICIT, the Labor Industry Coalition for
International Trade, and one of the things LICIT has looked at are
various ways in which the effects of trade can be cushioned, so that
average workers can ease in the transition.

I remember years ago, when they were calling it the Massachu-
setts miracle, forgetting about the fact that when the ‘Massachu-
setts miracle took place, there had been about 25 years during
which time there was no Massachusetts miracle, between the time
the textile and the shoe companies had left Massachusetts, and the
high tech companies came in. They were 25 years of misery.

'e have been doing better recently, and I think we can do better
in the future.

Mr. RANGEL. Great panel. Thank you for your contributions.

And thank you, Mr. Chairman.

Mr. HOUGHTON [presiding]. Thanks very much, Mr. Rangel.

Mr. Coyne.

Mr. Coyne. Nothing.

Mr. HOUGHTON. Nothing.

Look, I have got a lot of questions, but I will get them to you
gentlemen later.

[The questions and answers were not available at the time of
printing.


113

Graph 2

Public Spending Per Person Age 16 to 24
on Education and Training in 1988 Dollars

$24,700
a |
$17,100
a |
$10,840
Percent of School-Age
f | CSA Population 9
23.6
$5,520
onl 34.5
13.8

School Dropout High Schoo! 1to3 years 4+ Years
College College

Source: US General Accounting Office and Department of Education


122

TESTIMONY OF
HOWARD D. SAMUEL

SENIOR FELLOW, COUNCIL ON COMPETITIVENESS:
BEFORE THE
(COMMITTEE ON WAYS AND MEANS
JULY 25, 1996

‘Mr. Chairman and Members of this Committee:

My name is Howard D. Samuel, and since my retirement in 1992 as president of the
Industrial Union Department of the AFL-CIO, I have served as a senior fellow of the Council
‘on Competitiveness. The Council, which was founded ten years ago, is a non-profit, non-
partisan organization of chief executives from business, labor and higher education dedicated
to improving the nation’s ability to build a rising standard of living while meeting the demands
of the global markerplace.

‘The Council has formed a Task Force to benchmark best practices in on -the-job
training, with a special focus on the deployment of learning technologies to improve workers
skills. Chairing the Task Force are Richard Notebaert, chairman and CEO of Ameritech,
George Becker, president of the United Steelworkers of America, and Harold Raveché,
president of Stevens {nstitute of Technology.

‘Tt has become clear to the leadership of the Council—as it has to much of the nation-—-
that growing global competition and rapid technological change would require major changes
in the American workplace if the nation were to maintain and enhance its standard of living.
Indeed, it has become apparent that in today's world, when capital and technology move easily
from continent to continent, the structure of the workplace and the ability of the workforce to
meet changing conditions may be one of the principal determinants of industrial survival and
success.

‘The company of yesterday usually based its workplace on the principles espoused by
Frederick Taylor and Henry Ford at the beginning of the century: “tight divisions of labor and
narrowly designed jobs," in the words of MIT Professor Paul Osterman. The auto worker was
classified as an installer of front seats or rear seals and didn't switch from one to the other.
This eased the responsibility of the supervisor, and gave a certain job security to the relatively
unskilled and untrained worker~but it isa far cry from what is required in today's rapidly
changing industrial scene.

Today's challenges are different, and tomorrow's will be more so. These challenges
include constantly changing technologies and an increasingly demanding customer base, which
can shop the world for quality products at a good price. A successful company today must
build a flexible work organization, capable of meeting changing customer requirements and
taking advantage of changing processes.

‘A key factor in achieving such a workplace is a well-trained workforce, motivated to
commit itself to contimous learning.

‘The creation of a motivated worker doesn't start atthe factory door. A secure family,
an effective educational experience in earlier years, and a program which eases the transition
from school to work all play vital roles in producing a worker capable of meeting today's
challenges. On the job, skill training may pot be enough to produce a commitment to


127

Mr. RANGEL. Well, we are not sending any messages out today,
we are just trying to find a solution to a very serious problem, and
I hope you would at least recognize that those Members who are
here do recognize there is a problem, and you will be hearing from

S.

Mr. Bailey, in your research—Columbia is not only in an
empowerment zone, but has contributed a great deal to make cer-
tain that our proposal was in shape in order to be designated—in
your research in bringing the public school system closer in line
with the needs of industry, have you been able to fold in the tax
incentives that are involved in empowerment zones?

Mr. BAILEY. Well, the research that we have done has not so far,
analytically, included that.

Mr. RANGEL. Well, whom can I get from Columbia who is a part-
ner to include that, to see if it works in empowerment zones,
whether or not it could work in other communities.

Mr. BaILey. Sure. Some of the schools that we are looking at are
involved in the empowerment zone, and that is an ongoing aspect
of the research.

Mr. RANGEL. Would you know any of those schools that would be
in my congressional district?

Mr. BAILEY. I am not sure which ones, exactly, are in your
district.

Mr. RANGEL. Could you find out.

Mr. BAILey. I could find out, absolutely. Yes.

Mr. RANGEL. Good.

Mr. BAILEY. That is no problem.

Mr. RANGEL. And I want Columbia to be working very closely
with us, not just in studies, but in implementing what we are going
to come out here with. I would like for Columbia to play a big role
in this.

Mr. Samuel—and I will need your organization, because you
transcend the whole thing. You have problems—I mean, you are
dealing with policy, but you are also dealing with policymakers.

And we hope to have such an impact that we are going to be in-
cluded as policy makers, because you are going to have the largest
firms in the world, the largest bureaucracy in the world, and a
Congress, at least this Subcommittee, we are going to have to work
together, all of us.

So that is the good news. But if you have not done any work on
it, would you consider how unions would be able to—we will be
able to give assistance to unions, and union leaders, to get what-
ever training and support they need, when they know that their
primary job is to protect the workers who have paid dues to them
to protect those jobs.

Now, there comes a time when everyone will know that, not only
have those jobs been exported through sound treaties, but that low-
skill jobs are just not going to exist.

And of course, a lawyer has to know when to tell the client that
he has done the best he can for the client. And we have to politi-
cally be able to tell the labor leaders that there is no turnaround
with the direction in which the world and this country is going.


CONTENTS

Advisory of July 10, 1996, announcing the hearing ...
WITNESSES

U.S. Department of Labor, Hon. Robert B. Reich, Secretary . . 7
U.S. Department of Education, David A. Longanecker, Assistant Secretary,
Post-Secondary Education . 4
Columbia University, New York, New York, Thomas Bailey 115
Competitiveness Policy Couneil, Howard Rosen 92
Council on Competitiveness, Howard D, Samuel 120
IBM Foundation, Armonk, New York, Stanley Litow 67
Institute on Education and the Economy, Thomas Bailey 115
National Alliance of Business, Roberts T. Jones 61
National Coalition for Advanced Manufacturing, 15
Travelers Group, New York, New York, Sanford I. Weill 40

SUBMISSIONS FOR THE RECORD

Center for the Study of Economics, Columbia, MD, Steven Cord, statement

and attachment . 131
E.C. Murphy, Ltd., Amherst, NY, Emmett C. Murphy,
Jefferson Waterman International, Stephen E. Lamar, statement .

an


106

concerning what constitutes a “high performance" workplace, one thing we do know is that there
is a high retum to firms which spend more than the national average on worker training,"*

It is also difficult to measure the returns from investing in training. Contrary to most
evaluations which compare a worker's salary immediately before and after training, in fact, the
returns to individuals and the economy from investing in worker training must be seen over a
fonger period.

What should be the federal government's role in providing training and adjustment
assistance? US workers are increasingly being asked to shoulder the burden of economic change
in the economy. Technological change, defense conversion and trade liberalization, while each
resulting in long-run benefits for the economy as a whole, also bring some concentrated costs in
the short-run which threaten our willingness to accommodate these changes. The challenge to
public policy is to minimize the short-run costs in order to preserve the long run benefits.
Furthermore, government assistance is warranted in cases where dislocation may result from
changes in government policies, like in the cases of defense conversion and trade liberalization.

The United States needs a comprehensive adjustment program which assists dislocated
workers regardless of cause to encourage labor market flexibility and improve our nation's
competitiveness. It is increasingly difficult to disentangle the actual causes of economic
dislocation in our economy. Workers face pressures from the introduction of new labor-saving
technologies, increased competition from foreign producers both at home and in third markets,
and reductions in defense-related production. Any new program should be expansive enough to
provide assistance to all workers, regardless of cause of dislocation, yet flexible enough to enable
tailoring benefits to best suit an individual worker's needs. Benefits should be determined by a
person's prospects for re-employment, not cause of unemployment and should include income
maintenance during the period of transition, training and job search and relocation assistance.

‘Such a program should combine various aspects of existing programs. As in the current
EDWAA program, all workers in need would be eligible for benefits. But the level of benefits
should go beyond those provided under EDWAA, and be more similar to those provided by the
TAA. The complete set of benefits would include job search assistance, skills assessment,
counseling, referral services, adequate income support (covering at least 50 percent of lost
wages), payments for retraining programs and extended income and benefit (including health
care) payments through the training period.

The various worker training programs need to be coordinated at the local, state. and
national levels in order to better serve our training needs. The United States needs to create a
comprehensive network of one-stop centers for students, workers and firms which provide a full
range of services: skills assessment, career counselling, training, job search assistance, job
placement, recruitment and referral assistance. Training programs should also be flexible enough
to meet the needs of individuals.

Most importantly, structural changes in the US economy require new thinking about how
to preserve labor market flexibility. These changes are significant enough to require new
thinking concerning adjustment policy and not just changes in existing programs. Current
discussions seem to be primarily motivated by reducing budgetary expenditures rather than by
what works. [tis ironic that ata time when American workers are facing more pressure than ever
before, due to changes in technology, globalization and corporate down-sizing, the current
buzzword in Washington concerning training and labor market programs is "consolidation." If
enacted, these efforts at consolidation could lead to less government resources for training, and
possibly less effective programs, overtime.

5

For example, some departments within Motorola spend approximately 6 percent of
payroll on training as compared to 1 percent of payroll for the majority of US companies.
Motorola is certainly not sorry about its investment. on the contrary, other companies are trying
to lear how to emulate their success


66

A New Role for Government. The role of government becomes very different in this new
environment. Government must provide strong policy leadership, encourage flexibility so
companies can adjust rapidly to competitive needs, and, at the same time, ensure the
security of workers in this environment by facilitating the portability of benefits and
increasing investments in training. Most current government programs and institutions are
not structured to respond to changing labor market needs Our challenge is to build a new
foundation for worker security that embraces change, renovates laws and regulations to
accommodate new realities, and equips workers with the tools they need for the economy
ahead. Policies must reflect the new labor market realities, not the old ones. Government
officials must work with, not against, market forces

The Commitment to Learning

At the heart of these new economic realities and social relationships lies an increased demand for
education and life-long learning. It is a fact that job security, mobility, portability of skills, and
gains in standards of living rely on increasing levels of education and continuous training. This is
why business sees education as important

Education is such a critical foundation for economic success that the marketplace will become a
place of absolute discrimination for those without it. Recognizing education as the core of our
social and economic strength, business has also been involved in opportunities that bring schools
and academic curricula into close coordination with work site learning curricula. That is why
business has been dedicated to education reform for over 10 years and continues its involvement
in everything from the recent education summit with the governors to the more than 240 state and
local coalitions That is why business leaders and governors have committed themselves to
establishing higher academic standards, meaningful assessments of educational progress,
reviewing transcripts and academic achievements in making hiring decisions, and other activities
to encourage state and local reforms

The corporate value placed on education is also why more and more companies are increasing
investments for in-company training that meet the life-long learning needs of employees.

Pr

mers

Mr Chairman, the new economy requires increased investments in education and skill
development on a life-long basis. Not all of it can be financed by government, particularly at the
federal level, nor should it be, Success will require the joint efforts of business, government, and
schools working together. None of these can make it happen by themselves. New partnerships
that ensure all parties are working together toward the same goals are essential

{ would be happy to answer any question you may have.


52

NAFIONAL ACADEMY FOUNDATION

"==" ACADEMY OF

PUBLIC SERVICE.

PROGRAM SITES

1996 - 1997 Academic Year

PROGRAM SITES # of PROGRAMS:

Boston, MA
Buffalo, NY
Hillsborough County, FL
Mobile, AL

New York City, NY

San Jose, CA
Tallahassee, FL

mew eee

APS TOTAL: 9



101

Congress made significant program changes in the Trade Act of 1974, once again as a
means for gaining support for another round of trade negotiations, this time the Tokyo Round.
Eligibility requirements were liberalized and the benefit package was enriched. Workers no
longer had to prove that their job loss was due to a trade concession, but only that increased
imports "contributed importantly" to their job loss. Income maintenance payments (Trade
Readjustment Allowances, or TRA) were set at 70 percent of the worker's previous wage, but
could not be more than the national average wage in manufacturing. TRA payments were made
in addition to regular UI payments, although both benefits together were capped at 80 percent of
the worker's previous wage. The eligibility period remained 52 weeks, with a possible 26 week
extension for workers over 60 or enrolled in a training program. Workers could also be
compensated for 80 percent of their job search and relocation costs, up to a maximum ot $500.

Less restrictive eligibility requirements and a more than doubling of merchandise imports
between 1974 and 1980 resulted in a significant increase in petitions for TAA benefits. The
number of workers receiving TRA grew from 62,000 in 1976 to over half a million workers in
1980. Likewise, TRA outlays grew from $71 million in 1976 to $1.6 billion in 1980."" The
number of workers receiving training under this program never went above 5 percent of the
workers receiving TRA payments. Coupled with administrative problems, which resulted in
many workers receiving lump-sum benefits after they had found new jobs or retumed to their old
jobs, TAA was not seen as contributing to long-run labor market adjustment.

This criticism, together with the administration's efforts at reducing non-military
government expenditures, led President Reagan to recommend abolishing TAA in 1981. The
administration argued against any rationale for maintaining a separate program for trade-
impacted workers, and instead supported a revised, although smaller, economy-wide training
program.! Congress accepted JTPA but also insisted on maintaining TAA, albeit with certain
revisions. As a result of the Omnibus Budget Reconciliation Act of 1981, TRA payments were
reduced and the emphasis of TAA shifted ftom providing income maintenance to training and
other reemployment benefits. TRA payments were reduced to the same level as standard Ul
benefits, and payment could begin only after workers exhausted their Ul benefits, Ul and TRA
payments were capped at 52 weeks, except if a worker was enrolled in training, in which case
benefits could continue for another 26 weeks.

Following the 1981 changes there was a noticeable decline in the number of TAA
petitions received and approved, and accordingly a decline in the amount of government outlays
under the program." Even so, the Reagan administration continued in its efforts to abolish the
program and bring these workers under the umbrella of JIPA. Congress refused every attempt,
although it agreed to several program changes. The Consolidated Omnibus Budget
Reconciliation Act of 1985, which extended the life of TAA, required workers to be enrolled in a
job search progeam as a condition for receiving TRA benefits,

Under the Omnibus Trade and Competitiveness Act of 1988, TAA was extended to

September 30, 1993, and eligibility was expanded for a one-time inclusion of workers engaged in
oil exploration and drilling. Injury determination criteria and the benefit package were lett intact,
although enrollment in training as a condition for receiving TRA payments was strengthened. In

" Some critics claim that the Carter administration used TAA in an attempt to win union and
other labor support in its 1980 reelection bid, resulting in a large increase in benefit outlays in
that election year.

* See the previous discussion concerning the JTPA and its replacement of CETA.

© When the percentage of petitions certified for benefits fell below 10 percent in 1981, there
were some charges that the Department of Labor was being more restrictive in its certification
process. This criticism was never proven, and the percentage of petition approvals since 1983
has returned to their pre-1980 levels.


26

Statement by
David A. Longanecker
Assistant Secretary for Postsecondary Education
on
U.S. Trade Competitiveness and Workforce Education and Training

Mr. Chairman and Members of the Committee:

Tam pleased to appear before you to discuss an issue of critical importance to our nation’s
future -- the need to increase the international competitiveness of America’s workforce to meet the
challenges posed by the globalization of the economy. As you know, the mission of the U.S.
Department of Education is to ensure access to educational opportunities and to promote excellence
in our colleges and schools. The Department carries out its vital mission in partnership with State
and local government, institutions of higher education and other postsecondary education institutions,
lenders, guarantee agencies, and individual citizens. This partnership is carried out through the
various programs that we administer to provide financial aid to students and to programs that
educate Americans about the world in which they live

INTRODUCTION

Education is critical to the economic well-being of individual citizens, Education is more
important today for our country’s economic well-being than at anytime in our history as a result of
the increase in global competition. New technologies and new forms of organization in American
industry have transformed the American workplace. In the last ten years the number of jobs in high-
skill occupations has grown more than 32 percent, compared with 7 percent in low- skill occupations.
For this reason cducation and acquired skills have become a much greater determinant of individual
economic success. In 1994, the unemployment rate for 20 to 24 year olds who lacked a high school
diploma was 20 percent. By comparison, the unemployment rate for 20 to 24 year olds with a high
school diploma was 11 percent, and for those with an Associates or Bachelor's degree the
unemployment rate was just over 5 percent. Earnings for men without college degrees have fallen
by 12 percent since 1979, Over the same time period, the income gap between men with college
degrees and those with high schoo! diplomas has widened from 49 percent to 96 percent. For
women, the income gap has gone from 44 percent to 84 percent

‘As the number of individuals requiring education and training increases over the next decade,
cour national commitment to providing educational opportunities will be further challenged, given the
increase in the number of students at all levels and the constraints on Federal and State budgets. The
number of high school graduates is expected to increase by 20 percent, and the number of
postsecondary students is expected to increase by 11 percent between 1992-93 and 2004-5. We must
bbe prepared to ensure that the next generation of leamers has the ability to acquire the skills that they
will need to become part of the new economy.

Furshermore, we know that most of the workforce can expect to change jobs several times
in their careers. The rapidly changing requirements of the economy and the increasing complexity of
our society require us to rethink the kinds of academic and technical skills our workforce will need
in the future, and the way we educate and prepare students to acquire these skills. Education and
training must become a lifelong commitment, and opportunities for continuing education and training
must be avesiable to all Americans.

To respond to these challenges, the Administration has made a commitment to enhancing our
economic competitiveness by ensuring that all Americans have access to postsecondary education and
training, ensuring that America’s workforce has the opportunity for lifelong education; strengthening
programs that prepare Americans for a competitive marketplace, and increasing the level of
international literacy among all Americans

ENHANCING ECONOMIC COMPETITION THROUGH EDUCATION & TRAINING

A competitive economy requires that all individuals have access to the education and training,
that are necessary to enter a labor market that demands highly skilled labor. The Administration's
continuing support for ensuring that all Americans have access to postsecondary education is
evidenced by its increased support for student financial assistance and tax relief to encourage
investment in education

The Administration’s fiscal year 1997 budget will make available more than $41 billion --



22

What else needs to be done? J alluded in my statement to several
projects around the country that are preparing the most hard-hit
young people—actually dropouts from high school—for technology
Jobs that are not just minimum-wage jobs, but really pay quite
well.

Those programs work best when young people are being trained
for jobs that exist, when the business community identifies the
skills it actually needs, and when there are enough public and pri-
vate resources brought to bear, so that young people can get the
real, both on-the-job and also simulation, training they need.

In Detroit, Project Focus Hope is a tremendous success. In Los
Angeles, the East Los Angeles Skill Center is among the best I
have seen, but I could give you many other examples around the
country.

Now, Congressman, if you get me started, I could talk for far
longer than you would like me to talk, but when I say we have the
answers, I do not mean to suggest to you that there are uniformly
easy answers here.

There are no easy answers, but there are enough successes out
there that we know where we should be investing, both publicly
and privately.

Mr. Payne. Generally, as you spoke about what it is that we
ought to do, you talked about the low-income, low-skilled sector,
and you talked about dislocated workers.

In terms of those young people who are high school students,
who likely would not go to college, but in order to be successful in
this competitive, global environment in the future, need to have
additional skills.

What role do you think the public sector has? And you spoke
about community colleges, for instance, but how can the public sec-
tor do the kinds of things that it might best do, to assist in making
sure that that segment of the population can be as prepared and
as successful as possible?

Secretary REICH. Beyond the School-to-Work Apprenticeship Pro-
gram, beyond the programs targeted to the most disadvantaged
youth that I have already referred to, I believe it is very important
that the norm in our society be that everyone has at least 14 years
of education—not 12 but 14 years.

And the President has proposed a refundable tax credit equal to
the average tuition at a community college, so that every young
person can get at least 2 years of post high school education and
training. I think that is very important, it is what we all know
needs to be done.

Again, it is not a panacea; I do not want to suggest to you that
any of these will be the answer for every individual in every case,
but this is the direction we must go in, in my view.

Mr. Payne. I agree with everything you have said, Let me just
conclude by saying, it seems to me that recently the United States
was recognized as the most productive Nation in the world, and
that—we do a lot of things right—as we look at how we compete
with others around the world. I think we need to continue to focus
on those things that have gotten us to where we are, as well as
these things that we know we need to do to do an even better job.


105

sector may spend more on worker training, less is know about these efforts ~ both in terms of
program design and participation and effectiveness. Averaged across the nation, US firms spend
slightly more than one percent of payroll on training and most of this investment is concentrated
among a handful of firms -- one-half of one percent of all employers spend 90 percent of the
formal training dollars, (Graph 3 presents data comparing private training efforts in Japan and
the United States).

Based on a 1991 Current Population Survey, the Bureau of Labor Statistics reports that
only 16 percent of the workforce participate in some kind of employer-provided formal training.
This includes on-the-job training (15 percent of workers), schooling (13 percent of workers), and
other (7 percent or workers).

Training is highly concentrated by industry: Twenty-one percent of all training is
performed in professional and related services, 20 percent is performed in manufacturing
industries, 12 percent in finance, insurance and real estate, and 11 percent in transportation,
communications and utility industry.

Almost two-thirds of those workers who receive some kind of employer-based formal
training have had at least some college education. Thirty-eight percent of workers in receiving
training are college graduates. An equal percent of workers receiving training have high school
or less education. Thirty-one percent of the workers receiving training were between 35 and 44
years old and 29 percent were between 25 and 34 years old.

According to another study by the US Small Business Administration, there is @
relationship between firm size and training. Firms with greater than 500 employees are more
than twice as likely to provide formal training to new hires than are firms with less than 25
employees.

The key requirement is to induce more companies to devote considerably expanded
resources to continual skills development. ll firms need to participate, partly to obviate the
concems of those who already do that workers they train will go elsewhere. This "free rider”
problem is used by some to argue in favor of broader government-sponsored training programs.

One proposal to foster increased training, made popular by candidate Bill Clinton in
1992, would require all firms with more than 30 employees to invest 1% percent of payroll for
training (for all employees, not just top managers as in many current cases). Such a requirement
would represent a training guarantee, under which the firms either conduct the training
themselves or contribute the equivalent to a national training fund (“play or pay").

Currently, only very weak incentives are in place to encourage individuals to undertake
continuous retraining on their own. In fact, under existing tax law, individuals can only deduct
from their taxable income expenses for training for their current job, and not for future jobs. The
Clinton administration has suggested expanding this tax deduction to include any training
expenses for a current or future job, but no final action has been taken yet, In addition, the
United States is the only industrial nation without a formal system for developing and
disseminating skill standards. There have been recent efforts to develop such standards, but
proposed budget cut-backs could significantly curtail this exercise.

Concluding Thoughts

‘Training should be seen as a means towards an end, and not an end in and of itself, The
primary objective should be to assist workers meet the challenges of productive work. To do so,
workers must have access to good and timely information concerning employment
opportunities, skill requirements, and availability of training programs.

On the other hand, training should not be solelv for the purpose of getting a job, Recent

evidence suggests that those firms willing to make serious investments in their workers are more
likely to succeed in the globally competitive world market. While there are still many questions


34

International Comparisons of Student Achievement

Several tests are used to compare academic achievement of American students with students from
other countries. The International Assessment of Educational Progress, (IAEP) sponsored by the
US. Department of Education, the National Science Foundation, and the Educational Testing
Service, measures achievement levels in selected disciplines by nationally representative samples
of nine and 13 year-olds in participating countries.

In 1991 the IEAP compared performance in mathematics and science by a sampling of nine and
13 year-olds, and performance in geography by a sampling of 13 year-olds In mathematics

the United States scored nineth out of 10 countries for the 9 year olds, and 13th out of 14
counties for the 13 year-olds. In science American students performed better, scoring third out
of 10 for 9 year-olds and 12th out or 14 for 13 year-olds In geography the United States scored
fifth out of the nine countries. (See tables below.)

That same year the International Association for the Evaluation of Educational Achievement
(IEA) measured reading comprehension among 4th and 9th grade students, A total of 32
countries, including the United States, participated in the study. U.S. 4th graders scored second,
after Finland, and U.S. 9th graders scored nineth, after Finland, France, Sweden, New Zealand,
Hungary, Iceland, Switzerland, and Hong Kong. (See table below.)

MATHEMATICS

9 Year-Olds 13 Year-Olds
Country ercent Corre Country ve Perc
Korea 75 Korea 3
Hungary 68 Taiwan B
Taiwan 68 Switzerland nN
Soviet Union 66 Soviet Union 70
Israel 64 Hungary 68
Spain 62 France 64
Ireland 60 Israel 63
Canada 60 Canada 62
United States 58 Scotland 6
Slovenia 56 Ireland 61

Slovenia 57

Spain 55

United States 58

Jordan 40


115

Chairman CRANE. Thank you, Mr. Rosen.
Mr. Bailey.

STATEMENT OF THOMAS BAILEY, DIRECTOR, INSTITUTE ON
EDUCATION AND THE ECONOMY, AND PROFESSOR,
ECONOMICS AND EDUCATION, TEACHERS COLLEGE, COLUM-
BIA UNIVERSITY, NEW YORK, NEW YORK

Mr. BAILEY. Thank you, Mr. Chairman, and especially our
Congressman, Mr. Rangel. I am also happy to see that we have an-
other New York Congressman here, Congressman Houghton, being
from New York myself

I am very pleased to have been invited to speak to you today. I
have devoted most of my professional career to looking at the rela-
tionship between education and economics, both in terms of indi-
vidual well-being, as well as the economic strength of the country
as a whole.

I, think it is certainly timely and very important that you con-
duct these hearings.

I would like to say that much of my research is funded by the
Federal Government, through the National Center for Research
and Vocational Education, which is in the Department of
Education—a function in education for the Federal Government
that I think is extremely important, and want to emphasize.

I am the director of the Institute on Education and Economy at
Columbia, and we have done research in many areas having to do
with how education can enhance work, as well as how we can bet-
ter use educated workers on the job.

I want to emphasize today one aspect. We have been doing re-
search on School-to-Work, transition, funded by the School-to-Work
Opportunities Act, and I am enthusiastic about that program. One
reason is because it does provide skills for workers and for young
people.

But I am particularly enthusiastic because more and more I have
come to believe that School-to-Work, especially if it is linked
strongly to employers, has the potential to engage many students
in academic learning, in ways that traditional approaches to edu-
cation cannot.

We are talking about using the School-to-Work strategy to em-
phasize academic learning, not only vocational skills.

One thing we have learned, in the last 15 years, about employ-
ment and about work is that, in general, business was not really
using the full potential of its work force.

Workers were ex, ed to come to work, to leave their brains at
the door, and to follow orders. Over the last 10 or 15 years, many
businesses realized that. Through the use of teamwork, and other
types of employee involvement, through development of what is
called high performance work organizations. Businesses have tried
to engage fully the creativity, energy and imagination of their
workers, and I think this is an important reason why we have had
solid gains in productivity, especially in manufacturing, over this

eriod.
p Now, what does that say about education? Well, I think parts of
our educational system are indeed second to none in the world, but,
in far too many cases, schools also fail to fully engage their stu-


136

All of the organizations examined in the March 1995 study analyzed work
processes across all lines and levels, and produced data that was benchmarked against
nationwide best practices, This coniparison identified specific role, cost center and
organization-wide work-redesign, or e‘aff reduction, opportunities.

A year after completing this second study, 90 percent of the hospitals kept the
costs out, while 70 percent were able to remove additional costs in the range of 3 percent
to 8 percent of annual operating costs. Perhaps equally important, 80 percent of all of the
hospitals in the study reported an improvement in the assessment of quality by patients
and physicians, and more than 70 percent said their employee’s perceptions also
improved,

While sustained cost savings are attainable using work-redesign methods, this
research shows that across-the-board staff cutting actually prevents long-term cost
savings and impedes worker productivity and efficiency.

Savings generated by across-t:e-board cuts seem to be lost within 12 to 18
months, because there is a “backfill ect” that occurs as managers and workers -
including unions - fight back and cha‘ienge the judgment of senior managers, especially if
leadership has employed heavy-hand=d outside consultants.

‘The research study in March 1995 has shown that leaders whe followed a data-
driven process to restructure their operations to become more efficient and cost-
competitive were seen as more credible and obtained a much higher buy-in from their
staff, These leaders were praised for insight, responsibility and toughness. By fostering a
thorough analysis of their organizations, these leaders were seen as more courageous and
more willing to face the challenge than those described as “cut and run types.”

The findings of the October 1993 and March 1995 research studies suggest that
business and healthcare organizations under fiscal pressure and budgetary constraints
must be cautious of using any method of workforce downsizing that does not leave an
organization with the right people, Joizg the right job, at the right time.

To build and maintain a cost-competitive and dedicated work“orce requires a
specific set of tools and a thorough understanding of the actual work performed by
American workers,

Using the above strategy, American businesses can become more cost-efficient
and competitive internationally. This approach is a collaborative one, designed to
empower business with concrete tools and techniques to become in-house experts in work
redesign and change management.


58

Chairman CRANE. Thank you, Mr. Weill.

How do the courses designed by industry leaders and educators
fit in with the regular school curriculum of these students? Are
they required to take additional classes?

Mr. WEILL. They take courses that balance the normal high
school course, and have courses in accounting, courses in investing.
We have developed, with this program, college level courses. So, in
their senior year the students who want to can take courses in a
local college or a community college, so that when they go on to
higher education, they are better equipped than a lot of other kids,
because they are not intimidated by the education process.

We have lots of people from industry come in and speak to them
quite often, so that they can better relate to people, and the
mentoring program in this is alive and well.

Most of the young people who have these summer internships
are offered jobs by the companies they work for. They want to have
them back, because they are really terrific young people—they just
were not given the chance, or shown, and a lot of them did not
have the role model who could lead them into the future, and that
is what this does.

Chairman CRANE. In your written testimony, you have talked
about mentors, and I think all of us have experienced that at one
time or another in our lives. Can you elaborate a little bit on that
relationship?

I mean, some of the courses, as I understand it, are tailored on
a very brief basis. I mean, it is not like over the entire 4 years of
a high school education.

Mr. WEILL. No, the program really started as a 2-year program
for the junior and senior years of high school. And we had this
summer internship where every student would be guaranteed an
internship in their junior year, so that they could get a better un-
derstanding of what they are studying, why education is important,
and hopefully raise their self-esteem.

So, while it is only 2 years, I do not think that that is a short
period of time, because we are getting over 90 percent of the par-
ticipants to decide to continue their education, versus something
that might behalf that in a normal public school, and we are tak-
ing the same people who are in those public schools.

We have just started a full, 4-year program, so we have a full,
4-year high school. The first one was in New York next to the
American Stock Exchange. We are going into our 4th year, so we
have about a hundred students in each class.

We have started the same program in Hartford, and we believe
that we can have a 4-year balanced education program, with an
emphasis on accounting, finance, and business, because the finan-
ga services industry is one of the biggest employers in the United

tates.

It is an industry that we are a leader in globally. If we are going
to keep that position, then it has got to be led by the people who
are growing up in our high schools today.

Chairman CRANE. Well, you are to be commended.

Let me welcome Mr. Dow.

And, Mr. Dow, would you like to add anything to what Mr. Weill
has already said?


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14

Training, Inc. (Boston, Indianapolis, Newark) ~ BM will provide technology to three
Training, Inc. Affiliates to help redesign and upgrade student assessment, training,
employment services and staff development. Training, Inc./Boston will create a database of
individualized student portfolios for assessments, personalized education and employment
plans and outcomes. Training, Inc/Indianapolis will enhance existing workplace simulations
by adding interactive communications between customers and other entities outside the
simulated business environment. Training, Inc/Newark will develop new workplace
simulation models for the security and surveillance industry and for computer aided
‘manufacturing and design (CAD/CAM).

Al grants consist of the outright donation of IBM equipment and software, as well as [BM
consulting assistance to develop the systems and know-how necessary to use technology
effectively in workforce development and training.

The issues in K-12 education and those in adult education and job training are different, but
the applications of technology to the core operating questions have in fact more similarities
than differences.

What is most vital to us, however, is our conviction that the technology that is driving change
and economic growth in the private sector can, if used properly, help us cope with the
educational challenges in front of us. As a technology company we take our responsibilities
in this regard very seriously.

In cash and technology valued at market rate, we will contribute over $90 million this year.
It goes to a host of programs and projects in the United States and around the world targeted
‘on technology as a problem solving tool in education and training. This makes IBM's
contribution efforts in education and technology one of the nation’s largest ~- and we think
one of the best.


28

are required in their working environment;

+ Skills, obtained from structured training and work-based learning experiences,
including skills necessary for a particular career, as demonstrated in a working
environment; and

+ Valued Credentials, establishing industry-standard benchmarks and developing
education and training standards which ensure that proper education is received for
each career.

ENHANCING ECONOMIC COMPETITION THROUGH GLOBAL AWARENESS
A competitive economy requires that Americans be knowledgeable about the world
in which they live Tt also requires a cadre of professionals in education, government, and
business trained in foreign languages and international studies who are engaged in enhancing
our international economic standing and our long-range national security. Through a range
of interrelated activities, the Department's international education programs, including two
initiatives supported by the Fund for the Improvement of Postsecondary Education, address
the Nation's need for expertise in foreign languages and world areas and for a more
internationally literate citizenry. Although, individually, these programs are small in
comparison to other Federal programs, taken together they provide an integrated, cohesive,
and mutually supportive approach to preparing America's citizens for the country's leadership
role in the international arena
As economic and technological issues have become important components in national
policy, we have broadened the focus of our foreign languages and international and area
studies programs to include business and economics. Two programs meet the needs of
individuals and businesses engaged in international commerce
+ the Centers for International Business Education and Research program prepares
Americans for the international marketplace by training students, faculties, and
business leaders to respond to the new global realities and by supporting research and
teaching on issues that enhance American competitiveness, and
+ the Business and International Education Program supports the intemationalization
of the business curriculum and promotes linkages between academic institutions and
the American business community,

The Fund for the Improvement of Postsecondary Education is currently supporting
two important new initiatives, one in support of the North American Free Trade Agreement
(NAFTA) and one with the European Union (EU). The North American Mobility in Higher
Education program is jointly funded by the U.S., Canada, and Mexico to support trilateral
institutional cooperation and student exchange among the three NAFTA partners in fields
such as business, environmental technology, agribusiness, architecture, engineering, marine
policy, and law. A similar program of institutional collaboration and student exchange
between the U.S. and the countries of the EU seeks new and more effective ways to prepare
Americans for participation in the trans-Atlantic community.

CONCLUSION

The challenges of the competitive new global marketplace are immense, and
underscore the importance of a renewed partnership between the American people and their
government. This Administration is committed to ensuring that opportunities exist for all
‘Americans to acquire the education and training to meet these challenges effectively. It is the
responsibility of each individual, however, to avail himself or herself of these opportunities,
and to make a lifetime commitment to developing and sustaining the knowledge and skills
necessary to secure a productive place in the new global economy. We welcome this
challenge, confident in our ability to sustain our leadership in the global marketplace and to
thereby enable all Americans to participate in the “American dream.”


94

ing. I believe we need to move beyond discussing the level of spend-
ing and focus on the composition of spending.

We are spending more on training, but it is going to the same

cope. We are not training the people who really need it. We are
Ei not training the low-skilled workers, These people need the
training and if trained, can make a contribution to society.

There is a lot of rhetoric on the issue of training, and if only we
could just turn some of that rhetoric into actual action, I think we
would not only have a more productive economy, but we could re-
turn to the time when our living standards were rising.

Again, I want to end where I began: Competitiveness is an ongo-
ing challenge. There are no simple answers, there are no magic
bullets. It is going to take a lot of things, being done by a lot of
people, together, and a shift in the way we think about things, in
order to solve these problems.

T look forward to our discussion. Thank you.

(The prepared statement and attachment follow:]


9

and community colleges are the great unsung heroes of this transi-
tion that we are facing.

Businesses are stepping up to the plate. The latest estimate is
that American business is spending $0 to $40 billion a year on
training workers. But the question I always ask is, “Are you train-
ing the people who need the training the most? Who are you train-
ing; what are you training them for?”

The public sector is spending—the Federal Government—about
$5 billion a year training People. Again, we are consolidating those
training programs, providing one-stop training centers, so that
when you get an unemployment check, and you want to get a new
job, and you want to have access to training, it is all in one place—
you do not have to wait in multiple lines

We have a computerized job bank—America’s Job Bank—on the
Internet, right now—500,000 job listings. It was visited 6 million
times last month alone. We are beginning to create a system in
which people can get new jobs, get the training they need, but we
are far from the kind of system we need.

I am proud of the progress we have made, and how much the
business community, government, the labor community, and com-
munity-based organizations, have come together around | these basic
principles, but there is so much more to do.

Let me end with this note: Somebody said to me once, quite re-
cently, “You know, this training, it works much better than a lot
of people think it does, particularly when you know what jobs you
are training for, but how about the poor? How about the really
poor? How about these dropouts, these high school dropouts? Can
you really train them? Aren’t they just beyond reach?”

I told the person what I had seen around this country. In Detroit,
Michigan, Project Focus Hope—teenage dropouts, learning to be
numerically controlled machine tool operators, in great demand—
learning and then getting those jobs.

Eighty-five percent of those dropouts—poor, minority—getting
those jobs, and they are good jobs. They are not at the minimum
wage, those are good jobs.

1 what I saw in the East Los Angeles Skills Center. I went into
a large classroom where there were 40 young dropouts—many of
them had been gang members—and they were learning about mo-
bile technologies. They were learning to become automobile techni-
cians—not garage mechanics.

They were learning about the computers that are now under the
hoods of so many cars, and they were learning to diagnose and re-
pair those computers. Eighty percent of them were getting jobs
Starting at $15 an hour. They were making something of them-
selves.

Do not tell me that we cannot train and educate even the poorest
young people in our society for better jobs. There are opportunities
out there. Employers say they cannot get the skilled people they
need; let us create a better match between all of the people who
need the training and the skills, and all of the employers who need
the skilled people.

That is the goal: That will make us more competitive, it will en-
able us to grow without pushing on inflation; it will enable us to
be more productive; it will generate more tax revenues; it will gen-


17

Our final point is that we need much stronger engagement by
the business community in this whole process, and I am delighted
with Bob Jones’ report about the growth of business school consor-
tia.

We are very encouraged by IBM’s leadership in forming and con-
vening the summit meeting in Palisades, New York, earlier this
year. We think those are encouraging steps in the right direction.

But all of these are essentially moving around deck chairs on the
Titanic and putting Band-Aid solutions on the problem, unless we
really look at the need for structural reform and change in priority
and philosophy.

‘hank you.
[The prepared statement follows:]


83

Chairman CRANE. Thank you, Mr. Reddy.

I commend all of you for your presentations, and the information
you have provided the Subcommittee.

Let me throw out a generic question, and that has to do with
even better integration than we have now between the private sec-
tor and our government sector, if you will, referring to govern-
ment’s involvement in education.

You people are in the frontlines, in the trenches, so to speak. Is
there any impediment to the advancement of the initiatives that
you have all made already, and want to see continue and expand
with any of our exiting government programs?

Mr. Lirow. We selected 10 school systems and states to operate
in. There are 15,000 school districts in the United States. We se-
lected those districts that were willing to make systemic and fun-
damental changes. That assumes that there were thousands of
school districts that were not.

I think that largely the structure of education, grades kinder-
garten through 12, is a vestige of the 19th century; we are getting
ready to go to the 21st century.

The length of the day, the length of the year, the training of
teachers the jobs people have in the school system, the total ab-
sence of any new technology, is basically, the way that schools were
operated decades before.

And we need to create incentives for school systems to change,
and obviously to reward those incentives, but also to have some
sanctions for those that do not, or will not, change.

I think that this is not an industry that is going to change by
the few shining examples, and then allow the overwhelming num-
ber of schools and school systems to exist the way they existed be-
fore, whether that pressure comes from one level of government, at
the Federal level, or from the State level, which has most of the
responsibility for education.

I think it has to come from all levels, of government and the pri-
vate sector, to let people know that the current way that we oper-
ate our schools is just not satisfactory, and parents and citizens
overwhelmingly agree.

If you read the latest public agenda poll on what people think
about education—we had a speaker earlier who said that people
are largely happy with their neighborhood or local school. I would
wake up and read the latest polls, which indicate that is no longer
the case.

People are not so happy or content with the schools the way they
are, and they do not think that their children are going to graduate
with the skills to be able to work in the workday today.

So, I would think that we need to get a consensus among govern-
ment and business that there are going to be some serious and sys-
tem changes. That is what people began by agreeing to at the
National Education Summit in the Palisades, but it is going to take
a lot of work to make it happen.

Chairman CRANE. Well, something that I do not begin to grasp
is our sophisticated computer technology, and I have seen studies
that indicate that in a lifetime you tend to, on average, make five
career changes.


5

Mr. RANGEL. And, Mr. Chairman, I hope that today will be one
of the most important days in my legislative and political life.

The new changes in the Congress have caused a lot of friction in
the ability of Republicans and Democrats to work together. But, as
relates to the Trade Subcommittee, there has been a longstanding
tradition that, with respect to other nations, we stand as one, and
that we have been bipartisan, notwithstanding our other dif-
ferences in how to resolve problems in the best interests of our

lation.

And you have kept that tradition, and I am particularly glad to
have your continued friendship and support in working together on
trade issues.

Chairman CRANE. Thank you.

Mr. RANGEL. And especially for agreeing to have this hearing
today. I could not think of anyone whom I would want more to be
our first witness than Secretary Reich. In all of the conversations
I have had, with all of the Cabinet officials, it seems as though
there is one thing that you and I agree on—that having a job
brings dignity, brings hope, brings productivity.

Having a job, or even the hope of knowing you can get a job,
means you do not have time to do those things that are not only
detrimental to your life, which may not be worth anything to you,
but detrimental to society, and the people who are forced to live
with you.

Detrimental to your government in terms of not being productive,
detrimental to our ability to effectively compete against other coun-
tries that do not have the burden of millions of people locked up
in cells, shooting each other, conceiving children, doing crime,
doing violence, and continually causing our deficit to increase.

And the bottom line is, there is not one scintilla of evidence that
any of this has been productive. It is bad business, it is bad poli-
tics, and for the first time that I can remember, it is not just an
item on the private sector’s agenda.

It is up front, which to me means that the education of the peo-
ple in our great country is too important to leave up to the local
school boards.

The reason I say, Mr. Chairman, that this is the beginning of a

rocess is because the U.S. Chamber of Commerce next week will

giving a briefing on all of the educational projects that they
have underway. I would want educators to come and see the inno-
vative and creative ways they are making people productive.

And after that, I hope, you will find time yourself, or to send
technicians, along with Secretary Riley, to an overall conference—
not a hearing, not 5 minutes—with those of you who understand
that to get a job you need the training, and to get the training you
need education.

Soon we will be able to have mayors and Governors, and those
running for public office, who will be just as proud of the number
of people who have graduated and the number of universities they
have supported, as they are unfortunately, of the number of people
whom we are sending to jail, for lengths of time that are ridiculous,
in the number of prisons that we are building.

And so, Mr. Chairman, this to me is the first day of a grand new
project. When we talk about business having an even playingfield,


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81

viewed as bound for productive employment. Indeed, if a student can move quickly to
satisfying, economically rewarding work without the time and expense of college, this
should be viewed as 2 more successful mode! than a student going on to college without a
specific career objective,

‘The focus on preparation for work would give greater motivation and recognition
than is presently the case to students who are gifted in team-building and applied teaming
and technical skills. In addition, schools would have greater accountability forthe
Employment ofa its students and give far more empbasis to eareerpreparalion than is
presently the case.

This shift in priorities would require a far closer interaction between the employer
‘community and the Schools. In particular, employers would need to take greater ownership
of the schools and communicate their own workforce skills requirements more clearly.

Some of the succeeding recommendations point to how this basic change in
priorities could be accomplished.

NACFAM Recommendation 2: Use Employer-led Standards as an
Important Tool for Curriculum Planning and Student Learning

One key to ensuring that students can gain productive employment is to base the
school curriculum on employer-led standards. The employer is, afterall, the “customer” of
the school system, Employers will become better “customers” if they communicate clearly
their specifications for job skills~-and follow up by employing individuals with those skills,

Fortunately, new methods are now available to facilitate this communication
process. States and communities are beginning to make employer-driven skill standards,
Ofien in connection with School-to-Work programs, an integral part of their education
systems.

‘They are aided in this connection by innovative work done by industry groups since
1992, In that year, the U.S. Departments of Education and Labor began providing federal
matching funds to leading national trade groups to identify voluntary national occupational
skill standards for their respective industry sectors

{n supporting this program, the federal agencies wisely let the national associations
desiga the standards according to their own perceptions and needs, thus making them more
authentically employer-led. These are thus national, not federal skill standards,

‘The main value of these pilot projects is that they provide useful national
benchmarks against which states, communities, and companies can develop standards of
their own that fit into their individual economy and labor market conditions

States, colleges and schools must take these skill standards and integrate them into
broader curriculum frameworks and performance standards. In addition, each state must
decide at what level (secondary, post secondary or incumbent worker) they will be targeted
for instruction.

While the employer community should take the lead in initiating work on skill
standards, participation in the standards setting process by school, state and local
governance, parent, and labor organizations will also be needed. Standards must be
updated on a regular basis and should be cross-checked against national standards.

This requires a higher level of employer-school collaboration and partnering.
Business-school skills standards councils, co-chaired by employer representatives, might
be the appropriate format. This process beginning: In several sae, schoos ae
required by law to work with business advisory committees to assure that school programs
‘meet local employer needs.

‘In basing curriculum and student learning on demanding employer-driven
standards, the school systems would ake a major step towards shortening the ime between
school and productive employment. There would be another major benefit: making the
high school diploma meaningful again for all students.

‘This would reinforce the efforts in some states to do just that and would help
elevate the skills of the entire national workforce, not just those who go on to college. To
panicipate successfully in an information age economy. all students should perform at the
12th grade (not the 9th grade) level before receiving their high school diplomas.

NACFAM Recommendation 3: Strongly Emphasize Career
Preparation


107

A new model of labor market adjustment should be based on three pillars:

(1) Labor market policies must be viewed within the context of a system of lifetime
learning. Training for active and dislocated workers should be able to be built upon a
strong foundation of basic education and school-to-work transition.

(2) For too long American workers have shouldered most of the costs associated with
labor market flexibility. These costs should be more evenly shared by the private sector
and the government. Where appropriate, the government should finance labor market
programs delivered to the workers by the private sector.

(3) Training must be linked to employment in order to be effective. The ultimate
objective is for American workers to be gainfully employed in high skill, high wage jobs.
Although labor market flexibility is important in order to respond to the current economic
challenges, this flexibility should not come at the expense of eaming an income through
employment.

Labor market flexibility depends on training and climbing up the skill and wage ladder is
especially difficult for workers who lack basic stil Innit ofthe fat that he Clinton

‘Any new program for
dislocated workers should be an integral part of a strategy of lifetime learning which includes
improved performance at the K-12 level, substantially increased resources devoted to the school-
to-work transition, and access to continuous training for all active workers.

Amore flexible labor market is crucial to meeting the current economic challenges in the
international economy. The US government should follow a policy of encouraging this
flexibility at the least cost to American workers. Existing US labor programs are too small,
inadequate, and short-sighted to support this flexibility. Any serious adjustment program must
provide adequate income maintenance to enable workers to undertake the kind of retraining they
need to fully adjust to the changes currently taking place in the US labor market. Most
importantly, the govemment’s commitment to labor market adjustment must be backed up with
secure and adequate funding if there is any hope for serious adjustment to take place.


92

And gentlemen, we will proceed in the order I introduced you:
Mr. Rosen, Mr. Bailey, and then Mr. Samuel.

STATEMENT OF HOWARD ROSEN, EXECUTIVE DIRECTOR,
COMPETITIVENESS POLICY COUNCIL, WASHINGTON, DC

Mr. ROSEN. Mr. Chairman, thank you very much.

My name is Howard Rosen, and I am with the Competitiveness
Policy Council, which is one of a rare and becoming almost extinct
breed of bipartisan Federal advisory commissions. The Council was
established by the wisdom of Congress, to bring together represent-
atives from business, labor, the public and the government, to de-
velop policy recommendations to enhance U.S. competitiveness. The
group makes reports to the President and Congress, and is chaired
by Fred Bergsten, the director of the Institute for International
Economics.

I cannot resist the opportunity to comment that Congressman
Houghton was instrumental in setting up this Council. In fact,
when Fred Bergsten was appointed Chairman, he and I visited
Congressman Houghton. He was one of the first people to whom we
spoke, and his insights that day have been a very important part
of the way we have been running the Council.

With your permission, I would like to request that my full formal
statement be entered into the record, and I would also like to in-
clude some of the Council’s reports, which directly addresses these
issues.

I also want to commend this Subcommittee for holding these
hearings. First, we have not had much discussion, on these issues,
and I think it is very important to continue having these discus-
sions.

Second, I have had the privilege, and honor to testify before this
Subcommittee in the past, in my role as a trade economist, to talk
about trade issues, and the one important thing that I think needs
to come out of this discussion today is that we can no longer just
look at these issues discretely and separate. We have to see them
as linked. The fact that this Subcommittee is holding hearings on
the relationship between education and training to trade, is an ex-
ample of this point.

is morning I have heard a lot about the issue of competitive-
ness. Let me just say, that competitiveness is not a static. It is not
something you have today and is gone tomorrow. It is an ongoing
challenge. I get quite concerned when I hear people saying that the
United States is the most competitive economy in the world. We
are, and I am very proud of that. It is due to a lot of the effort by
the business community, and by workers in this country. But it
does not suggest that we can just sit back and rest on our laurels.
It does not mean that we have won the battle. Competitiveness is
an ongoing and we have to continue thinking about it that way.

We have heard some very successful individual stories today.
They are great cases, and one of the great parts of this hearing
today is to get these stories out. But we have to ask ourselves, why
is it that they are doing it and others are not?

Part of the reason is because people do not know about these
great stories. We have to share these success stories and that is
part of the function of these hearings. I think that you should be


60

And a lot of people in business also are proud, or like to be
proud, of what we do, and what we accomplish. And we do not
want people to want us for just our money; we want people to want
us for our ability to make things happen, to lead change, to be a
part of change.

And so this is a great example of how that partnership can work,
and some of the things that you are thinking about can accelerate
it dramatically.

Mr. RANGEL. Well, Mr. Weill, I want to thank you.

Sometime—I hope in September—we will have national leaders
such as you coming together with Secretary Riley and his staff, to
see whether they can imitate and expand these programs, or what
can we do without putting another layer of bureaucracy out there,
to support your good efforts, but to make certain it becomes a part
of tradition.

Doctor, I had a chance to speak and meet with many of the
teachers who had a conference in New York. How many teachers
were there?

Mr. Dow. We had over 600 at that conference.

Mr. RANGEL. And how many States were involved?

Mr. Dow. All of them, some 25 States.

Mr. RANGEL. Mr. Chairman, you can tell, almost, the quality of
education that a kid gets, without the kids, when you see the en-
thusiasm of the teachers. This was one of the most exciting groups
of people I have ever seen, and all they were talking about was
how they could do better.

Mr. WEILL. Congressman, they are doing it because they know
they can make a difference in people’s lives. That is why they are
so enthusiastic, it is terrific.

Mr. RANGEL. And I am glad you mentioned Sandy Feldman, who
is a very aggressive leader of the union, who has said a number
of times that she is prepared to support any program that will
show that teachers can teach, when given the tools and the envi-
ronment to work with.

And so we do not have that union problem here, because the
teachers are all union and enthusiastic.

And I hope, Doctor, that you might share with me some of the
things—not now—that came out of the conference, that you think
I, on any level, might be supportive of. ’

Mr. Dow. Certainly.

Mr. RANGEL. But let me thank you both, because it makes me
proud to be a New Yorker, to see that we do not wait for constitu-
tional changes, we move on with what we have to work with.

Thank you.

Mr. WEILL. Thank you very much. And as an American citizen,
thanks for giving me the rest of the summer off, and not doing this
until September.

Chairman CRANE. Mr. Coyne.

Mr. Coyne. I have no questions.

Chairman CRANE. Well, I thank you both for your presentations,
and keep ap the good work, and I look forward to examining in
depth, as Charlie already has, the program you have set in place.

Mr. WEILL. Thank you very much. We appreciate it.

Mr. Dow. Thank you.


56

NATIONAL ACADEMY FOUNDATION

ems Pn

NAF SUMMER INTERNSHIPS
1989 - 1995

$ 3,585,120

$ 3,081,540

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1992-1995 figures calculated at $5.50 per hour for 7 weeks



18

neapolis and St. Paul, and in fact in Bloomington, the largest city
in my district, and we certainly appreciated your visit.

I also appreciate the bipartisan pragmatism I am hearing on the
panel here today. I think that it is healthy, and we need more of
that, generally speaking.

I must say, and I do not want to subtract from that in any way,
but I was struck by your written testimony—I actually read your
written testimony, believe it or not—and you cited a New York
Times article specifically about Minneapolis, the Twin Cities, say-
ing that the situation—I am quoting now—“in Minneapolis mirrors
the national economy.”

I just have to, for the record, Mr. Secretary, clarify that the Twin
Cities economy does not mirror the national economy. In fact, the
growth rate for my district, and for the entire State, is about twice
the 2.3 percent national growth rate that we are currently experi-
encing.

In addition, the unemployment rate, we are proud to say, is bare-
ly half of the national unemployment rate.

So, I do not believe our economy is a reflection of the national
economy. We have excelled at a greater rate of growth, and with
Jower unemployment than the national economy.

A lot of our success can be attributed to the Minnesota work
ethic, and to the successful education system in Minnesota that
prepares students. We are always getting blue ribbon awards.

I think we have the highest per capita number of schools gettin;
the Department of Education’s Blue Ribbon School Award—a hig!
school in my district just received it. The 1996 National Teacher of
the Year is from Minnesota. We are very proud of our excellent
education system.

I would jest like to direct your attention, Mr. Secretary, to the
same article in the New York Times, David Wyss, who is director
of research at DRI/McGraw-Hill, was quoted as saying, “Our labor
market is a primary constraint on growth right now.”

And I think implicit in that statement is the problem in man:
States, many school districts across this Nation, high schoo) grad-
uates-~and I am sure you will agree with me—are not leaving the
school system with the knowledge, skills and abilities required to
enter and compete in the job market—the high-tech, knowledge-
based society in which we are operating today.

I like your emphasis on School-to-Work. Do you think that is our
best option? You mentioned targeted jobs tax credit. I hope the ad-
ministration is going to sign the next tax bill we send that includes
the targeted jobs tax credit.

Is that the intention of the administration?

Secretary REICH. Yes, it is. In fact, the work opportunities tax
credit, which is the modified version of the new targeted jobs tax
credit, is an improvement, in my view, because it has employers
certify in advance that a particular employee is qualified, which
means that employers will actually go out and seek eligible people
for the targeted jobs tax credit.

It also has a longer number of hours as a required mandate for
eligibility. That is, in terms of how many hours an employer has
to Keep somebody at work before that employer is eligible for that
tax credit.


al

THE ACADEMY MODEL: A VEHICLE FOR SCHOOL REFORM

Over 100 Academy Advisory Boards have been established and more than 700
business partners offer students paid internships.

167 public high schools offer their students a choice for enriched academic
curriculum and a dynamic means of learning through Academy programs.

Over 600 public high school teachers have undergone industry training, continuing
education and professional development to teach Academy courses.

More than 8,000 students have graduated from NAF Academies since 1984. The
annual graduating class is expected to increase to 3,000 in 1996.

90% of Academy graduates nationveide pursue their education beyond secondary
school.

Academy students eared $3.5 million during summer internships in 1995.

DIVIDENDS

Students stay in school and gain a meaningful base of knowledge and skills as well
as work experience for career preparation.

Schools offer a choice to students, improved credentials and opportunities for
teachers, and up-to-date resources.

Students successfully completing program requirements are awarded certificates
which evidence skills competence.

Business participates in educational improvement, and helps ensure the
development of a well qualified, motivated workforce.


51

NATIONAL ACADEMY FOUNDATION

PROGRAM SITES

1996 - 1997 Academic Year

Bakimore, MD
Boston, MA

Palm Beach County FL.
Providence, RI

San Jose (Unified). CA
Seminole County, FL
‘Sweetwater Union. CA,
‘Volusia County, FL.
Warwick, RI
‘Washington, DC
Westbury, NY
Westchester BOCES, NY
Woodtiver Junction, Ri

AOTT TOTAL: 78



80

+ the cost to parents of sending their children to schools that do not prepare their
Braduates for productive employment,

This disconnect between school curricula and workplace needs is a basic structural
problem that will only grow more serious as schools, as they are presently organized, are
‘unable to modernize rapidly enough to keep pace with the dynamics of technology.

Federal Programs: Only Partial Solutions

Jn paraliel with growing concerns the 1980's over the ability of the U.S. to compete
effectively in the global marketplace, there was a heightened awareness of the need to focus
‘more strongly on developing the skills and knowledge of the American workforce. This, in
turn, led to various federal initiatives. These programs, however, represent only partial
solutions that do not address the underlying structural gap between schoo! and work

‘The Job Taning Parmershipe At, JOBS, andthe Petkins Vocational Education
Act are worthy programs and deserve support, but they are focused heavily on s
populations. The Tech Prep and subsequent School-to-Work programs enable fader)
goverment 1o stimulate oral intiaives to cote the gap between Schoo] and work, bat hee

funding levels are modest. Indeed, in a 1993 NACFAM study of all federal education
programs, we found that less than 10% of the funds were allocated for all forms of
\vocationai-technical education,

‘The federal government has an important leadership and direction-setting role. Even
modest federal funding can have a strong catalytic effect at the local and industry level. AS
noted in the recommendations below. the federal role in supporting industry-ted, voluntary
national occupational skill standards is an example of this federal leadership role at its best.

‘The principal responsibility for educating and training America’s industrial
workforce. however, rests with employers, teachers, schools, and state and local
government. In keeping with our national culture, the major resources for this purpose
also reside with states and localities, not with the federal government.

{As suggested in the recommendations that follow, more fundamental reform is
‘needed far beyond what the federal government can accomplish. ‘These reforms go to the
heart of the schoo! culture and business-school relationships and would give the employer
‘community more leverage, but they do not require additional resources. Indeed, they will
lead to greater efficiencies and cost savings,

In preparing NACFAM's recommendations in this field, we thus went on the
assumption the education improvements would have to be effected through re-direction of
resources and organizational change, not in additional dollars or school hours, This U.S.
already scores high among OECD countries in both categories.

NACFAM Recommendation 1: A Basic Change in Priorities: Make
Productive Employment for All Students the First Goal of the Nation's
Schools

‘The starting point for genuine school reform must be at the level of basic priorities.
Current priorities are embodied in the "National Education Goals* by the President
and state governors atthe Charlottesville Education Suramit in 1989, which stated that
students should be prepared for “responsible citizenship, further learning, and productive
employment.”

This paper recommends that “productive employment” be put at the head of the
class. Under this approach, the first priority of schools should be to prepare its graduates,
to move promply into rewarding carer field thats commensurate wit he stents
interests and abilities.

This change in priorities does not signify indifference to education for “responsible
citizenship" and "further learning,” but rather makes the simple point that rewarding
employment is the foundation stone upon which the other benefits of education rest. A
citizen wit ob sles key to meet his civic resposiiliues and to afford
“further learning” than isa citizen who is productively employe

Under this new approach, the measure of a school’s success and of student
achievement would be the placement of all graduates onto a clear track toward a productive
career either immediately following school or through more specialized training at post
secondary level.

With caer placement asthe diver the dsncton between “callege-bound
"vocational," and “work bound” students would be irrelevant, since all students will be


135

This research clearly demonstrated that healthcare work systems are extremely
complex and wasteful. In comparison with a control group of more than 1,300 workers
and managers from business and industry, virtually every healthcare work role - from the
CEO to the floor nurse - was found to be 100 to 800 percent more complicated, either in
terms of the scope of resources to be managed or the work activities to be performed.

The complexity of healthcare operations creates a great potential for waste and
confusion, considering that the average healthcare worker reported that 31 percent of their
time was wasted through paperwork, rework, duplicate work, or inappropriate work. This
consumed more than $65 billion of ta2 $384 billion spent for healthcare in hospitals
alone, and this total today is much Ligver.

Taken together, these results suggest a strong relationship bot.veen the
organization of work and increased mortality and morbidity. When staff size is reduced
without redesigning the work, waste is merely compacted, not eliminated. Fewer people
are left to grapple with the same inefficient procedures and complexity, which leaves
even less time for patient-focused activities.

When E.C. Murphy completed its next study in March 1995, it clearly indicated
that hospitals that used used “data-driven work-redesign” methods to reduce staff levels
experienced sustained cost-savings, no increases in patient mortality and morbidity rates,
improved perceptions of the quality f care by patients and physicians, and produced
higher rates of leadership retention.

The study examined more tl:an 300 organizations, including 117 general acute
care hospitals, with total employmest in excess of 170,000 healthcare workers. There
were 23 hospitals in this group that reduced their annual operating cots by 4 percent to
10 percent in a single year. The question: is it possible to cut costs ar: preserve -- or
actually improve -- the quality of patient care?

Across-the-board cuts eliminate a given number of positions to save money,
leaving fewer people to do the same volume of work. On the other hand, work-redesign
changes the skills mix in an organization or department, placing people with certain
levels of training and pay to perform work at corresponding levels.

Organizations which make scross-the-board staff cuts not only put their patients at
risk, but their leaders as well. In f ot. 48 percent of the CEOs in the March 1995 study
who implemented an across-the-bcard downsizing strategy were no longer employed by
their organization 18 to 24 months oer cutbacks.

In contrast, the tummover rate for CEOs that initiated a process of work-redesign
was 11 percent, and half of this tumover was the result of CEOs who were promoted or
moved on to other favorable positions.


13

We've proposed to put more power into the hands of
unemployed, dislocated workers by consolidating scores of federal
job training programs and creating "skill grants" that empower
workers to choose the training they feel they need

In partnership with state and local governments, and the
private sector, we're continuing to build School-to-Work
opportunities throughout the country. Since its enactment two
years ago, states report that more than a half-million high-
school students have participated in School-to-Work programs in
communities nationwide. Businesses are also becoming involved
with many students getting job experience with participating
companies. This initiative is preparing young Americans for the
jobs of the future.

School-to-Work, training vouchers or “skill-grants," and our
efforts to help dislocated workers find new jobs -- all are
important components of our strategy of building a highly-skilled
workforce that will keep our nation prosperous in the new global
economy -

These initiatives have received broad, bipartisan support in
the past. The nation's business leaders have been supportive
And that's why it is so disheartening that the President's
workforce development proposal has been attacked here in the
Congress. The attacks from outside groups on School-to-Work and
America's Job Bank have been distorted, misleading and
outrageous. America's workers deserve better. America deserves
better

So we'll fight on -- because our economic competitiveness is
at stake, because these initiatives work, and because they are
right for the economic future of our country

Inevitably, some workers, particularly those with lower-
skills, will be displaced by trade. That is precisely why we
should continue to fund programs such as Trade Adjustment
Assistant (TAA) and NAFTA-TAA -- so that we can ensure that these
workers, who are hit hardest by the effects of trade, have an
opportunity to re-enter the workforce with enhanced skills.
Purther, we need to continue to support Title III of the Job
Training Partnership Act, which serves dislocated workers who
have been affected by other economic changes

And we must continue to seek ways to use education, training
and job-placement initiatives as a vehicle of hope for those who
live in America's most impoverished areas -- places where jobs
are scarce and the prospects for employment are diminished. We
simply cannot expect to build a world-class workforce while so
many are left behind.

On that point, let me commend Congressmen Rangel and
Houghton for their work in reshaping the Targeted Jobs Tax Credit
into the new Work Opportunity Tax Credit. The bills that have
passed the House and Senate address many of my concerns and those
of the Office of Inspector General, and I look forward to working
with you further as they are taken up in conference

There is one other element cf our strategy, Mr. Chairman.
which Theliewe ie alen witslly impavtant kn hie ahallanae
and that is encouraging the private sector to do more to upgrade
the skills of their workers

We know that government cannot possibly do what is needed to
ensure that more than 100 million working Americans get the
opportunity to learn more, to work smarter and to stay ahead of
the technological curve. ‘In fact, we are paring back the amoun
of resources that government devotes to this task


137

In addition to evaluating the organization's cost structure, service delivery, and
worker productivity, training employees to become eof change is the key to the
success of any business becoming more competitive. The most effective means to
accomplish this task is through the application of a moral compass and sound leadership
ability,

As an outgrowth of the vast body of knowledge it has accumulated in helping
hundreds of organizations successfully restructure to reduce costs and improve
productivity, B.C. Murphy has also conducted the most comprehensive empirical study of
leadership, Published in his third book, Leadership 1Q, Dr. Murphy reports the results of
a five-year research study to determine the common characteristics of the world’s most
accomplished leaders.

Analyzing the beliefs and practices of more than 18,000 managers at 62 large
and small organizations in the United States and around the world, the study identified
1,029 individuals who demonstrated exceptional leadership abilities and then isolated the
qualities that made those leaders great.

Those leaders that are considered superior in the eyes of their colleagues and that
produce superior levels of customer satisfaction, productivity and financial performance
are those that approach work very differently than average leaders. They master a core
set of competencies including pragmatism, optimism, commitment, responsibility,
humility, and an understanding of the importance of individual competence,

It was also found in this five-:'ear substudy, that average leaders, by contrast,
tend to believe their achievements iay beyond their control, rely on others to lead
them to success, and have a difficult time breaking free from the bureaucracy of their
organizational structures to focus on problem solving and instilling pride in their
employees.

To maintain the competitive edge it has in many areas (e.g., technology,
communication and transportation) and to gain it in others, American business must
continue to retool and restructure to meet ever-increasing competition from abroad,
Increasingly, they must also restructure their workers, especially their leaders. A key in
each of these areas is a clear understanding of work at the individual, group and corporate
levels. E.C. Murphy’s work with hundreds of businesses of every size and stripe has
given it some unique insights in this regard.

cctestfy doe
98/96


55

NATIONAL ACADEMY FOUNDATION

Number of
Students

eee rere
pew aceon

NAF STUDENT ENROLLMENT HISTORY
1982 - 1995

12000.

"1983 1984 1985 1986 1987 1988 1989 1990 1991 1952 1993 1994. 1995

YEAR
1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1093 1994 1995
JAOF 35 200 350 420710 _1069_1541_2019 2715 3169 3628 4139 53406226
AOTT 76161 __195 5649041519 2006 2878 3659
APS. 63188339406 427__—367
TOTAL 35 200 350 420 710 1145 1702 2214 3342 4761 5486 6639 8645 10252



ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE

FOR IMMEDIATE RELEASE CONTACT: (202) 225-1721
July 10, 1996
No. TR-27

Crane Announces Hearing on U.S. Trade Competitiveness
and Workforce Education and Training

Congressman Philip M. Crane (R-IL), Chairman of the Subcommittee on Trade of the
Committee on Ways and Means, today announced that the Subcommittee will hold a hearing
on USS. trade competitiveness and workforce education and training. The hearing will take
place on Thursday, July 25, 1996, in the main Committee hearing room,

1100 Longworth House Office Building, beginning at 11:00 a.m.

BACKGROUND:

‘The Subcommittee is aware that increased international competition requires both large
and small U.S. companies to position themselves in the international marketplace in order to
succeed, which presents new challenges for firms and workers. Entering more forcefully into
the global marketplace and improving America’s export base will continue to exert
competitive pressure on the workforce. The Subcommittee also recognizes the resiliency of
the U.S. economy and workforce in responding to these competitive pressures. The hearing
will allow witnesses from the Administration to outline education and training programs
designed to improve the global trade competitiveness of the U.S. workforce. Witnesses from
the private sector, research foundations, and academia will also provide testimony, including
an evaluation of the success or failure of past initiatives and suggestions for improving current
Programs.

FOCUS OF THE HEARING:

“The hearing will focus on ways in which the government, business, and industry are
‘working to improve the competitiveness of the U.S. workforce through education and training
initiatives.

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

Requests to be heard at the hearing must be made by telephone to Traci Altman or
Bradley Schreiber at (202) 225-1721 no later than the close of business, Tuesday, July 16,
1996. ‘The telephone request should be followed by a formal written request to Phillip D.
Moseley, Chief of Staff, Committee on Ways and Means, U.S. House of Representatives,

1102 Longworth House Office Building, Washington, D.C. 20515. The staff of the
Subcommittee on Trade will notify by telephone those scheduled to appear as soon as possible
after the filing deadline. Any questions concerning a scheduled appearance should be directed
to the Subcommittee staff at (202) 225-6649.

In view of the limited time available to hear witnesses, the Subcommittee may not
be able to accommodate all requests to be heard. Those persons and organizations not
scheduled for an oral appearance are encouraged to submit written statements for the record of
the hearing, All persons requesting to be heard, whether they are scheduled for oral
testimony or not, will be notified as soon as possible after the filing deadline.

Witnesses scheduled to present oral testimony are required to summarize briefly their
written statements in no more than five minutes. THE FIVE-MINUTE RULE WILL BE
STRICTLY ENFORCED. The full written statement of each witness will be included
in the printed record.


72

that staff who work in adult education and training programs are able to meet the demands of
their jobs. In each of these five areas, we agreed to support programs that use our technology
to eliminate barriers and resolve systemic issues.

In March, after sponsoring a nationwide competition, we awarded a dozen technology grants
valued at a total of $2.5 million.

Let me give you a sense of the scope of this initiative by running through the organizations
that have been selected to receive IBM equipment, software and technical support:

Veteran's Leadership Program (New York) ~ The Veteran's Leadership Program (VLP)
provides interactive modules of education and training that enable participants to translate
their military skills and experience to the job market and entrepreneurship. VLP will use
TBM technology to provide on-line access to curriculum modules, individualized education
and employment planning, job development and placement services, communications lines
with employers and one-to-one training and consultation for staff and trainees.

Atlanta Regional Commission (Atlanta) ~ IBM will provide technology to ARC to create a
regional technology model for case management, training, employment services and referrals.
An innovative voucher program will allow clients to purchase education and training directly
from a list of pre-approved institutions that will increase flexibility in client choice.

EI Centro College (Dallas) -- IBM will provide technology to El Centro College to create a
comprehensive career path in digital imaging. This program will provide leading-edge
technology and training to all student populations, including the physically challenged.
Faculty support and professional development will be accomplished through the use of
interactive teleconferencing and on-line networking.

F.E.G.S. (New York) -- Since 1934, F.E.G.S, has been helping new immigrants and displaced
workers enhance their job skills. Their grant from IBM will be used to establish a
Technological Applications Leaming Center to integrate technology into an array of existing
programs and demonstrate effective uses of technology in training clients, The Center will
also provide a valuable link between job listings and employment listings.

Na Ohana Ho omalamalama (The Hawaii Collaboration) ~ [BM will fund a collaborative
adult basic skills and workforce training program that links Alu Like, a local multi-service
community-based non-profit organization, with the Governor's Council for Literacy and
Lifelong Learning and the Hawaii Literacy Policy in Action Academy. The technology from
IBM will help this collaboration use telecommunications and create multiple access points for
clients for distance leaning, on-line services, a referral system for job training, and resources
for clients and practitioners throughout the four islands of Hawaii.

Jobs for Youth (Boston) — Jobs for Youth is a nationally recognized school-to-work transition
program. IBM multimedia technology will be used by Jobs for Youth to convert their
environmental industry instructional materials to computer-based instruction that will enable


27

more funds than ever before available -- in total Federal assistance for our grant, loan, and work-
study programs to help approximately 7 million students finance postsecondary education and
training. According to the College Board, Federal student financial aid accounts for 70 percent of
all financial aid available to individuals enrolled in postsecondary education. The Administration has:

. proposed increasing the Pell Grant maximum award -- the amount that the lowest-

income postsecondary student can receive under this program -- from $2,300 in 1994-
95 to $2,700 in 1997-98 and to $3,128 in 2002-2003.

. proposed increasing support for the Federal College Work-Study program so that one
million students will be able to participate in this program by the year 2000, In
addition to providing support to students as they pursue their postsecondary
‘education, the Work-Study program offers work experiences that many find helpful
in making the transition from school to work.

. requested $130 million for a new Presidential Honors Scholarship program that would
provide $1,000 scholarships for the first year of postsecondary study to an estimated
128,500 high school seniors graduating in the top 5 percent of their classes in 1997.
This program expands on and complements the effort of the Byrd Honors
Scholarships to recognize and reward meritorious students.

. made it easier for individuals to repay their student loans by offering a wide range of
repayment plans, including graduated, extended term, and, in the case of the Federal
Direct Student Loan program, income-contingent repayment plans.

Building upon the Administration's strong support for student financial assistance, the
President recently announced the “America’s HOPE Scholarship” to encourage investment
in higher education. The President’s goal is to make 14 years of education ~- including the
first two years of college -- as common tomorrow as 12 years of schooling is today by
providing a refundable tax credit of up to $1,500 for each of the first two years of full-time

+ postsecondary enrollment. The proposed tax credit is intended to pay more than the average
tuition and fees charged at a community college and make a significant down payment at more
expensive postsecondary education institutions.

The President’s proposed HOPE scholarships build upon his proposed tax deduction
of up to $10,000 each year for postsecondary education and training and expanded use of
penalty free withdrawals from Individual Retirement Accounts for educational expenses. The
tax credit and deduction are specifically designed to assist middle income families who are
struggling to put their children through college

The students who benefit the most from these proposals are those whose incomes are
too high to qualify for Pell Grants and other federal grants but whose incomes are not high
‘enough to pay college tuitions without struggling, These proposals will provide $42.9 billion
in tuition assistance over six years, and are fully paid for within the President's six-year plan
to balance the Federal budget without reductions in any other education spending,

ENHANCING ECONOMIC COMPETITION BY BLENDING
EDUCATION & WORK

‘A competitive economy requires that students have a different type of preparation --
one that blends rigorous, academic instruction with work-based experience. Through the Carl
Perkins Vocational and Technical Education Act, the federal government currently provides
51 billion to provide students in high schools with the education and training necessary to
achieve in the new workplace environment

‘Asa result of the technological changes that have swept industry, there are fewer and
fewer entry level jobs that require only low level skills. Indeed, economic competitiveness
demands that all workers have higher levels of knowledge and skill. To address the needs of
the economy, the Administration proposed and Congress enacted -- with bipartisan support --
the School-to-Work Opportunities Act which provides Federal seed money to States and their
partnerships to design the school-to-work system that makes the most sense for them. There
is no single model for “School-to-Work”. Instead, it builds on existing models and efforts
such as career academies, youth apprenticeship, Tech Prep, and cooperative education, While
these systems are different from State to State, the School-to-Work initiative will make the
workplace an active learning environment. These systems will provide every American student
with:
+ Relevant Education, allowing students to explore different careers and see what skills


70

STATEMENT OF STANLEY S. LITOW, PRESIDENT
IBM FOUNDATION

Chairman Crane and members of the Trade Subcommittee, my name is Stanley Litow,
President of the IBM Foundation. We appreciate the opportunity to discuss our education and
training programs with you.

These programs are designed on the belief that the same information technology innovations
that are revolutionizing business can provide important breakthroughs for public and nonprofit
organizations. Technology has the power to help these organizations deliver higher quality
services, manage costs, maximize effectiveness and implement exciting new programs.

IBM's commitment to solutions-oriented innovation requires that we go beyond simple
checkbook philanthropy to more comprehensive programs of corporate citizenship.

Our primary focus for our corporate citizenship efforts are K-12 education and adult
education and training. We focus on the issues of education and training because our
employees, shareholders and customers tell us they think education is the number one
challenge facing our country, and also because we know that no business can succeed in an
unsuccessful community; and the most important factor in determining the success of a
community is its education program, The American public agrees since the latest CNN poll
suggests Americans rate education as our number one challenge. Moreover, all research
indicates that educational attainment is the greatest and most reliable predictor of economic
success and a stable work life.

‘One way we are using IBM expertise and corporate contributions to improve education is to
help school systems solve some of their toughest challenges through the use of technology.
We are investing $25 million through IBM's Reinventing Education initiative in 10 school
districts and states over the next three to five years. This program reflects our belief that
technology solutions can redefine and improve how our schools function. To be selected for
an IBM Reinventing Education grant, school districts or states had to commit to setting world
class academic standards, but we did not select only the highest performing districts. In fact,
we selected some of the most challenging geographies in the nation. We wanted to find
locations where there was a commitment to change and a desire to use the power of
technology to bring that change about. The nature of this initiative is best demonstrated by
describing the sites in which we are working.

In Charlotte, North Carolina we are using technology to get at the serious question of parent
involvement. As the Charlotte schools struggle with the challenges of parent involvement and
fight to overcome the twin barriers of time and distance that oftentimes keep parents
(especially working parents) from full involvement in their children's education, we are
building a "parent friendly" computer network to bridge the gap between school and home.

In Charlotte's new Governors Village complex of schools due to open next month, computers
will connect parents to their child's school via access points at community centers, public
libraries and homes. In these locations, parcvics and community caregivers will be able to
review information about current classroom activities and homework, view test papers and
examples of student work. In addition, “electronic” parent-teacher conferences will keep



63

TESTIMONY OF
ROBERTS T. JONES

ON BEHALF OF THE
NATIONAL ALLIANCE OF BUSINESS

BEFORE THE
SUBCOMMITTEE ON TRADE,
COMMITTEE ON WAYS AND MEANS.
U.S. HOUSE OF REPRESENTATIVES

ON
“THE IMPACT OF WORKFORCE QUALITY IN THE NEW AMERICAN ECONOMY"

JULY 25, 1996

Mr. Chairman. I appreciate this opportunity to discuss the changing world of American business
‘competitiveness and the impact of those changes on human resource issues

Iam Roberts T Jones, President and CEO of the National Alliance of Business The Alliance is a
nonprofit corporation advancing business leadership at local, state, and national levels to increase
workforce quality through improved training and education

damental Economic Changes

The economic world that American companies compete in today is very different from that of
even 15 years ago, and the change is both continuing and accelerating. Unprecedented challenges
are coming from new pressures of competition worldwide, technological developments,
deregulation, shortened product life cycles, and new standards of quality and customer
satisfaction These factors are restructuring entire industries while reshaping how companies
organize their workplaces and manage and train their employees. Staying in the competitive game
requires companies to have unprecedented flexibility, constantly refocusing as new technologies
and emerging players reshape markets virtually overnight

These realities have fundamentally and permanently changed the U.S. economy Static
institutions and old assumptions about roles and responsibilities (including those of government,
the company, schools, and the individual) are increasingly irrelevant.

The Change is Ni

Some of the short-term, transient effects that accompany these changes, like downsizing by an
employer, often generate headlines. But, painful as they are, these changes are often vitally
needed if companies are to remain responsive to economic realities over the long-term. What the
media often misses is that layoffs are only a small part of the story. In an industry where layoffs
might occur with one large employer, millions of new jobs are being created through new
technologies, spin-offs, and new customer services. For example, even as major
telecommunications companies have announced workforce cuts, the rapid convergence in
computers, communications, and entertainment technologies has generated about 400,000 jobs in
the past year alone in that industry

Corporate leaders are predicting that this period characterized by constant turnover in the
structure of markets, innovations in technologies, and customer needs will continue well into the
next century So the issue is not how to police the short-term economic effects of change, but
how to restructure public policies to support the long-term productivity of companies, individuals,
and educational institutions

Impact of Economic Change on Employees

The ramifications of all this change on people must be looked at in a new light also


20

Mr. Secretary, welcome, and thank you for your testimony. My
question has to do with trade policy, and whether or not you think
we are adequately responding to displaced workers who find them-
selves jobless as a result of U.S. trade policies.

Secretary REICH. Congressman, I think we are certainly respond-
ing as well as we can, given the restraints on our resources. I be-
lieve that we do have a great challenge in this country, with peo-
ple—particularly middle-aged people—who are losing jobs either
because of trade displacement, technological displacement, because
their companies are restructuring, or for whatever other reason.

We must make sure that they have every opportunity to get a
new job that is as good as the job they left. Now, unfortunately the
data shows—and this is not a new phenomenon, it has been going
on for 15 to 18 years—that when somebody loses a job, for what-
ever cause, the next job they get is not likely to pay as well as the
job they lost, and not likely to have the same level of benefits as
the job they lost.

Now, I believe that it is to some extent a public responsibility to
make sure that people have access to the job search assistance, job
training, and job counseling they need. We have been, as I said,
creating one-stop career centers, putting public resources to far
better use than ever before.

But I must say that I also believe that there is a private sector
responsibility here as well. If a company is laying off workers,
downsizing, and the company is profitable, I think that company
does have a responsibility to help its workers—those whom it is
laying off—find new jobs and get well positioned.

Mr. Coyne. Is it your experience that industry is meeting its
responsibility?

Secret: REICH. It is very difficult to tar all of American indus-
try with the same broad brush. Some companies, as I mentioned
before to the other Congressman, are treating their workers truly
as assets, to be developed.

Not only are they w ding their skills, and bringing them in
as partners, in terms of gain sharing and partner sharing, but they
are also providing, when they must downsize, all sorts of services
enabling their employees to get new jobs.

But, at the same time, I have witnessed other companies, and I
have talked to both the executives and the employees, those compa-
nies are not treating their workers as assets, they are treating
them as costs, they are discarding them—particularly lower wage
workers.

The high-wage workers—the top executives—are treated to “gold-
en parachutes,” often, but the low-wage workers being laid off are
treated to lead balloons.

Mr. Coyne. Has your department been denied by Congress the
resources to do the necessary training of people being laid off as
a result of our trade policy?

Has Congress denied the resources to the department?

Secretary REICH. Congressman, between 1993 and 1994, we were
successful in just about doubling the resources for displaced or dis-
located workers, and that was extremely important, because not
only were we facing all of the downsizings that I mentioned before,
and still are, but we also have tremendous restructuring going on


37

Mr. RANGEL. Mr. Chairman, I ask unanimous consent to ask just
one question.

Are there parts of our educational system that warrant being
indicted for failure to perform? Communities?

Mr. LONGANECKER. Yes, there are certainly. But again, as I think
Secretary Reich says, it is difficult to brand all schools in all levels
with the same brush.

Mr. RANGEL. I want to agree with you a hundred percent, but
there are certain communities that are very costly, in terms of our
budgetary problems, that can be, and should be, indicted.

Mr. LONGANECKER. There are school districts that one can look
at and wonder why the productivity is not higher. But keep in
mind, different communities face very different circumstances.

The community in which we live, this area, has to spend much
more resource on protection of students, and on counselling serv-
ices, and on issues that the student brings to the school—.

Mr. RANGEL. You are talking about the reason for the indict-
ment. I am asking whether or not, if the kids are not being
educated-—

Mr. LONGANECKER. Yes.

Mr. RANGEL. OK.

Mr. LONGANECKER. No, there are——

Mr. RANGEL. We have got to work on that, that’s all.

Mr. LONGANECKER. Yes, absolutely.

Mr. RANGEL. We have got to work on it.

Mr. LONGANECKER. Yes, we do.

Mr. RANGEL. I am sorry.

Chairman CRANE. Were you finished, Mr. Coyne?

Mr. Coyne. Yes.

Chairman CRANE. Mr. Payne.

Mr. PayNg. Thanks very much, Mr. Chairman.

And thank you, Mr. Secretary.

Mr. LONGANECKER. You are welcome.

Mr. PAYNE. Because we are the Trade Subcommittee, and our in-
terest is in how we can be more competitive in the world, certainly
any improvements we make in education and training must be
done with the public and private sectors working in conjunction
with one another.

Mr. LONGANECKER. Yes.

Mr. PAYNE. What is the Department of Education doing with the
private sector, and particularly business and industry, as it relates
to some of the objectives you mentioned in postsecondary
education?

Mr. LONGANECKER. A couple of things. The higher education
community has been working closely with the business community
for some time.

We have specific initiatives. Obviously the most significant is the
School-to-Work Program, where a major partner is the business
community providing the work-based learning component of that

program.

The School-to-Work Program is a secondary/postsecondary link-
age program as well. Therefore, I consider that to be part of my
charge, as do the other assistant secretaries who deal with that
issue.


57

NATIONAL ACADEMY FOUNDATION

ene peor

NAF ACADEMY GRADUATES
1989 - 1995

1989 © 1990s «1991-1992 «1993" 1994" 1995"

Graduates 510 621721 9441270 1525 1902

College Bound 464 558 670 8611139 13931708

College Bound 91% 90% 93% 91% 90% 91% 90%

** Figures include Academies of Finance, Travel & Tourism and Public Service graduates



23

I appreciate very much all that you have said here, and I would
hope that I have an opportunity to work with you in the future,
as we implement some of these important things.

Thank you.

Secretary REICH. Thank you, Congressman.

Chairman CRANE. Mr. Neal.

Mr. NEAL. Thank you, Mr. Chairman.

Welcome, Mr. Secretary. Just to follow up on what Mr. Payne
was saying, once you scratch back the surface here, we are really
talking about city problems, in large measure.

We are really talking about the problems that innercity children
have today. There seems to be no appetite in this town, at this par-
ticular time, on any side of the aisle, for really addressing in a com-
prehensive manner the problems that many of these people have,
day in and day out. As manufacturing jobs have left and as the
economy has changed, the middle class base has been eroded.

We can talk about enterprise zones, and we can talk about spe-
cial projects and programs, but we really do not do anything on a
comprehensive basis, do we, Mr. Secretary?

Secretary REICH. Congressman, we do not have—if by “com-
prehensive” you are talking about large, national programs, that
deal with the problem, as you put it, innercity young people, many
of whom are dropping out of high school, no, we do not.

But I would go back to your initial premise. There are three sep-
arate problems in the labor force, as I see them now. First, those
high school dropouts—how to keep them in school, how to give
them the skills they need, how to give them every opportunity to
succeed, and how to make ‘their education a true education.

econd, the people who are losing their jobs. They may not be
poor, r, the: may be middle class, but when they lose their jobs they
may suddenly become quite poo.

The third has to do with The "problem of poverty among adults,
a segment of the population that simply does not have the right
skills, or the right education. Maybe they are living in the wrong
place, they do not have the right contacts. They also need help into
the job market.

Now, we are dealing in an incremental way with all of those
problems, but incremental is probably not good enough. We are the
most competitive nation in the world, we have a $7 trillion econ-
omy, we have unemployment down to 5.3 percent, we have cut the
deficit by more than half, we have no inflation in sight. We can do
more.

Mr. NEAL. Well, I appreciate your comments. My sense is that,
while we are not prepared at this time comprehensively to deal
with many of these urban problems, that before too much longer
they are going to be before us, and we are going to have no choice.

Thank you, Mr. Secretary.

Chairman CRANE. And I want to thank you too, Mr. Secretary,
and reassure you again that your entire written testimony will be
made a part of the permanent record.

And with that, we thank you for your patience, and we will let
you break for lunch.

Secretary REICH. OK, thank you. Thank you all.


90

What I am describing, by the way, bears no relationship to any-
thing that is actually going on, that we have seen at the present
time. This is really quite different.

Mr. Coyne. You had mentioned that at the present time there
are 20,000 job openings for, I believe you described them as some
type of machinist—tool——

Mr. Reppy. Sure, this is just one example of what employers
mean when they talk about a shortage of skilled workers. We will
hand copies of this out. This has been produced by Charmilles, Inc.,
an advance technology company, talking about career opportunities
in tooling and machining.

In this example entry level toolmakers average $27,000 a year.
Experienced precision metal workers earn $40,000 to $60,000. The
industry has thousands of unfilled, high paying, secure jobs that do
not require a 4-year degree.

Gloomy rooms and greasy machines are replaced by computers
and high technology, and so forth. These are highly desirable jobs—
well-paying, solid jobs—in the information age. They have 20,000
openings that they cannot fill; they cannot find the people with the
skills to fill these jobs.

That is just in one industry, and if you have been out in the Mid-
west recently, the common figure there is that “the Big Three” are
going to need to fill over 250,000 jobs in the next 5 years, because
the work force is graying, and the old work contracts are ending.

We have got all kinds of people in their fifties or sixties who are
going to go to Palm Springs, and companies just do not see the sup-
ply of skilled workers coming in to take their place, at a time when
they are adding more and more technology to their plants. This is
causing very serious and deep concerns out there in U.S. manufac-
turing.

So, there really is a shortage of people with the right skills, and
the only way we can figure out to close that gap is, first of all, for
employers to say what are those skills. 1 mean, companies complain
to schools and say we need good workers, but the schools do not
know what they mean when they say they need good workers.

Exactly what are companies looking for, when they are asking for
good workers?

That is the kind of structure, at least, that we have in mind.

Mr. Coyne. Thank you.

Chairman CRANE. Well, I want to thank all of our panelists for
your presentations, and Mr. Rangel wants to make one final
commen*

Mr. RANGEL. Yes. First of all, I hope that the three of you would
agree that we could meet when it is convenient, to see how we can
better form a closer relationship with business and the govern-
ment, so that the type of changes that have to be made can be
made in a way that you do not find the heavy weight of the Federal
Government, but you find the encouragement of the Federal
Government.

And also, I have heard from some very high tech companies that,
in order to do these jobs, as Mr. Reddy said, you do not really need
the Ph.D.’s. We do have master teachers, and videos, and so man’
things, that we can take someone almost from zip to the threshold,


44

and (3) a minimum grade point average. We don't just take the top students; a large
majority of our students are considered at a "high risk" for dropping out of school.

Results Are What Counts

Having described our program, what counts is not our effort or our design but our results.
“The most important result is that virtually 100% of Academy students graduate from high
school. In addition, numerous scholarships are given to offset the ever-increasing burden
of college tuition. Consistently, over 90% of our students go on to two or four year
colleges (see Attachment 7), and many continue to work in the financial services industry
during college. Finally, over 50% of our students return to the financial services industry
after college.

Corporate Support
Matching our record of growth is our record of private sector support Today, more than
1,000 corporations and organizations in America support the Academy of Finance. The
support comes in the very necessary form of financial support but also in sometimes more
important ways. Summer jobs, real work experience and the involvement of senior
‘executives are just some of the examples of how corporations can get involved in helping
students. I would encourage more corporations to take part in this or other education
efforts. Many corporations are already contributing time, expertise and money. I serve
as the Chairman of the Board of the National Academy Foundation and many of the other
fine executives and corporate supporters are described in the materials I have brought
today.

Conclusion:

In conclusion, | want to state that I am very proud of the Academy of Finance and Tm
suse that shows through. In just 15 years, the Academy of Finance has gone from an idea
‘with no precedent to a nationwide program that benefits thousands of kids. 1 am
especially proud of the major efforts - the partnership between the public school officials
and the private sector comprised of corporations across the country. 1 firmly believe that
the future of effective education will be found in this type of partership between the
private and public sectors.


85

Finally, and again staying away from social work, we have to
make certain that we do not create economic problems for ourselves
by having to invest productive money into programs that do not
produce anything, and hardly contain the problems.

I find this to be very exciting, not what we have done today, but
to consider this a beginning, where nobody’s going to tell you to
stop what you are doing, but it will give you an opportunity to see
what the other partners and government can do to encourage and
enhance your efforts.

And Mr. Litow, people who do not see the advantage of doing
what you are doing in selected communities can be made to under-
stand better that those who produce get, and there is a nicer way
to say it, and I will find that language.

But you do not take Federal dollars and just say, in a general
way, we have got scholarships. We want to be able to see what are
the results of the investment that we are making, especially since
the private sector has not come to the Congress and asked for the
type of assistance which you do for research and development, and
any other number of things that allow you to remain competitive.

ut I want you to know that I am going to be here, and recep-
tive, when you start asking for those incentives to make a more
educated and more productive America.

We are not going to change anything overnight, but I have an
idea that more Americans are reading from the same page than we
hear in the halls of the U.S. Congress.

Let me thank you so much, for what you have been doing, but
more importantly for what you are going to help me, this
Subcommittee and this Congress to do for America in the future.

Thank you very much.

Thank you, Mr. Chairman.

Chairman CRANE. Thank you.

Mr. Houghton.

Mr. HouGHtTon. Yes, thank you, Mr. Chairman.

Gentlemen, I am sorry I was not here for most of your testimony,
but in reading quickly over your papers, and some of the questions
that you have suggested, let me just ask this.

You know, we could talk about increasing governmental pro-
grams, and you have said that that is really not the answer, al-
though it is part of the answer. We can do a variety of different
things in terms of our communities; businesses can increase the
educational component.

But doesn’t a change in attitude have to take place, because our
problem is that there is a whole group of people here who are not
getting educated at all, and those are the people who have the po-
tential, but there is no incentive for them—there is no Sputnik out
there, to enthuse them.

How do we change that around? There are all sorts of things
which businesses can do, but it cannot change the attitude outside
of the corporation—peripherally in a community, but not that
much.

How do we change this attitude.

Mr. JONES. Congressman, let me suggest that business does have
a role on that issue, in conjunction with government. It may be one
of the most important ones of all, in getting the American people’s


62

Sixty percent of the companies are increasing their spending,
while only 2 percent, in the last 2 years, have decreased it. Forty-
one percent of employees are now receiving skill training, compared
to 36 percent just 5 years ago.

Companies providing remedial education have increased from 4
percent to 20 percent, from 1990 to 1996. There are over 1,000
company universities, increased over 50 percent in 5 years. Busi-
ness involvement in community coalitions across this country—we
now have over 240 business-led coalitions in every major state and
community in the country, focused on education reform and train-
ing reform, within those communities.

Indeed, I would suggest to those of us today who want to look
at this issue, we need to be looking outside of Washington, in the
communities. School reform is alive and well, and going phenome-
nally successfully. Reform inside the companies, in terms of how
we relate to employees in training and education, is growing
rapidly.

But it is all on a local basis. There is a commitment, as you
heard, in the summit recently from New York, where education
leaders agreed unanimously from across the country, to stay fo-
cused on high education standards, high assessments, and for com-
panies to use transcripts in hiring and concern themselves greatly
with Congressman Rangel’s question about where schools in fact
are dealing with these issues when they locate their businesses.

Goals 2000, controversial as it is, was supported by the business
community; the financing, indeed, this year in this Congress, was
supported by the business community. The CAREERS bill that has
been in trouble was supported dramatically by the business
community.

National skill standards, to communicate these kinds of things to
people, are supported by the business community.

The bottom line is, there is a great concern that without those
kinds of success efforts, the ultimate discrimination will take place
by people not being skilled enter into the workplace.

We think in the end this is a partnership issue. As the Congress-
man pointed out earlier, it is not a Federal issue by itself, it is not
a local issue by itself, it takes the business community, the govern-
ment, and the schools to work together, both financially and
substantively.

There is a role for the Federal Government, and it is a role of
strong and vociferous leadership on this important issue. The role
of the companies indeed is a responsibility to their employees and
their communities, a different kind than we had in the past, and
there is a role of the individual, but it will take all three working
as partners to make this happen.

you.
[The prepared statement follows:]


86

attention, to understanding a very significant shift in the ultimate
American value.

That was the belief that you could get a job in this system, and
you could work your way up to be president of the company, or in-
deed President of the country, and that simply is not true any
longer.

Without basic education skills, the ability to get in, and to main-
tain wage equity, has changed forever, and the American public—
parents, teachers, students—do not understand that. It goes to the

eart of the financing issue, it goes to the heart of the way we run
schools, it goes to the heart of the public policy structure, and how
we work within companies.

But we need to make the public, business, parents, teachers
more and more aware of the impact of this shift that we are seeing,
and its growing impact over the next few years, and I think we all
have a role in it.

But if we do not do that, all the programs we pass, all the struc-
tures we engage in, are only going to have minimal impact on this
discussion.
ur HOUGHTON. Would anybody else like to make a comment on
this?

Thank you, Mr. Jones.

Mr. Litow. Well, I think it comes back to this issue about stand-
ards. We are the only country that does not have a set of clear aca-
demic standards, that people are held to, and are accountable for.

Again, the latest public opinion poll indicates that while people
have a lot of different opinions about what to do about the edu-
cation problem, the thing that they all have consensus on—rich,
poor, black, white, north, south—is that they would support high
academic standards, and they are actually quite frustrated that
there are no standards in the schools—a clear expression of what
children should be able to know and do, by grade level.

So, I think if you are looking to get at the issue of attitude and
motivation, I do not think that there could be anything that would
contribute more to that than having a clear set of standards, as-
sessments that tie to them, and some sense of accountability for
performance.

Mr. HouGuTon. Mr. Reddy.

Mr. REDDY. Just a couple of points, Mr. Houghton. Some of our
research has indicated that—I can cite a couple of points here that
you will find in more detail in my written testimony—even 7 years
after high school graduation, less than half of our young adults can
correctly predict the occupation they will be in 5 years later.

Related to that, by age 30, only one-third of working adults in
the United States have been in their jobs for more than 1 year.

This is what we have come back to in our analysis. There is an
enormous yawning gap between what the education system is pro-
viding and what the workplace is demanding. The best solution
that we have been able to come up with on that is for companies
and employers of all kinds to communicate more clearly, to parents,
schools, and to students, what the workplace needs.

And the school system needs to respond. That means that when
people move out of school, they are prepared to move into produc-


121

systems, these are the terms of art which I think are going to rule
the world of training and education in the years ahead.

They hold the promise of making training faster, cheaper, and
more accessible to even the smallest companies. The small and me-
dium sized companies are the furthest behind in undertaking train-
ing activities,

‘he Council on Competitiveness has initiated a major research
project on training, with an emphasis on the development of learn-
ing technologies, with the belief that they may be the key to im-
proving the ability of the work force to meet the challenges of the
future. -

Finally, let me mention the role of the government, which has
been touched on briefly today. The government has a role to play,
obviously, in the creation of a capable work force. There is an effort
in Congress and the administration to rationalize government
training programs, which would surely be of benefit to dislocated
workers.

The Goals 2000 Program, which was initiated by a Republican
administration, and endorsed by a Democratic, should continue to
serve as a guidepost for improving our educational systems.

The National Skills Standards Initiative, and the School-to-Work
Transition Program, both of which were endorsed by our Council
in 1993, should be maintained at a level which will assure their ef-
fectiveness.

The Manufacturing Extension Partnership, in the National Insti-
tute of Standards and Technology, is the only institution today
which is systematically reaching out to small and medium sized
firms, and should continue to be supported.

And finally, an area which we have not touched on at all—
perhaps this Subcommittee would be interested in studying it fur-
ther in the future—the training experience of numerous govern-
ment agencies should be shared with the private sector.

This applies particularly to the Department of Defense, where
training for readiness is a major budget element, and which has
been in the forefront of developing new learning technologies.

At the Council we are now working with several of these govern-
ment agencies, and with a number of business, labor and profes-
sional organizations, to bring about a closer association. I would
urge the Subcommittee to develop this issue further.

[The prepared statement follows:]


124

Finally, high school graduates receive much less training in the U.S. that they do in France,
Germany and Japan.

‘What of the future? What will be the challenges of the years ahead, when more nations
will enter the globat economic fray, when technology change will increase its pace, and when
both phenomena will be complicated by a U.S. workforce which will probably include more
‘groups~-minoriti -whose disadvantaged background will challenge management?
Let me summarize a few of the problems and opportunities that will face all of us in the period
ahead:

1, There is ample evidence, statistical and anecdotal, that the educational preparation
‘of our population does not meet the needs of the modem workplace. As a result many
‘companies have difficulty in recruiting adequately educated workers, and more and more
‘companies are obliged to sponsor remedial training programs. ‘There is some evidence that
this situation is improving, through the efforts of both the public and private sectors, a
partnership that should be encouraged.

2, ‘The changing demography of the workforce could add a burden on American
business. A growing number of immigrants will have language problems. Members of
minority racial and ethnic groups often face major educational handicaps, and their numbers
are increasing. Women have now become a major part of the workforce in virtually every
industry, bot many women still face the conflicting demands of work and family.

3. Much of American industry, in every major sector, has felt it necessary to impose
sharp reductions on its workforce in order to cut costs. At the same time, wages and salaries
have remained stagnant for most workers for a number of years, And finally, more and more
companies are substituting part-time or temporary workers to fill what used to be full-time
permanent positions. Downsizing, stagnant pay envelopes and contingent workforces have had
and will continue (o have an impact on the ability of managers to maintain morale among their
workers and make it more difficult to maintain an environment which encourages a
commitment (o quality and continuous learning.

4. ‘There is a growing awareness that training and skills are no longer static. New
technologies require new skills; training must develop the ability to acquire them. And the
effectiveness of training must be measured not by the amount of inputs (hours or money
spent), but by the performance improvements of those trained.

5. A factor which will surely have a substantial effect on education and training will
be the development of learning technologies. Computer-based training and the Internet,
‘electronic distance learning, interactive systems and performance support systems are the
terms of art of the furure, They hold the promise of making training faster, cheaper and more
effective, and bringing it within the reach of even the smallest companies. As T indicated
earlier, the Council of Competitiveness has initiated a major research project into training best
practices, with an emphasis on the development of learning technologies, in the belief that they
may be the key to improving the capability of the workforce

| suggested above that some of these challenges can best be met by a partnership of the
private and public sectors. Government has an important role to play in assuring that our
‘workforce is equipped to meet the challenges of the future.

For example, there is an effort in Congress and the Administration to rationalize
government training programs, which would surely be of benefit to dislocated workers.
‘The Goals 2000 program, which was initiated by a Republican Administration and endorsed
by a Democratic, should continue to serve as a guidepost for improving our educational
systems. The National Skills Standards initiative and the school-to-work transition program—
both of which were endorsed by the Council in 1993-should be maintained at a level which
will assure their effectiveness. The Mamufacturing Extension Partnership, in the National
Institute of Standards and Technology, is the only institution systematically reaching out to
small and medium size firms, and should continue to be supported.

Finally, the training experience of numerous government agencies should be shared
with the private sector. This applies particularly to the Department of Defense, where training
for readiness is a major budget element, and which has been in the forefront of developing
new learning technologies. The Councit is now working with several agencies and with a
number of business, Jabor and professional organizations to help bring this about.


31

Mr. RANGEL. That is why I am here. I am not prepared to allow
my country to go down the tube because we have said in this na-
tional crisis, that we are restricted constitutionally and budgetarily
so that we cannot do anything. .

So, it seems to me that if the businesspeople are making a plea,
if you know that under this system, and we are the Federal
Government, we are saying that while we are making these con-
tributions, and providing incentives, we accept the fact that we are
giving so little and that we are restricted by the Constitution.

That in certain parts of this great country we cannot do anything
to improve the school buildings that are just falling apart, the dedi-
cated teachers who have forty or fifty students there, the fact that
all moneys being put in searching students, that some of the kids
cannot bring home books to study with—there are no supplies—
that on this Federal problem we are restricted, and it has to be
dealt with by our partners at other levels of government.

Are we saying that, Mr. Secretary?

Mr. LONGANECKER. I do not think we are quite saying that,
because I think ——

Mr. RANGEL. What are we saying then, what comes as close as
that, that you believe is true?

Mr. LONGANECKER. I think we need to have a really smart in-
vestment of our public funds. That is why we like the Goals 2000;
and the School-to-Work Program will fundamentally reform second-
ary education in this country. Our postsecondary initiatives ——

ir. RANGEL. Mr. Secretary, I do not want to talk about reform
which is patchy. There are some people in this Congress who would
say that we do not need a Department of Education.

Mr. LONGANECKER. We have heard that.

Mr. RANGEL. OK. Now, you have some idea of the type of
Congressional district I represent, right?

Mr. LONGANECKER. Yes.

Mr. RANGEL. If that thought prevailed, and tomorrow we had no
Department of Education, could you give me the impact that it
would have on the school system in my Congressional district?

Mr. LONGANECKER. Your district would be substantially im-
pacted, because while our role is fairly modest overall in this coun-
try, in disadvantaged communities the Federal role is much more
substantial, because Federal funds are targeted to those students
who most need them, both in elementary and secondary and post-
secondary education.

Most of the students in postsecondary education in your district
would probably not be able to financially afford higher education,
without the Federal Pell grant program.

Mr. RANGEL. Now, how would my district effectively compete
with other districts in the United States, if we now are the bene-
ficiaries of this limited, but certainly important, contribution, and
we are not producing anybody who can even get into the job mar-
ket effectively, or there few compared to other communities.

It is really hard to see how much more pain we could take, if
your outfit were not in business. But, having said that you have
these restrictions, constitutionally and legally, with these partner-
ships, it would seem to me that, without increasing the Federal bu-
reaucracy, you could at least be providing the leadership to in-


7

There are over 1 million—mostly African-American—youth that are imprisoned
for nonviolent crimes in the United States at an average life cost of between
$600,000 and $1 million per prisoner. In 1991, public expenditures associated with
the consequences of drug abuse and dependence cost American taxpayers about $70
billion. Crime cost Americans about $450 billion a year. These astronomical expendi-
tures diminish productivity and represent investments in the wrong direction.

We cannot be competitive in the global marketplace if a large percentage of our
work force is uneducated, in jail, or drug dependent. I hope that America will devise
a holistic and serious approach to invest in her youth and workers who represent
the only hope for a prosperous and peaceful future.

America’s economic leadership in the 21st century indeed depends on the invest-
ments that we make today in education and training.

Mr. Chairman, I hope that today’s hearing is the beginning of an ongoing dialog
between the Trade Subcommittee, the administration, and the private sector on
ways to improve continually the education and training of our work force so it can
compete in the world marketplace. If we do not succeed in this area, our open trade
policies will surely not be sustainable over the long run.

you, Mr. Chairman, for your leadership on this issue and I look forward
to working with you.

Chairman CRANE. Thank you, Mr. Rangel, and we have a num-
ber of very distinguished witnesses who will be testifying today,
and number one of course is Secretary Reich.

STATEMENT OF HON. ROBERT B. REICH, SECRETARY, U.S.
DEPARTMENT OF LABOR

Secretary REICH. Well, thank you very much, Mr. Chairman. In
the interest of time, as you suggested, with your permission I will
submit my formal testimony to you, and make just a couple of brief
remarks, and then any questions that any members of the panel
may have, I would be delighted to answer.

Again, Mr. Chairman and Congressman Rangel, and other
Members of the Committee, let me congratulate you on having this
hearing, because it seems to me that issues of American competi-
tiveness in international trade cannot be separated from the qual-
ity of our work force. They are absolutely inseparable questions—
inseparable issues.

it is an American economy? Is it our companies? No, because
they are becoming multinational. In fact. global companies are the
rule, rather than the exception these days.

Is it our money, our savings? No, because our savings are moving
around the world, almost at the speed of an electronic impulse.
Foreign savings are coming, our savings are going there.

Is it our machinery? No, because machinery can be, and is being
replicated around the world.

So what is the essence of the American economy? What is it on,
which our future standard of living uniquely depends? It is our peo-
ple—their skills, their insights, their education, and their capac-
ities to work productively together. That is the American economy.

The way in which, and the extent to which, we add value to this
increasingly integrated global economy will determine our standard
of living in the future. That is the basic principle upon which all
else rests.

And Congressman Rangel, you put your finger, on the issue
facing us with regard to welfare policy, social policy—all kinds of
social problems we have in this country. There is no better social
policy, antipoverty policy—there is no better policy that we could

ave in dealing with all our social problems than a decent job.


139

mechanism -- known as NAFTA trade adjustment assistance (TAA) -- under
which the Federal Government actually certifies the number of jobs lost or in
danger of being lost because of increased imports from Mexico (but not
necessarily as a result of NAFTA). The provision is based on a similar TAA
program that applies to imports from all over the world.

To be balanced, these TAA provisions are intended to provide job retraining
assistance and other benefits for individuals who lose their Jobs when the
economy reorients itself to the disciplines of trade liberalization. Some in
Congress have proposed abolishing this assistance as a way to save money.
Such programs may be necessary, however, both to soften the blow that trade
liberalization may hold for some highly-protected industries and to gain some
political support for a pro-free trade agenda from organized labor interests.

Unfortunately, a side effect is that these programs disproportionately highlight
the job-destroying effects. Because US workers and employers have an obvious
incentive in reporting such job disruption to the Federal Government -- the
displaced worker receives federal ald from the Government, in addition to
unemployment insurance, to help locate a new job -- the TAA programs are
used as a barometer of the kind and number of Jobs lost through the effects of
free trade.

As a result, NAFTA critics can announce with stunning preciston that imports
from Mexico have resulted in 71,125 job losses from January 1994 to May
1996. While NAFTA proponents can downplay the relevance and size of this
statistic, they cannot avoid the fact that, with each passing month, the Labor
Department is busily certifying more and more US workers as being threatened
by US imports from Mexico. To make matters worse, no similar mechanism
exists to certify the Job-creating effects of NAFTA's trade liberalization. This
means that, according to official US Government certifications, NAFTA will
always trigger a net loss of US Jobs.

What's needed is a program to balance the TAA statistics and certify the job-
creating effects of trade beralization. By developing an incentive to report the
creation of new export-related jobs. the government can more accurately record
trade-related employment statistics -- both the losses and the gains
nationwide. Without such a mechanism, free trade proponents will find
themselves at a disadvantage as they seek to defend US trading relationships --
be they with Mexico, China, or other markets -- for many years to come.

One idea is to allow for US-based firms to receive a nominal tax credit for each
export-related job it has created in the United States during the previous year.
While it may be difficult to structure such a program to conform to our
obligations under international trading regimes, which prevent most export-
felated subsidies, this kind of program would provide a clear Incentive for US
firms to report their export-related Job growth.

Similarly, the Government could initiate a TAA-comparable program to provide
training directly to employees who have recently been hired because of
Increased exports. In this way, we can help employees sharpen their skills to
remain competitive and keep their Jobs as they respond to inevitable changes in
the world marketplace.

Another possibility might be to establish a block grant program that can be
used to support the export promotional or job training efforts of states that
can certify trade-related job growth. Under such a scheme, a state government
would receive federal export or job training dollars based on the number of new
export-related jobs that were created in the state during the previous 12
months. Such a program may make budgetary sense as well since it would
channel export promotional and educational dollars to the states most able to
use this assistance.

Whatever the program, It is clear we need to fundamentally alter the way we
view trade agreements. Current Congressional budgeting rules already
overstate the fiscal cost of trade legislation. It is truly a shame that job
retraining laws understate the employment benefits of trade initiatives as well.


46

PARTNERSHIPS AND WIDE COMMUNITY PARTICIPATION ENRICH
SCHOOLS AND THEIR STUDENTS

At each Academy, local, civic and business leaders join educators to offer a comprehensive
program of classroom instruction, work experience, and career preparation to every
Academy student. Academy partners may assist in one or more ways.

They can:

# Serve on Local Business Advisory Boards

Ateach Academy site, a Business Advisory Board advises on policy and operations, assists
in fundraising, provides guidance in locating and planning student intemships and promotes
the Academy in business, education and goverment forums.

« Assist with Curriculum Development

To ensure NAF curriculum is current and relevant, partners collaborate with instructors,
supply support materials, develop teacher training opportunities and serve as guest speakers.

© Provide Scholarships and Other Incentives

Companies, organizations and individuals offer scholarships and financial assistance to
students who wish to continue their studies in college.

© Participate in Mentoring and Shadowing Programs

Students receive valuable one-on-one guidance and encouragement from local business
volunteers. They also learn about the world beyond the classroom through shadowing
experiences in which students follow the daily activities of managers in businesses and
government.


6

I want every U.S. business to have a fair advantage over everybody
else.

I want our businesses to be able not only to compete, but to win.
I want every foreign country to know that when they steal our in-
tellectual property rights, when they steal our software, when they
steal our movies, when they steal our pharmaceutical products,
they are stealing our jobs, and that is not to be tolerated.

And so, I think this new partnership with the private section on
work force education and training is the most patriotic thing I have
ever done, and I am proud to have partners in the private sector,
and proud to have such a distinguished public servant who has
been saying this over and over, and I look forward to this being a
very exciting, working relationship.

Thank you, Mr. Chairman.

[The opening statement follows:]

OPENING STATEMENT OF HON. CHARLES B. RANGEL

Mr. Chairman, thank you for calling this hearing on the importance of education
and training to U.S. trade competitiveness.

Preparing our future and current work force to meet the demands of a rapidly
changing and technologically advanced global economy is in our national interest—
and should be a priority for our Nation.

Indeed, the public and private sectors must work together to ensure that America
has an internationally competitive work force. I hope that today’s hearing will ad-
vance efforts to develop a framework for such collaboration.

Tam pleased Mr. Chairman that so many fine Americans, recognizing the impor-
tance of this topic, have chosen to deliver and/or submit testimony.

I am particularly pleased that our distinguished Secretary of Labor is with us
today. Secretary Reich has labored long and hard in the economic vineyard for
American youth and workers. His commitment and work in both academia and gov-
ernment have been exceptional. I look forward to his insights on increasing U.S.
work force competitiveness as well as his ideas on effective public-private sector co-
operation. I also welcome Assistant Secretary Longanecker and our other witnesses.

I am very proud of some of the private sector initiatives that we will learn more
about today. ‘The firms represented here are trailblazers and have invested millions
of dollars in our youth and workers. These firms recognize that investments in edu-
cation and training yield substantial returns.

T hope other American firms will follow the lead of those that invest in education
and training. Businesses, particularly international firms, understand the skills re-
quired in the international marketplace and should naturally be involved in edu-
cation.

‘There is broad agreement that Americans will live in an increasingly challenging
and borderless world—a world so complex and advanced that only the best educat
and best trained will succeed. Mr. Chairman, how prepared are we for this new era?
How can we best assure that our workers have the skills that this new marketplace
requires?

the experts tell me that there is a gap between what the schools are teaching
and what the global market is demanding. While skills in math and science will con-
tinue to underpin our trade and technology competitiveness in the future, the Unit-
ed States ranks the lowest among industrial nations graduating students in math
and science.

While international trade will surely be a cornerstone of U.S, economic growth,
the National Geographic Society reports that Americans rank among the bottom
third in geographic knowledge.

Mr. Chairman, 60 percent of all jobs by 2007 will require some postsecondary edu-
cation, The National Alliance of Business reports that a 10-percent increase in the
educational levels of a company’s work force increases productivity by 8.6 percent.

In an era where Federal resources are shrinking and where raising taxes in our
national interest is untenable, international trade may well be the best available op-
tion to generate jobs and growth.

Tam concerned Mr. Chairman, about those that will not be able to compete in
this brave new trade-driven global economy. I am concerned that the cost of doing
nothing to enhance our human capital is too high.



40

Mr. LONGANECKER. Oh, absolutely, sure. There are a lot of
schools where the students either do not come out, or when they
do come out, have a very difficult time competing with the rest of
the world.

Mr. RANGEL. So, if this is throughout the United States, that is
Federal, isn’t it?

Mr. LONGANECKER. Yes, it does sound like it. It is certainly na-
tional, and it certainly is a Federal interest, and it does suggest
that the resources we put in, whether they are at the level that you
and I might hope, or the level that we have, we have to do the
smartest job possible of assuring that we——

Mr. RANGEL. OK, we have to go and vote, and I will be.in touch
with you personally. But I would like to see what Federal program
you have that is constitutional and that says it is more important
that this issue be left up to the local school boards.

I would like to see how you look at this, so that I can work with
you.

Mr. LONGANECKER. Great.

Mr. RANGEL. With your restrictions.

Mr. LONGANECKER. We will work with you.

Chairman CRANE. Thank you again, Mr. Secretary.

Mr. LONGANECKER. You are welcome, Mr. Chairman.

Chairman CRANE. And the Subcommittee stands in recess until
this vote is over.

{Recess.]

Chairman CRANE. Mr. Weill, we welcome you before the
Subcommittee, and before your presentation I would like to have
Mr. Rangel make an introduction.

Mr. RANGEL. Thank you, Mr. Chairman.

I will be brief, because the testimony will explain what an out-
standing individual Mr. Weill is. He has proven his success as a
businessman throughout the world, but the thing that has im-
pressed me the most is that he recognizes that in order to have a
strong economy you need a strong work force; in order to have a
strong work force, we need a strong educational system.

And when he found the system was not working, it did not stop
him. He went out and built one, and it serves as a model as to
what can be done, and I am so glad that he is able to be here. More
importantly, he is willing to share his expertise and his staff with
the Federal Department of Education, and other businesspeople, so
that we can come together and find out what works, what can be
duplicated, without even thinking about another layer of Federal
bureaucracy.

f So, thank you for giving me the opportunity to introduce my
friend.

And thank you, Mr. Weill, for being here.

Chairman CRANE, You are more than welcome.

STATEMENT OF SANFORD I. WEILL, CHAIRMAN AND CHIEF
ee OFFICER, TRAVELERS GROUP, NEW YORK, NEW

Mr. WEILL. Congressman, thank you for that kind introduction.
Mr. Chairman, I have managed to live for 63 years without ever
doing this, so this is a first. So, you have got to forgive me if I am


120

Chairman Crane. Thank you, Mr. Bailey.
Mr. Samuel.

STATEMENT OF HOWARD D. SAMUEL, SENIOR FELLOW,
COUNCIL ON COMPETITIVENESS, WASHINGTON, DC

Mr. SaMUEL. Mr. Chairman, my name is Howard Samuel, and,
since my retirement in 1992 as president of the Industrial Union
Department of the AFL/CIO, I have served as a senior fellow at the
Council on Competitiveness.

The Council on Competitiveness, unlike the Competitiveness
Policy Council—we are two different groups—is a private, non-
partisan organization, consisting of business leaders, labor leaders,
and leaders from the field of higher education, which is dedicated
to improving our ability to raise the standard of living, at the same
time meeting the demands of the global marketplace.

Mr. Chairman, as the final witness in a day which has been dis-
tinguished by outstanding witnesses, I have been looking for ways
in which to earn your approval, and I thought perhaps the best
thing to do is really not to look very carefully at my testimony,
which will appear in your record, I understand, but to summarize
very briefly two or three points that have not been raised.

Second, and perhaps more important, to be brief.

Let me raise these issues first. The issue of training and the
worker in the work force must be regarded much more holistically
than we have.

One term which has not been heard today is low birth weight ba-
bies, and I suggest to you that the problem of low birth weight ba-
bies has an impact on our educational system, and therefore on the
ability of our work force to meet the challenges of the global
marketplace.

In short, what I am suggesting is that we have got to look at the
problem of the worker, holistically, as part of a continuum, starting
with the mother’s prenatal care, moving through the early health
issues, obviously through early education, and then into the work-
place.

We have got to look not only at training, but at the climate with-
in which training occurs. One of the things we have learned, and
I think this has been agreed upon by both the business organiza-
tions, such as the N, and the NAB, and by the AFL/CIO that
is that training is far more effective when it is undertaken in a cli-
mate of cooperation and partnership, when workers feel that they
are able to participate in the decisionmaking process, where there
is possibly some system of gain sharing, when workers have a
sense of security on a job.

Training, by itself, is not as effective as when it is done under
that kind of a climate.

The second issue is an issue which has been touched on here, but
which I would hope this Subcommittee would look at more care-
fully, and that is the role which technology, learning technologies,
will play in the spread of training and education in the years
ahead.

Computer based training, the Internet, electronic distance learn-
ing, interactive systems, and and electronic performance support


19

Now, the School-to-Work Program is working, as I said, very ef-
fectively, and Congressman, I was so impressed in Minnesota. I vis-
ited several companies, including a company that was specializing
in family friendly policies. The president of that company said to
me something very interesting.

Mr. RamstaD. That was Ceridian?

Secretary REICH. That was Ceridian. Larry Pearlman was the
president. He said to me, “You know, these kinds of family friendly
policies, valuing employees as assets to be developed, rather than
as costs to be cut, these policies are good for our bottom line, be-
cause it means that we can attract very talented people, and we
can keep them, and we can make them more and more loyal.”

And I talked to other employers in your State, who said to me,
“The biggest problem we have—the biggest problem—is getting
skilled employees, and keeping them.”

Again, the constraint on growth, in Minnesota as elsewhere,
right now, is not so much the tightness of the labor market, but
it is the quality of the labor market.

Mr. RaMsTAD. I also hope that an idea that certainly my distin-
guished colleague from New York supports, and I think there is a
broad bipartisan support for enterprise zones, is something else I
think that is worth considering, as we look at this subject more
broadly.

Would you agree with that?

Secretary REICH. Absolutely, and enterprise zones have been al-
ready quite successful. We are facing, in the job market, several
different related challenges, and even though unemployment is
very, very far down, and we have all of these new jobs, and as that
New York Times article to which you referred, Congressman, point-
ed out, most of the net new jobs being created are very good jobs.

They are demanding technological skills, managerial and profes-
sional skills, but that is precisely my point. We have got to redou-
ble our efforts—private sector and public sector—to make sure that
people are qualified for all of these good jobs that. are being
created.

Mr. Ramstab. Well, just a final comment, Mr. Chairman.

And Mr. Secretary, again, thank you for appearing here today.
I think a real litmus test of the importance of the targeted job tax
credits will be, in terms of new jobs, in this area—in the Washing-
ton, DC, area. Dayton-Hudson’s Target Co. is going to open nine
new stores in the Washington, DC, area.

I am sure you had to drive past several Target Stores when you
were in Minnesota, because there are so many of them. As much
as any employer I am aware of, certainly more so than any in my
state, Target relies on the targeted jobs tax credit, to employ the
type eof people, the audience that the School-to-Work Program
reaches.

And so, hopefully we can get that restored and get a tax bill with
the target jobs tax credit, because I think you are going to see an
impact in this immediate area, as well as the rest of the country.

Thank you, Mr. Secretary.

Chairman CRANE. Mr. Coyne.

Mr. Coyne. Thank you, Mr. Chairman.


4

So the private sector has to do more. Many companies are
going the extra mile to help their workers upgrade their skills
And they are making money in the process.

At the President's conference on corporate citizenship here
in Washington a couple of months ago, we heard the CEO's of
several companies -- large and small’-- outline their strategies
for increasing worker education and training. We heard about on-
site education centers offering basic math and reading courses to
production workers. We heard about college tuition
reimbursements and in-house training programs to which every
worker must devote five percent of his or her work time. We
heard about huge investments of company resources on training

So, many companies are taking the ball and running with it
We ought to be encouraging others to follow their lead

Mr. Chairman, there is no doubt that this nation has the
resources to make its workforce the most productive on the
planet. Doing so would make us a shoe-in to win the global
economy of the 2ist Century. The question is whether or not this
nation's institutions will join together to make the necessary
investments in the skills of our people


In order to assure the most productive use of the limited amount of time available to
question witnesses, all witnesses scheduled to appear before the Subcommittee are required to
submit 200 copies of their prepared statements for review by Members prior to the hearing.
Testimony should arrive at the Subcommittee on Trade office, room 1104 Longworth
House Office Building, no later than 11:00 a.m. on Tuesday, July 23, 1996. Failure 10 do
‘so may result in the witness being denied the opportunity to testify in person.

IN STATI IN LIEU IN,

Any person or organization wishing to submit a written statement for the printed
record of the hearing should submit at least six (6) copies of their statement, with their
address and date of hearing noted, by the close of business, Thursday, August 8, 196, to
Phillip D. Moseley, Chief of Staff, Committee on Ways and Means, U.S. House of
Representatives, 1102 Longworth House Office Building, Washington, D.C. 20515. If those
filing written statements wish to have their statements distributed to the press and interested
public at the hearing, they may deliver 200 additional copies for this purpose to the
Subcommittee on Trade office, room 1104 Longworth House Office Building, at least one
hour before the hearing begins.

FORMATTING REQUIREMENTS:

tea fer pratng tote ty a wns, any wre cont bend for as pad record
‘any wean commonts ia reqpaaie to roquct for ween comments wust cont to the gudaine Hated below. Any stalmnent or
‘eau nt tt wih an wl ot be peta, tt wl be me es fr rove and ane by the
Commlase,

1 ‘2 sustments and any accompanying elit for printing mast be typed in engl xpi ox logasea paper and may not
acoed a tal of 90 pages Incadng enachment.

2 Copan af wn docamentssubencd a4 ort malarial wl not bo acceptd fer prating, Insend, echt material should bo
‘atrenced and quota or paraphrased, All exible material not meeting hese speccadens will be malntalned to the Commie Ds fr
‘ava and woo by te Common

2 abt naar tx absense mu i yom of pe Neng. ming can
1 reponse wo 8 quae fo mye met inetd en i at a

Note: All Committee advisories and news releases are now available on the World Wide Web
at HTTP://WWW.HOUSE.GOV/WAYS_MEANS/" or over the Internet at
*GOPHER.HOUSE.GOV" under "HOUSE COMMITTEE INFORMATION’.

sane


Seven Nobel Prize Winners
Endorse Land Value Taxation

“The headline iscorrect, ITwe had eight, would you be more impressed, and even more importantmoved to action?

Milton Friedman: “I share your view that taxes
would be best placed on the land, and not on improve-
ments”

Herbert Simoa: “Assuming that a tax increase is aec-
‘essary, itis clearly preferable to impose the additional cost
‘on fand by increasing the land tax, rather than to increase
the wage tax - the two alternatives open to the City (of
Pittsburgh). Itis the use and occupancy of property that
creates the need for the mumicipal services thet spear as
the largest item in the budget - fire and police protection,
‘wasie removal, and public works. The average increase
tax bills of city residents will be about twice as great with
‘wage tax increase than with a land tax increase.”

Peal Saswetson: "Pure land rent i in the nature of a
“surphs’ which can be taxcd heavily without distorting pro
duction incentives or efficiency.” A land value tax can be
‘called “the vscfel usxon measured hand surphus.*

Jamses Tobla: "I think in principe it's a good idea to

land from productive use toa purely private wse should be
required to pay higher, not knves, tures”

Franco Modigliani: “tis important thot the reat of
land be retained as a source of government revenuc. Some
enone who could make excclent ute of land woukd be un-
able to raise money for the purchase price. Collecting rent
answally provides sesess lo land for persons with limited
‘eccen to credit”

Robert Solow: "Uses: of land shoubt-not be allowed
to acquite rights of indefmite duration for single payments.
For efficacy, for adequate revenue ama For jastice, every
scr of and should be required to make an annual payment
(the bal government equal tothe current rental value of
knee cys prrertatien fom eng”

‘Treawrentp elect ofthe As Economics Wittiam Vickrey, and vatuc taxa.
tion: "Ht guarantees that no one disposscases Tcltowcilcns by abiining = daproporionae share of what na-
ture prewitis for’ ,

“The endorsements from the last three coonomits named ahowe were taken from a letict dated November 7, 198040
Mikhail Gorbachev signed by 30 prominent U.S, ccomomisis.



110

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69

That is what this company is doing. We are doing it largely out
of self-interest, because we cannot be a successful company if com-
munities are not successful, and communities will not work unless
their schools work.

So, thank you very much for inviting me. I have left you with our
written testimony and a lot of materials that we have developed,
and I would be happy to answer any questions at a later point.

(The prepared statement follows:)


24

Chairman CRANE. Next I would like to ask Hon. David
Longanecker to come forward.

And, as I indicated earlier, if you can try and summarize your
prepared testimony, any written testimony will be made a part of
the permanent record.

STATEMENT OF DAVID A. LONGANECKER, ASSISTANT SEC-
RETARY, POST-SECONDARY EDUCATION, U.S. DEPARTMENT
OF EDUCATION

Mr. LONGANECKER. You bet, Mr. Chairman. I have submitted my
testimony in the full text for the record, and I will just do the
abbreviated comments here.

It is a particular pleasure to be here today, both because the
Education Department does not often have the opportunity to ap-
pear before this Committee, and because the topic that you are dis-
cussing, the importance of education in contributing to the eco-
nomic competitiveness of this country, is near and dear to
Secretary Riley’s heart, and is central to the department’s reason
for being.

Now, I am following Secretary Reich, and you should not feel too
sorry for me. It is always a tough task to follow Secretary Reich—
he’s such an articulate and comprehensive presenter. But we have
an important and contributing agenda at the Department of
Education, so we are thrilled to be here.

Our mission is simple at the Department of Education: We exist
to ensure access to educational opportunities and to promote excel-
lence in our colleges and schools. That is it.

To sustain and enhance the United States economic competitive-
ness, the department, in partnership with the States and local gov-
ernments, and with colleges and universities and schools, and busi-
nesses around this country, must succeed in our mission.

So, we are very pleased to have received your invitation to be
here today, to talk about how integrally linked education and eco-
nomic competitiveness are, and how our Federal programs promote
this linkage.

The evidence is clear that education is not “a,” it is “the” critical
path to economic well being—for our individual citizens, and for
our Nation. This is as true today, particularly with respect to post-
secondary education, as at any time in our history.

Over the last 10 years, the number of high-skill jobs has grown
by 32 percent, compared with 7 percent for low-skill jobs. Earnings
have become even more skewed. Unemployment among young
adults without a high school education in 1994 was 20 percent,
whereas it was only 5 percent for those with a college degree. And
while earnings for noncollege graduates actually declined over the
last decade, the gap between college and noncollege educated in-
creased greatly, as Secretary Reich has already mentioned to you.

It is virtually impossible for an individual to be competitive eco-
nomically without some postsecondary education, and the implica-
tions of this for our country are obvious: We must be better edu-
cated to remain economically competitive in this knowledge-based
world economy.

Despite this economic imperative, it is going to be increasingly
difficult for us to achieve the higher levels of postsecondary edu-


10

erate a more productive society; it will reduce the earnings gap be-
tween the high-paid and the low-paid, because the low-paid and the
poor will have a future.

This is not rocket science. We are beginning to do it, but we need
to focus on the amount of resources, the scale of doing it that is
going to be required—both public sector and private sector. We are
not there yet.

Let me not end my statements by creating a falsely optimistic
sense of security—no. We have a very long way to go, but we know
the, answers. This is not something in which we do not know what
to do.

We can do it, if we have the will to do it—the private sector, the
public sector, union leaders, community-based organizations—we
can do it if we have the will to do it.

Thank you.

(The prepared statement follows:]


29

Chairman CRANE. Thank you, Mr. Longanecker.

lam a former history professor, and I have reflected on the input
I have received about the escalating costs of education since my
teaching days.

But one of the things that has concerned me is, we were required
to teach 15 credit hours a year, and now I have been told that some
professors are teaching only 3, they are not even preparing their
exams—that is done by assistants—they are not grading their pa-
pers—that is done by assistants—and with a pay scale that is just
beyond sight, compared to what we were making back in the early
sixties.

I am wondering, since the college tuition costs have more than
doubled since 1980, what would you recommend we might do to try
and contain some of those costs?

Putting professors back to work, it seems to me, is one, because
it was not just the credit hours that we taught; there were counsel-
ing hours that had to be made available to students as well, and
my understanding is that there are not even counseling hours,
sometimes, required on the part of these professors, and this is at
State universities.

I taught at Bradley University, which is a private school, but
have you any thoughts on that?

Mr. LONGANECKER. Well, I think this is an interesting and im-
portant area for the Federal Government, but we have to be very
careful that we keep in mind our Federal role. We are a partner
here, and the primary responsibility for establishing the cost or the
price of higher education is generally a responsibility of the states
and the governing boards of those institutions.

And ‘while it is, a very significant Federal concern, it is not nec-
essarily a Federal responsibility. On the other hand, we put about
$11 billion in Federal funds to support about $40 billion in student
financial assistance a year, and we provide an additional $1 billion
in direct institutional support.

So, we have a pretty strong vested interest in what you are talk-
ing about, and that is a fairly substantial commitment.

‘ou know, most of the studies show that faculty are still working
very hard and very long hours, they are just working on different
things than the instructional load that they used to have.

Secretary Reich mentioned the community colleges. By and large,
the community colleges, and many of the state colleges, still have
pretty substantial teaching loads for their faculty.

It is those institutions that are research universities, or that are
hoping to become substantial research universities, that have sub-
stantially changed the mix of their faculty activities, and I think
you have touched on an issue that many state legislatures are also
looking at.

That is, not whether the faculty are productive, but whether they
are productive in the activities that the citizens had intended them
to be.

I do not have an answer for you on how we come back to a ra-
tionality, in part because we have got a serious issue—I mean, we
have a very strong system of higher education in this country—
some would say the strongest in the world. We also have the most


98

A SURVEY OF TRAINING IN THE UNITED STATES

Outside of basic education, the United States tends to invest less in formal training
programs than other nations (see Tables 1 and 2). For the most part, government programs are
limited and targeted toward select populations. This is due in part to the fact that the labor force
is growing, which relieves pressure felt by firms to have to train their workers. In addition,
beyond basic education, Americans tend not to place a high value on skill enhancement,
especially for one's current job.

To compensate for this lack of training, over the last thirty years the federal government
has developed an array of labor market programs, primarily designed to assist unemployed
workers move into new jobs (see Table 3 and Graph 1).

Basic Education and School-to-Work Transition

There are two important developments relating to government support for basic education
which have occurred over the past few years. One development is the move toward subsidizing
private education and allowing more choice in where to send children to school. The second
development is the establishment of academic standards and assessing the achievement of those
standards. In 193, the US Congress passed and President Clinton signed into law the Goals
2000 program which established national educational goals and provided funding to those states
interested in implementing them.‘

It appears that federal school-to-work programs may face a similar fate. Approximately
fifty percent of all US high school students enter college or university. Of those, only fifty
percent complete four years of schooling. Spending on basic education is directly related to the
amount of schooling, but inversely related to the number of students (See Graph 2). The United
States has a consistent history of investing very little, particularly in the transition from school to
works

Several experiments are currently underway with different types of school-to-work
transition programs in the United States: apprenticeship programs, compacts where employers
guarantee jobs to students who do well in school, cooperative education where seniors work part-
time in areas connected to their training specialty, and career academies where students develop
skills around a specific field. Several elements are essential whatever technique is followed:
provision of mentoring and jobs by local employers, integration of academic and vocational
learning, protection against exploitation of student-workers, and the provision of broadly
recognized certificates of occupational skill mastery that will be readily accepted by employers.

‘The federal government, despite its historically limited role in easing the school-to-work
wansition. has recently initiated several steps to expand its efforts in this area. One of the
centerpieces of President Clinton's initial legislative agenda included expanded financing for
pilot school-to-work programs and the creation of a national youth service corps (Americorp).*

* Since 1993, the House of Representatives and the Senate have tried unsuccessfully to

terminate the Goals 2000 program.

* Incontrast. 20 percent of German students who qualify for college participate in the
government-sponsored apprenticeship program. and German companies contribute about 3.5
percent of payroll to national training accounts which back a wide range of employment and
training institutions (including the apprenticeship program). The results are stunning: two thirds
of the German workforce has completed an extensive apprenticeship program compared with
three-tenths of one percent in the United States.

” There have also been several Congressional attempts to terminate or significantly cut-back
funding for both of these initiatives.




91

as where the company can take over from there, and do what has
to be done.

And I have 36 videos in my office that were sent. I have not the
slightest idea what to do with them, but I will have a chance to
listen to New Yorkers.

When we see all that you have done, believe me, I am excited
about the possibilities. You will have an opportunity to express to
those people who are restricted constitutionally, but have the same
goals that you have, to say how we can do it.

You have spent more time on this than the public sector, and it
is not, Mr. Reddy, that the teachers are not dedicated, or the school
system is falling apart, it is that, as somebody said, they were
taught to deal with the nuclear family—mother, father, and a dog,
and go to church on Sunday, and to have reasonably sized classes
that they could teach.

They were not prepared to go into communities where the par-
ents are more of a problem than the kids—the kids bring in prob-
lems of neglect and abuse and addictions and weapons, and the
teachers are 40 and 50 years old. The teachers are appointed by
seniority now.

They pick where they want to go, and the least experienced can
burn out when they do not have the proper equipment to teach the

s.

So, they find one or two students who are going to make it, and
they stick with that, in order to survive.

But I think what you are saying, and I totally agree, given the
opportunity for them to do what they were trained for, they will be
excited about change. Just do not mess with their pension, and we
can take care of that too.

But they are wonderful people, and we will be meeting, and I am
going to ask that Ms. Whittaker just take your cards, and find out
when it is convenient for you, and then we will plan that bigger
meeting, with a structure, because the three of you is all I need,
since where you want to go is where I want to go.

And I think that your companies are going to have more persua-
sive power than my Secretary of Education. I have got that feeling.

Anyway, thank you so much for what you have done, and for
sharing it with us today.

Chairman CRANE. And I want to thank you all again, and I take
an offense. Maybe I misunderstood what Mr. Rangel said, but I
have got a Ph.D., and you just said we do not need those Ph.D.’s.

Mr. RANGEL. Oh, no, I am sorry. [Laughter.]

Mr. RANGEL. I have a half dozen of them that I have not earned,
but no, we were saying everybody does not need a Ph.D. to be pro-
ductive.

Chairman CRANE. Oh, very good, Charlie. Thank you.

And thank you all.

I would like to call our next panel: Howard Rosen, executive di-
rector of the Competitiveness Policy Council; Thomas Bailey, direc-
tor of the Institute on Education and the Economy, and professor
of economics and education—undoubtedly another Ph.D.

And Howard Samuel, senior fellow on the Council on Competi-
tiveness.


ll

TESTIMONY OF ROBERT B. REICH
SECRETARY OF LABOR

Mr. Chairman, Congressman Rangel, members of the
subcommittee:

I am delighted to have the opportunity to present testimony
today and I look forward to answering any questions you may have.

Let me commend you for holding this hearing, because I
believe you are on to something here. You are making the right
connections -- the right links.

For America to succeed in the 21st Century, our industries
must succeed in the global marketplace.

For our industries to succeed, their workers must be highly
productive.

And for workers to be highly productive, they must have the
education and training necessary to keep them in tune with the
onward march of technology.

As America moves further into this age of information and
global competition, it becomes increasingly important that we
make critical investments in our "human capital" -- that is, in
the knowledge, education and skills of our workers.

Today, tomorrow and far into the future, a highly-skilled
workforce is and will be our comparative advantage

It's true on a national scale and it's true for individual
companies, as well. One study has found companies that
introduced formal employee training programs experienced a 19
percent larger rise in productivity than firms which did not
train their workers. Two recent studies of 3,000 businesses
showed that a ten percent increase in the average educational
level of the workers paid off with productivity increases of
between five and nine percent in the manufacturing sector, and
six to 13 percent in the non-manufacturing sector.

The fact is, Mr. Chairman, training and education work.
Don't just take my word for it. George David, the CEO of United
Technologies -- which is spending millions of dollars to help
employees get more education -- put it best: "It's in our
interest to have an educated workforce."

I could give you volumes more from CEOs, economists,
investors and academics about these payoffs, and how a better-
trained, better educated workforce is so vitally important to the
future of the nation's enterprises.

Last Sunday, The New York Times ran a lengthy article about
the new, well-paying, high-skill jobs that are being created by
this economy in great abundance. The article focused on the
Minneapolis area, where the jobless rate is less than three
percent ani employers are reporting that they're having trouble
finding enough workers who have the necessary skills to fill
these good-paying jobs.

And Minneapolis, the article indicates, mirrors the national
economy.

Which begs the question: How do we grow this economy in a
non-inflationary way? It seems to me that raising the skill
levels of workers -- and with it their productivity and the
nation's standard of living and competitiveness -- is, and should
be, a vital part of the equation.

Nowhere, however, has the impact of education, or lack of
it, been felt more acutely than in the homes of America's working
families.


oT

work transition programs are generally provided to older adolescents and younger adults, and
training for active and dislocated workers is usually provided to adults.

ing it, Basic education has
traditionally been viewed as having high public and private retums. Furthermore, based on the
premise that the public returns from basic education outweigh its private retums, the costs tend to
be shared throughout society (a classic “public good”)? The balance between public and private
returns shifts at later stages in the lifetime learning model, and the ratio between private and
public returns increases. Accordingly, costs for school-to-work programs tend to be shared by
government, firms and unions, active worker training tends to be financed primarily by firms and
unions, and training for dislocated workers tends to be financed by the government and
individuals.

Government support for training is divided into national, regional and local efforts.
National governments generally aim to achieve full-employment and therefore have the greatest
interest in labor market flexibility. Regional and local governments tend to be more concemed
with raising living standards, Thus national governments tend to focus their efforts on programs
geared toward unemployed workers and state and local governments tend to focus their resources
on attracting high wage jobs into their regions. In this sense, regions should be concerned with
workforce skills in order to attract investment. Firms are more concemed with increasing
economic efficiency in order to raise profits rather than labor market flexibility. Accordingly,
firms tend to care more about the complete complement of skills within a firm rather than the
skills of individual workers. Individuals, concemed about job and income security, obviously
have the most to gain through training.

WHERE

Basic education takes place in public and private primary and secondary schools. School-
to-work programs take place within schools, firms, and community facilities. Active worker
training can take place at the firm (on-the-job training), at public or private educational facilities,
like secondary schools, community colleges, or universities, or at community facilities like
churches, adult education centers or public libraries. Individuals may perform independent
study, working on their own at home or at work. Training for dislocated workers can occur at
any of the places mentioned above.

THE MISSING PIECE

Many assertions are made concerning its value, yet very little is known of the actual
retums to training. This is primarily due to the fact that very limited evaluations are performed
on the effectiveness of training programs and their short and long term effects on workers and the
economy. Methodologies to determine the impact of training on productivity are inadequate and
almost non-existent. Accurate evaluations would entail labor-intensive and costly studies over a
lengthy period of time. Many variables may also be involved, beyond the actual training
program, which would require additional expense. To date, there has not been much
collaborative work between those who study human capital and those who study broader
business and economic issues such as productivity, investment and business management.

This lack of information is convenient for those who expound on the virtues of training.
Thus there is no evidence to contradict the common sense view that the marginal returns to
education are always positive (i.e. more education is better than less).

> This view has been changing in recent years and there is a movement to subsidize private
education.


102

1993 the program was extended for another 5 years, with declines in funding to become effective
in 1997.

The training component of TAA remains rather small, with expenditures equalling only
one fifth of the amount allocated for TRA payments. Outlays for job search assistance and
relocation benefits are even smaller. For the most part, TAA’s primary function remains income
maintenance, even after several attempts to change the program's focus.

Other Targeted Programs

The development of US labor market adjustment programs has simultaneously taken two
paths. The federal government supports programs with broad eligibility criteria. These
programs include the UI scheme and programs such as CETA, JTPA and EDWAA. At the same
time, the government also supports smaller programs targeted at specific populations. The TAA
program is the largest among these targeted programs. Other such programs include assisting
workers adversely affected by the Clean Air Act, by defense conversion and by North American
Free Trade Area agreement, Most of these programs follow the TAA model, which includes
rather generous income support (cash benefits), limited training benefits and other employment
services such as job search and relocation assistance.

‘Two reasons are traditionally given for these targeted programs. First it is argued that
those workers covered under these programs face a more difficult adjustment process and thus,
deserve additional public assistance. For example, it has been argued that workers adversely
affected by trade liberalization tend to be older and less skilled than other dislocated workers. In
the case of defense conversion it has been argued that workers in defense-related industries tend
to be geographically concentrated, thus placing them under a higher adjustment burden.

The second motivation for these targeted programs is more political. There is evidence
that a willingness to assist those people adversely affected by government action (i.e. trade
liberalization, regulation, defense cut-backs), makes it easier for politicians to vote in favor of the
action itself. Thus these targeted programs are ofien used to "buy" votes in Congress.

One of the problems with the proliferation of smaller programs is that it has resulted in a
maze of discriminatory government programs which workers must navigate themselves. This
has proven to be particularly confusing during periods of higher general unemployment, when
workers from the same firm, or even plant, may be eligible for different benefits, This confusion
has contributed to calls for greater harmonization among government supported programs. The
fact that the benefits offered under these programs differs widely are usually more generous in
the targeted programs is a major impediment to efforts toward consolidation.

Workforce Development Act of 1995

A recent report by the General Accounting Office found that the US government is
supporting 163 separate programs, across 15 federal agencies, and costing more than $20 billion
a year to assist workers. This finding has led to calls for better coordination and consolidation of
federal training and labor market adjustment programs. In addition, continuing a trend begun
during the Reagan administration, Congress has been advocating transferring more responsibility
for these programs to the states. The result of these two objectives, program consolidation and
transferring more responsibilities to the states is the Workforce Development Act of 1995.

The legislation provides $7 billion per year in the form of block grants to the states over
the period 1998 to 2001. This amounts to a 15 percent reduction from current spending levels on
the programs in question, The block grants are to be made available based on the following
formula: 60 percent of funds based on a state's percentage of the population aged 15 to 63 years;
10 percent of funds based on percentage share of individuals ages 18 to 64 who are at or below
the poverty line; 10 percent based on the state's percentage share of the unemployment rate for
the previous 2 years; and 20 percent based on each state's percentage share of adults receiving


118

Testimony to the House Committee on Ways and Means
Subcommittee on Trade
July 25, 1996
Thomas Bailey
Director of the Institute on Education and the Economy
and
Professor of Economics and Education
Teachers College, Columbia University

This statement is based on Bailey, Thomas and Donna Merritt (1996). School-to-Work for
the College Bound. New York: Institute on Education and the Economy, Teachers College,
Columbia University.

Mr. Chairman and distinguished members of the Committee, | thank you and your
colleague, our Congressman Mr. Rangel, for inviting me to testify before you on the importance
of education and training for our country’s’s competitiveness and economic growth. I have
devoted most of my professional life to the study of the role of education for work and the
economy, as a professor of economics and education at Teachers College, Columbia University
and for the last four years as the Director of the Institute on Education and the Economy. Lam
also on the board of the National Center for Research in Vocational Education, a education
research center funded by the Office of Vocational and Adult Education in the Department of
Education, Much of my own research and the research of my colleagues at the Institute has been
made possible by this funding from the Department of Education

During the last few years, our Institute has been devoted primarily to looking at how
skills and human resources can be more effectively used to promote productivity and
competitiveness and how schools and employers can more effectively teach those skills and
abilities to the country’s young people. I can only mention a few of the things that we are doing,
but [ think that our research on initiatives funded by the School-to-Work Opportunities Act of
1994 might be particularly relevant to your interests. The school-to-work strategy combines high
standards with career guidance and exploration, and stronger links between schools and the
community, especially employers. I have become increasingly enthusiastic about this approach,
not only because students learn useful skills, but even more because I believe that school-to-work
has the potential to engage many students in academic learning in ways that more traditional
approaches to education cannot. And I believe that the problem of student engagement in
learning is a crucial educational issue, especially as it relates to competitiveness and growth.

While economists disagree about many things, all agree on the importance of education
for economic productivity and for individual economic well being. Thousands of studies have
shown that individual earnings rise with education. Studies of macro economic growth show that,
as much as 60 percent of the growth in per capita output can be attributed to increases in
education. Studies that we have done at the Institute have shown how the increasing pace of
technological change is increasing the importance of flexible skills in both service and
manufacturing industries.

One of the most important lessons that businesses have learned over the last 15 years is
that in general they do not use the potential of their employees. Many employees were asked to
come to work, “check their brains at the door,” and follow orders. Recently through the use of
teamwork, modern human resource strategies, and so-called “high performance work
organizations” many employers have tried to engage fully the creativity, energy, and imagination
of their workers. This is an important reason why we have had important productivity gains over
the last decade at least in manufacturing.

In far too many cases, schools also fail to engage their students in the activity of learning.
Many students find their schoo! boring, and they fail to see the relevance or importance of what
they are learning in school. They see no reason to work hard. But this is a tremendous waste.
Increasing education by increasing the hours or days of schooling is expensive, but increasing


65

+ Smaller companies are linking to form learning consortia. For smaller companies, the
cost of training is a major concern and economy of scale is a practical problem. The
importance of training for economic success has produced innovative arrangements
Companies in similar economic sectors pool resources, define common curricula for job
skills and quality standards, and work with training institutions or community colleges to
share costs. The employer defines the curriculum and pays for individual tuition; the
institution provides teacher training, facilities, equipment, and certification.

ct Benefits from Educat

‘There is a direct payoff to both the company and the employee for the investments in education
and skill development

For companies, studies show that productivity directly increases based on the educational
level of the comapny's workforce A 10 percent increase in the education level of a
corporation's workforce (about | year of additional education) increases productivity by
8.6 percent. By contrast, a 10 percent increase in investments in plant and equipment
increases productivity by 3.4 percent. [National Center on the Educational Quality of the
Workforce, University of Pennsylvania. ]

For individuals, the clearest basis for economic success is education and skills. Estimates
for U.S. workers suggest that an individual's earnings increase about 8 to 9 percent for
each year of educational achievement beyond high school

+ According to 1994 data a high school graduate (including GED) earns 64% more
than a high school dropout. A person with | to 3 years of college (including
associate or vocational degrees) earns 21 percent more than a high school
graduate A college graduate with a BA degree or higher earns 52 percent more
than a person with | to 3 years of college. [U.S. Census Bureau]

+ The benefits for individuals are not just in dollars. There is a direct correlation
between education levels and reemployment rates, job tenure, and participation in
benefit plans, Unemployment also decreases with greater education. Individuals
with more education and training have more stable employment compared to those
with less And more educated workers are likely to be covered by, and participate
in, a pension or health plan

‘The New Social Compact

The social compact, which traditionally defines the relationship between employer and employee,
is not dead, as the media would have us believe, but there is a change in what in contains. While
the old compact was founded on adversarial assumptions about the roles of individuals and
companies, the new compact is built on maximizing life-long learning for the benefit of employees
and employers

The success of the social compact in the new economy requires new ways of looking at the roles
of companies, individuals, and the government.

A New Role for Business. Companies have responsibilities for continuous growth and
profitability of their business in a complex and changing world market, But, they also have
responsibilities to their employees. They are responsible to provide employees with
portable benefits like health care and pensions, and with credentialed skills that are world-
class, and therefore portable to other jobs. These factors comprise the foundation of
worker security in the new economy, and employers have a responsibility to help provide
them.

A New Role for Individuals. Individuals will take on added responsibilities for pursuing
additional learning, for making key decisions about investments for health care and
pensions, and sharing in higher level decision making at the workplace. Individuals will
have a responsibility for pattern of life-long learning


7

Parents connected to the process of education and leaning. If successful in Charlotte, this
system can be replicated in other districts and states and applied to increase connections
between teachers and teacher, parents and other parents, etc.

In Dallas, Texas educators are struggling to overcome the segmentation of the school day
which often frustrates learning, especially in areas such as math and science. The typical 45
minute class period stands as an impenetrable barrier to the teaching of advanced math,
especially problem solving and laboratory and hands-on science. Working together, IBM and
the Dallas Public Schools will create the first ever interdisciplinary math and science
software. Initially focused on the middle schools (grades 4 - 8), it will provide more time on
task in math and science. All of this is designed to help students meet new, tougher math
and science standards. Obviously, the software can be utilized by a host of school districts
and states,

In the other areas such as Vermont, West Virginia, San Francisco, San Jose, Philadelphia,
Chicago, Broward County, Florida and Cincinnati, Ohio, technology is helping rethink teacher
training, lengthen the school day and year, improve student assessment and develop better
information for school-based decision making.

Just as technology can be vital in the education of our children, it can also be a powerful tool
in education and job training for those who are out of school. Contrary to the view that
technology deprives people of jobs and deepens the divide between society's “haves” and
“have-nots” we have discovered through organizations we support through IBM's new
Workforce Development Technology grant program that technology can help broaden
‘opportunities and strengthen programs and services available to those in need of new skills
and education. By simulating real work conditions it can make the acquisition of education
and skills more effective. Moreover, technology can bridge the gap of time and distance
connecting people to training and then to available jobs.

‘Unfortunately, while technology can provide a vital set of solutions, for the most part adult
education and job training programs currently use technology in very limited ways, i.e. simple
keyboard training or the teaching of basic office skills. At a leaders forum that IBM
sponsored a year and a half ago for those involved in adult education and training programs
certain key barriers were identified, standing in the way of the more effective use of
technology in adult education and training. They are: cost, knowledge of technology, staff
expertise, equity, poor practices and the need for clear standards. To develop the practical
experience base to help eliminate those barriers we targeted our technology and technical
expertise on programs that deal with the core elements of effective training and education.
These elements are: Recruitment and Assessment: the central and critical first step in adult
education or training. Program Content and Education: i.e. increasing the scope, and quality
of the tools used in adult education and training. Job Development and Placement
developing the right match between skills and jobs, the A” *r Placement Process: ensuring
that people succeed on the job and, lastly, Staff and Professional Development: i.e. ensuring



16

Mr. Secretary, if it is true that America is really moving toward
a crisis, I see this U.S. Congress and this Nation prepared politi-
cally to talk about tax cuts and not tax increases, and at the same
time talk about balancing a budget. This being an election year,
put me down for both.

Having said that, I would like for you to promise me that soon
you will have a meeting with the Office of Management and Budg-
et, and ask them how much is it costing the American people to
put Federal funds, if we have got to balance the budget, into dis-
tricts that have the highest dropout rates or the highest poverty
rates, or the highest children born out of wedlock, or the highest
number of people on drugs, or convicted, or in jail.

And you cannot measure the hopelessness that is involved in
how kids know more about going to funerals than to graduations.
But you can measure the lost productivity that all the economists
talk about, when somebody is caged in a cell.

Now, I am against violations of human rights in Cuba, and viola-
tion of human rights in China, but it is my understanding we have
got 1 million human beings locked up in little cells, at the height
of their productive years. Eighty percent have not committed any
violent crimes.

I am a former Federal prosecutor, so, it is OK with me. But
somehow, if we find that the billions of dollars that we are putting
into the poorest of communities are there to lock them up and at
the same time were cutting welfare and other things that we find
too expensive, where does a hat cutting lead us?

Don’t Secretaries and OMB Directors talk to each other and say,
“Hey, if we've got to cut taxes, we’d better cut expenses, and these
poor communities are costing us too much.” There must be a better
way.

Secretary REICH. Congressman, let me give you some figures
which dramatize the point that you are making, and ought to be
of concern to every American. If you drop out of high school and
you are a male, the chances that you are going to be in prison or
on parole or on probation are approximately 34 percent.

That is, one-third of all young men who drop out of high school
are going to be in prison, on parole or probation.

Now, the cost per year of somebody in prison—not even dealing
with the productivity loss that you are mentioning, which is a huge
potential loss for the society—the cost simply of having somebody
in prison for 1 year is about $20,000 per year.

Mr. RANGEL. It is $60,000 for the detention home for juveniles
in the city of New York, Reikers Island.

Secretary REICH. And let me give you one other statistic: If you
graduate from a 4-year college, you are going to have an income,
on the average, that increases the income gap between college and
noncollege graduates about twice as much.

That is, in 1978, the college graduate was earning about 40 per-
cent more than the noncollege; now the college graduate is earning
about 78 percent more than the noncollege.

But society, on average has provided college graduates with
about $25,000 in low-interest loans and grants, and the university
you attended received additional sources and resources.


Unemployment Insurance

Unemployment Insurance (UI) is the primary labor market adjustment program in the
United States. It is clearly the largest and most far reaching. Under the existing unemployment
insurance scheme any unemployed worker on whose behalf contributions have been made to the
Ul trust fund is eligible to receive 26 weeks of benefits, equal to, on average, between 35 to 40
percent of his previous wage. The program also allows for an additional 3 weeks of benefits
under certain conditions during periods of considerable economic downtum, Workers must
show evidence of an active job search in order to receive benefits.

Reflecting a reluctance for large government-supported income maintenance programs,
the US unemployment insurance program is shorter and less generous than similar programs in
other industrialized countries. Advocates claim that the shorter program has resulted in less
long-term unemployment in the United States relative to Europe, where unemployed workers
receive benefits for longer periods. On the other hand, only about one-third of unemployed
workers collect benefits under the US program, due in large part to restrictive eligibility criteria.
Only half of the total number of unemployed workers in the 1980s were eligible for these
benefits, as UI does not cover new entrants, re-entrants, disgruntled job-seekers and voluntary
job leavers.’

Unemployment insurance aims primarily to offset income loss during spells of
unemployment. Only limited attention is paid to making job search assistance available, and
i ini i i . The program is structured around previous
‘wages, and is not sensitive to difficulties which individual workers might experience in finding a
new job, such as age, family status, education level or location.

Job Training Partnership Act

Dislocated workers receive job search and training assistance under the Jobs Training
Partnership Act (JTPA), and more recently under the Economic Dislocation and Worker
‘Adjustment Assistance (EDWAA) program. The Reagan administration proposed JTPA in 1982
as a replacement for the Comprehensive Employment and Training Act (CETA). JTPA contains
many of the same activities which were available under CETA, except for public service
employment, but funds allocated for JTPA are substantially lower than the level of CETA
funding. JTPA is a decentralized program, providing states with increased benefit delivery and
oversight responsibilities. JTPA covers training services for economically disadvantaged youth
and adults (Title {1-A), the summer youth employment and training program (Title II-B),
employment and training services for dislocated workers (Title I11), employment and training
services for native Americans and migrant and seasonal farm workers (Title IV-A), the Job Corps
(Title IV-B), and veterans’ employment and training programs (Title IV-C).

Title IN of ITPA authorized state programs to provide job search assistance, classroom
training, on-the-job training, relocation assistance, and pre-layoff assistance to dislocated
workers, defined as those people laid off and who are unlikely to return to their previous industry
or occupation. This includes workers who lose their jobs as a result of a permanent plant closing,
and long-term unemployed who have substantial barriers to employment, such as age and lack of
skills. States received three-quarters of the Title III funds according to a formula based on
unemployment and long-term unemployment rates.

? [tis becoming increasingly evident that the traditional survey of the labor force is missing
many people. For example, the survey does not follow people if they move. In addition,
individuals can decline to be interviewed and only people actively looking for a employment are
counted in the survey. It is unclear how this affects the survey, but some have suggested that it
results in under-counting the long-term unemployed.


21

in the health care sector, and we have military downsizing to top
it off.

Now, our hope was that we could continue that trend in the 1995
and 1996 budgets, but that was not the case. We have held our
own—that is, we are just about where we were in 1994—but there
has been no net increase.

And that is because our requests have repeatedly been denied,
and we have repeatedly received fewer resources than the
President wanted for dislocated workers.

Mr. Coyne, Thank you very much.

Chairman CRANE. Mr. Payne.

Mr. PAYNE. Thank you very much, Mr. Chairman, and I want to
thank you and Mr. Rangel for holding this hearing. I think this is
very timely.

And Mr. Secretary, thank you very much for your testimony. I
was very impressed by that, and learned a great deal from it.

You concluded your testimony by saying that we know the an-
swers, we can do it if we simply have the will. It would be helpful
to me if you could elaborate a little bit on that, in terms of more
specifically from the public policy perspective.

Maybe just talk a little bit about what you see as the top two
or three answers that we know, and what is it in terms of
resources that needs to be done in order to make those happen?

Secretary REICH. Congressman, I am delighted. I have alluded to
them, but let me summarize. Number one, for low-wage, low-
income, particularly poor young people, the School-to-Work Appren-
ticeship System that we are building is having a dramatically
positive result.

I think later on today you will hear from members of the private
sector who are engaged in these kinds of programs in which, in
grades 11 and 12 young people are exposed to both academic edu-
cation and on-the-site job experience.

These programs take down that wall, that artificial wall, be-
tween academic education and vocational education. They keep
academic education, but enable young people to see the relevance
of what they are learning in the classroom to the real world of
work.

And then they take those children, those young people, through
the summers, often give them summer jobs—the private sector has
to be actively involved—and then provide them 1 or 2 years beyond
high school, where they can develop those skills, and perfect those
skills, and develop an area of competence on which they can
thereafter build.

Number two, I mentioned for dislocated workers one-stop career
centers, in which unemployment insurance is integrated with job
counseling, job search assistance, and also access to training.

We have built a computerized system on the Internet, which is
kind of a help-wanted section of cyberspace—500,000 job listings on
America’s Job Bank.

Now, all of that is very helpful to dislocated workers. It makes
it easier for people who have lost their jobs to get new jobs that
are, hopefully, as good as the jobs they had before. There are re-
source constraints on both the School-to-Work Apprenticeship Pro-
gram and also our one-stop career centers and America’s Job Bank.


50

NATIONAL ACADEMY FOUNDATION

Detrow. Ml
Dasha. NC
Duval County, FL
act Hartford, CT
Gioveest
Hanford. CT
Henry County, GA
Hillsborough Coun. FL.
lu HE

Jersey City, NI

za

ACADEMY OF FINANCE

PROGRAM SITES
1996 - 1997 Academic Year

Palm Bleach County, PL
Pickens County. SC

Polk County, FL

Prince George's County, MD.
Providenee, RI

‘Red Bank, NI

St John's County, FL.

St Lucie County, FL

Salt Lake Ciy, UT

San Francisco. CA

San Jost, CA (East)

San Jose. CA (Unified)
Seatle, WA

‘Seminole County, FL

Wilmington, DE
Yookers, NY

AOF TOTAL: 115



95

INVESTING IN EDUCATION AND TRAINING:
SIMPLE RHETORIC OR THE KEY TO US COMPETITIVENESS?

A Survey of US Efforts
Statement by

Howard Rosen
Executive Director, Competitiveness Policy Council

before the

‘Subcommittee on Trade
House Committee on Ways and Means

July 25, 1996

Thank you for the opportunity to appear before the Subcommittee this morning to present
the views of the Competitiveness Policy Council on the issue of education and training and US.
competitiveness. The Council is a 12 member, bipartisan advisory commission comprised of
three business CEOs, three labor union presidents, three representatives of government, (both
federal and state), and three representatives from the public. (Complete membership list is
attached.) The Council reports its findings and policy recommendations to the President and
Congress. Dr. C. Fred Bergsten, Director of the Institute for International Economics, chairs the
Council.

The Council defines competitiveness as “the ability to produce goods and services that
meet the test of international markets while our citizens earn a standard of living that is both
rising and sustainable over the long run.” Thus the Council's work focuses on ways to raise US
living standards in an environment of increasing international competition. Sustainable
improvements in living standards, in tum, must be based on gains in productivity, and
continuous investment in human and physical capital are key to achieving those gains in
productivity.

Investment in human capital -- developing an educated workforce, equipping workers
with relevant skills and strengthening the science and technology base -- is now considered to be
as important, if not more important than traditional forms of investment in plant and equipment
in terms of contributing to economic growth and raising incomes. In a competitive environment,
firms must continuously invest in maintaining the most up-to-date equipment to produce goods
and provide services at the highest quality, although at a price people are willing to pay. But
equipment can only be as useful as the skills of the people who use it. This awareness has
brought businesses and workers to appreciate the importance of continuous investment in their
workforce.

Until recently, there has been a tendency to view human capital development as a series
of separate and discrete stages. By contrast. building and maintaining a world-class knowledge
base demands continuous investment with the various pieces feeding into one another. Instead of
discrete, unrelated programs, continuous investment in human capital should be viewed within
the context of a system of "lifetime learning.”

Lifetime learning begins with basic education at the primary and secondary level. Some
students may continue onto higher education at colleges and universities. Others will attempt to
immediately find jobs in the workplace. Efforts at facilitating this "school-to-work" transition
may include apprenticeship programs, vocational training, skill certifications, business-labor
compacts, co-op education and professional mentoring programs. These programs are designed
to ensure that youngsters leam the kinds of skills they need to enable them to find and maintain
productive, rewarding and stable employment.


33

Mr. LONGANECKER. Well, I think the record is mixed, and we
spend a great deal of time working together, so I feel comfortable
addressing that concern, even though it is not under my purview
of responsibility.

The record is clearly mixed. There has been, recently, some good
news, in that—in international comparisons now using what we
think are more apples-with-apples comparisons than apples-with-
others—the United States students have begun to look more com-
petitive than they did in some of the earlier estimates.

On the other hand, we still are not leading in those areas most
Americans would expect or want us to, and IJ think we still are not
moving as aggressively toward achieving those national goals that
have been established, of reduced dropout rates, and higher
achievement levels, that almost all Americans agree we should be
moving toward.

And so I think it is very much a mixed boat.

We are now saying that we believe all people should go on to
postsecondary education. Some people have interpreted that as a
statement that our elementary and secondary schools are failing.
We do not believe that at all.

We live in a much more complex world, where the requirements
are going to be both higher job specific skills and citizenship skills.

And so saying that people should have more education should not
be taken as an indictment of our secondary system. It is that, logi-
cally, acquiring those skills will take somewhat more time than it
took in the past.

Mr. Coyne. How do we compare with other industrialized na-
tions, in educating students at the elementary and secondary level?

Mr. LONGANECKER. Let me provide you with, for the record, some
of the data that we have on that comparison, which will give you
the precise numbers.

I think most Americans, when they see those comparisons, will
be both disappointed and, unfortunately nonbelieving. Many of us
think there are problems with our education system, but most of
us think our schools are great.

That is because we are all proud of our communities, and the
places that we support, and so it is very difficult, often, to see an
accurate picture of where we logically fit.

Mr. Coyne. Well, I would like to see those figures if you could
provide them.

Mr. LONGANECKER. I will provide those to you.

Mr. Coyne. Thank you.

[The following was subsequently received:]


133

STATEMENT OF
DR. EMMETT C. MURPHY, Ph.D.
E.C. MURPHY, LTD.

Please accept the following written statement in support of the U.S. Trade
Competitiveness and Workforce Education and Training hearing which was conducted on
July 25, 1996.

This testimony is submitted on behalf of the proceedings of the Subcommittee on
Trade of the Committee on Ways and Means for inclusion into the printed record of the
above-mentioned hearing. Dr. Emmett C, Murphy, Ph.D. forwards this document as
formal exhibit material on behalf of E.C. Murphy, Ltd., an international healthcare
research, management consulting, ard educational services firm specializing in the
quality improvement and work-redesign of organizations.

eee

During the course of E.C. Murphy, Ltd’s (hereafter referred to as E.C. Murphy)
25-year history, the company has worked with more than 400 hospitals and healthcare
organizations throughout Canada, the United States, and Europe. E.C. Murphy has
established a prestigious reputation built on the scientific inquiry and investigation of the
nature of leadership and organizational productivity, particularly in the healthcare field.

Perhaps the gréatest challenge facing today’s leaders -- regardless of what
happens with the various budgetary reductions in the near future ~ is the need to
continuously improve and restructure business operations to keep their organizations
competitive for the long-term.

To maintain or improve their ¢>ganization’s competitive position, today’s leaders
maust improve the efficiency and cost effectiveness of their organization’s operations by
educating their employees. This requires preparing the organization for change, assessing
the organization’s current operations, diagnosing concrete opportunities for improvement,
retooling their managers to implement change, taking action, evaluating the results and
continuously improving the integrity of the work-redesign process.

Two major studies undertaken by E.C. Murphy and their findings are detailed in
this report, as well as supporting commentary on how the results of those analyses are
being benchmarked to identify further opportunities to improve the competitive nature of
the American workforce. These studies have gained national attention and exposure in
USA Today, Modern Healthcare and Congressional Proceedings on Healthcare Reform.

Dr. Murphy, an organizational psychologist by training, has spearheaded the
development of an extensive database which contains input from mere than 280,000
workers from a variety of U.S. and foreign organizations. Through data-driven research,
EC. Murphy has developed state-of-the-art management and technologies that provide
leaders with conerete answers about work-redesign, operational restructuring and cost,
reduction.


1

And that is good. But, if you are a dropout, on the average, you
have no help from society with additional training or education.

Instead, society, is spending, for one-third of the male dropouts,
at least, $25,000 a year, putting them up in a prison.

Now, that kind of mathematics makes very little sense for our
society.

Mr. RANGEL. And it is growing. It is not stopping.

Secretary REICH. Next year in the 1997 budget, the President is
seeking $270 million additional funding, focused on the high pov-
erty, high crime census tracts, where more than 50 percent of the
high school dropouts are unemployed.

We are seeking those funds for pilot projects, to show that if you
get them jobs, if you get them training, if you work with the busi-
ness community, you can reduce the crime rate—dramatically.

Mr. RANGEL. Well, I am telling you, you should be more optimis-
tic, because this hearing is going to prove that the private sector
recognizes this, they think it is a crisis, they think that more has
to be done.

They do not want any more Federal bureaucracy or any more
new programs; they want whatever they are doing to be recognized
and to be coordinated with what we have.

I am confident that, not only in terms of reducing this enormous
budget, but in allowing America to continue its leadership in world
trade, the private sector is willing to do its part. More importantly,
when we say that we are going to lose the low-skilled job, but in
the long run we are going to have more jobs, higher paying jobs,
for all of Americans, we can be confident that Americans will be
well prepared for those jobs.

And every American, no matter what community they are in
should be able to say. “You know, that could be me.” And when
every kid can believe that they will have access to the training to
get that job, that is the America that made us so strong, and
provided so much leadership for the rest of the world.

You have been a gem, Mr. Secretary, and believe me, this is the
time to be optimistic. The private sector realizes not just equitable
tax treatment, but what are we doing with their tax dollars to pro-
vide them with what they are paying for, and that is a decent
professional work. force.

d what we are giving or should be giving them—and I sup-
port—is a tax incentive for the billions of dollars they are spending
in their way to assist in making a more productive society.

So, I am excited. I hope you can get together with OMB; I would
like to work with you, because for those who do not care about peo-
ple, they should be concerned about the taxes that we are paying,
and the reductions in the deficit, and those other issues. It is all
one.

You are a great guy, and thank you so much for leading off
today.

Secretary REICH. Thank you, Congressman.

Chairman CRANE. Mr. Ramstad.

Mr. RamstaD. Thank you, Mr. Chairman.

And thank you, Mr. Secretary. I was appreciative of the fact that
you visited my State last week. You were in the Twin Cities, Min-


61

Mr. RANGEL. Thank you.

Chairman CraNe. And now I would like to call up Mr. Jones,
president and chief executive officer of the National Alliance of
Business, Stanley Litow, president of IBM Foundation, and Leo
Reddy, president of the National Coalition for Advanced Manufac-
turing.

And let me tell you panelists that, if you can condense your pres-
entations to 5 minutes or less, all of your prepared testimony will

be made a part of the permanent record, and we will start with Mr.
ones.

STATEMENT OF ROBERTS T. JONES, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, NATIONAL ALLIANCE OF BUSINESS,
WASHINGTON, DC

Mr. JONES. Thank you, Mr. Chairman and Congressman Rangel.

We appreciate the hearing. We think that it is not only impor-
tant on the substance, but this Subcommittee has a growing leader-
ship role on this set of issues.

I will keep my comments quite short. Many of the items that I
would speak to you about on the changing nature of the economy
and its impact on human beings and workers have already been
stated. I would suggest two things.

One is that this set of behavior, from global competition, tech-
nology and everything else, is not going to abate, it is going to in-
crease, and its impact on our institutions and on individuals will
be felt more in the future, not less, and we need to deal with the
underlying implications of that.

The greatest underlying implications are, in fact, as the
Secretary pointed out, good jobs, and high skill, but the key to the
future, in terms of wages, benefits, tenure on the job, reemploy-
ment, access to the original job, all, more and more, come back to
the education investment that is in our system.

We are replete with data about the increasing impact of edu-
cation on each of those points. I will not go through them now. But,
we would raise it as a significant issue for the Congress, and for
the public to understand.

One of the implications of this is the growing role of corporate
leadership on this issue. You just heard an outstanding example of
it, you will hear more in a moment from IBM and other companies.
But, across this country, Mr. Chairman, the increasing role of large
and small businesses on this set of issues is visible and seen, not
as a political issue, or a social issue, but as an underlying economic
issue, both for the company and for the individual.

You may have heard that we now live in an era in which we do
have data that show directly the impact of education on productiv:
ity in a company. We have data which show the direct impact on
the individuals.

So, when companies take leadership, both in the school system,
in their own company, or in the broader community, it is for very
significant and serious reasons.

Let me just cite a couple of things. Corporate spending is increas-
ing rather dramatically. The Secretary indicated $30 billion a year;
indeed, the recent number is $52 billion a year, just up since 1990.


130

Thank you so much for what you have done. I mean, I think this
question that you brought up, Mr. Rosen, if training is so good why
do we do so little? gets to the heart of this whole thing.

Who does it, how do we get it done, and how do we incite?

Thanks very much.

Mr. ROSEN. Thank you.

Mr. BAILEY. Thank you.

Mr. SAMUEL. Thank you, Congressman.

[Whereupon, at 3:04 p.m., the hearing was adjourned.]

{Submissions for the record follow:]


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116

dents in the activity of learning. Just as workers are not engaged
in their work, students are not engaged in their work.

Many students find their schooling boring, and they fail to see
the relevance or importance of what they are learning in school.
They see no reason to work hard.

But this is a tremendous waste. Increasing education, which I
think many people agree is necessary, by increasing the hours or
days of schooling, is probably a good idea, but it is also tremen-
dously expensive.

Increasing education by increasing the focus and engagement of
our students, and the hours that they work, perhaps on their own,
or with their parents, has much less of an impact on the taxpayers.

I think that is an unexploited resource that we need to focus on.
Learning is a demanding activity, and we need to get our students
to work more at that activity.

Now, how do we do this?

Several previous witnesses have presented several good examples
of how we can do a much better job of connecting school and the
school experience to the adult world, to the broader community and
to the world of work.

Through this we can exploit students’ interests and aspirations
to enhance their academic learning. Why is it that in almost all
cases, outlets for student interests and passions are found outside
the classroom?

One of the key objectives of education reform is to try to take
those interests, and incorporate them into a student’s academic
learning.

Of course, I want to stress that many students do not have the
slightest idea what their interests are, or what their aspirations
are, and I think we can do a lot more to help them think about
that. I am not saying that students must make a decision about
their futures at the age of 16.

None of us could probably have done that, but we must help stu-
dents think systematically about what their interests and aspira-
tions are. That is the only way that we can then use those inter-
ests, to engage them more in their education.

Another important finding from our research is that many young
people who are engaged in internships find it useful and motivat-
ing to be treated like adults, and given responsibility.

It is an interesting thing about our society, that just when we
are preparing our young people to enter the adult world, we isolate
them from adults in a youth world. And I think one of the real ad-
vantages of internship programs is that they give an adult role to
young people, but in a situation in which they can also receive
guidance.

I agree with the previous speaker that much of our knowledge
about successful education reforms is based on stories. Stories are
useful, but they do not give us a rigorous measurement of the effec-
tiveness of programs. At Columbia, we are carrying out a rigorous
evaluation of career magnet schools in New York City, many of
which have strong contacts with employers, including internships.

And just to highlight a few of our findings, we found that, 2
years after graduation, career magnet graduates were more likely


4

Chairman CRANE. Thank you for coming this morning to the
Subcommittee’s hearing on U.S. trade competitiveness and work
force education and training.

I am impressed with the interest shown in this topic, and I am
pleased to have been able to cooperate with my distinguished col-
league from New York, Mr. Rangel, to make this hearing possible.

We have already been interrupted by votes thus far, and we
could still have more, and so I would ask our witnesses to try and
compress their opening remarks, and then any written statement
will be made a part of the permanent record.

This hearing will focus on ways in which the government, busi-
ness and industry can improve the competitiveness of the U.S.
work force through education and training initiatives, especially for
those preparing to enter the work force for the first time.

The United States is the most competitive nation in the world,
and U.S. workers are the most highly skilled and innovative in the
world. Business and industry have worked aggressively to ensure
that public education responds to its needs, and also have estab-
lished numerous educational programs to achieve this end.

Business and industry rely on the educational system to provide
a pool of talented workers. As a result, the output of U.S. workers
is higher than that of workers anywhere else in the world.

American firms scour the globe, developing and expanding over-
seas markets for our exports. Many foreign companies invest here,
providing jobs for our workers. These are not new phenomena.

For decades the internationalization of foreign markets has
forced U.S. companies to expand globally as advanced tele-
communications and transportation make the world smaller and
more interrelated.

The trend toward globalization also has increased competition in
labor markets, both here and abroad. I have seen this with my own
eyes. It has been my privilege to travel to nearly every continent
on the globe.

Mainland China and the new democracies of Eastern Europe,
such as Romania and Bulgaria, are the latest countries to emerge
as players in the international marketplace.

As we open this hearing on global trade competitiveness and
work force education and training, let us keep in mind two things:
First, the entry of new countries into the global markets for capital
labor is only an acceleration of a process which has been going on
for years.

The United States has always responded quickly to become the
primary player worldwide.

Second, while the need to be both competitive and innovative
continues, I am confident the training provided by corporations tai-
lored to workplace need, along with a responsive education system,
will allow American workers to hold their lead as the most produc-
tive workers in the world.

And I would now like to recognize our distinguished Ranking
Member, Mr. Rangel, for‘any statement he would like to make.

Mr. RANGEL. Thank you very much, Mr. Chairman.

I would hope that my written statement would be entered into
the record.

Chairman CRANE. Without objection.


93

congratulated for that. But, at the same time, we have got to make
sure not to lose sight of the fact that these are individual stories;
these are the trees, and there is a very big field out there, with not
many trees. There is no great forest to look at. There are many
great, individual stories and we need to capitalize on them. But
they do not really reflect what is going on in the whole economy.

If we do nothing else today, I would like to leave you with one
question, which I think we all need to answer. Mr. Chairman, if
training is so good, why do we do so little?

Let me turn to the real issue which brings us here today, which
is the anxiety over wage competition. That is what this is all about.
We are afraid that we are going to have to compete against wages
from lower wage countries, which will hurt our jobs and hurt our
living standards.

I have two responses. First, overtime labor costs are becoming in-
creasingly less important in deciding who wins markets.

Second, it is really competition over wages and productivity, not
wages alone. If we were competing purely on the basis of wages
then the United States would 1 not produce anything, because our
wages are higher than those in other countries. But it is the fact
that we have higher productivity that allows us to enjoy higher
wages. And so the real question becomes, if we want to preserve
our higher wages, how do we enhance productivity?

The only way I know how to do that is through investment in
physical and human capital—no great surprise. And here I want to
just pick one example: Personal computers. At some time we have
all sat in front of a personal computer, and I am sure there has
been some frustration in terms of our own skills and using that
personal computer. A computer is an investment. That is an invest-
ment in physical capital, but it really cannot enhance our produc-
tivity unless we know how to use it. Putting it a different way, the
ability of that computer to improve our living standards is limited
by our ability to use it.

And that is why we have to have a trained work force. Workers
have to be trained to use the equipment—not just physical equip-
ment, but also used to produce goods and to provide services.

Training in this country is ad hoc and inadequate. In fact, the
major ingredient to training in this country is luck. A person’s edu-
cation and training depends on what school district you are from,
on which industry you go into, and on which state you live in, if
you are eligible for a Federal program or not. And in the case of
programs for dislocated workers, it even depends on the cause of
your dislocation.

Luck is at the center of our system, and in fact we really do not
have a “training” system per se.

Mr. Chairman, we know why we should train, we know how we
should train. In fact, we have heard many good examples this
morning. The key question is, who is responsible for providing the
training, and who should be trained?

Should the worker or the employer be taking on that responsibil-
ity? Or, is it some shared coalition between workers, employers,
and other institutions in our society?

There is one other thing I want to leave with you. There is a lot
of talk today in Washington about the level of government spend-


38

In addition, we have developed our programs to encourage the
participation of businesses. We have supported the provisions that
allow businesses to provide education with a tax deduction for their
employees, and we have worked closely with them.

It is also important to keep in mind that our system of higher
education is fundamentally different from most other countries.
Ours is a privatized system of higher education. We do not have
Federal institutions of higher education; most countries run their
systems of higher education.

We buy services in a system where about 75 percent of the
students attend state institutions of higher education, about 25
percent in traditional colleges and universities that are private,
not-for-profit institutions.

We also, in the Federal Department of Education, contract with
over 3,000 private, for-profit trade schools, some of which have
problems in their operation, but most of which are offering a qual-
ity, important service to the community by providing trade and
technical education.

And so, we have got a variety of ways in which we work with
an almost privatized system for high school graduates for the coun-
try.
"ts that responsive, Mr. Payne?

Mr. PayNE. It is, and one of my observations, and I think
Secretary Reich alluded to this earlier, is that the community col-
leges seem to be playing a really important role, in terms of ensur-
ing that the postsecondary education that people are getting is in
fact applicable to their community, and to the employment needs
in their communities.

I think that is because these institutions are very interested in
working with the private sector, and understanding what the
opportunities are.

Mr. LONGANECKER. Absolutely.

Mr. Payne. Anything that we can do to encourage more of that
happening, so that the kind of education that people receive is as
applicable in a practical way as possible to the needs in their com-
munity, would be very, very helpful.

Mr. LONGANECKER. Absolutely.

Mr. Payne. There is one other thing I wanted to touch on, and
that is, one of the Goals 2000 objectives is that we will be first in
the world in math and science by the end of this decade.

In terms of trade, in recent years the balance of trade in high
technology goods has gone from a surplus to a deficit.

I understand that in 1975 the United States and Asia each grad-
uated 60,000 bachelors of engineering, and yet 20 years later the
United States is graduating 65,000 bachelors in engineering, and
Asia is graduating 300,000.

It seems that one of the things that we really need to do is to
encourage more people to participate in science and in engineering,
in terms of postgraduate work.

What ideas do you have, or what can be done, to encourage that
to happen?

Mr. LONGANECKER. Well, one of the dilemmas that is hurting us,
particularly at the graduate level, is that some of those programs
that traditionally have supported science and research in this coun-


125

Chairman CRANE. Thank you, Mr. Samuel.

Mr. Rosen, Motorola has its corporate headquarters located in
my district, and they are currently investing about 6 percent of its
payroll in training employees, and that, I have been told, is one of
the highest levels in the entire country.

What would you suggest to encourage other companies to follow
that kind of an example? I mean, I have heard nothing but high
compliments back home on what Motorola has been doing.

Mr. Rosen. Yes, Mr. Chairman, I note that example in my writ-
ten testimony, in the context of the term high performance work-
places. This is a term of art which has been used over the last 2
years, and I am reminded of the Supreme Court Justice, who said,
when asked about pornography, “I do not know how to define it,
but I know it when I see it.” Well, that is a “high performance
workplace.” There are many explanations of what it really is, but
Motorola just puts its money where its mouth is, and trains its
workers. And it pays off, the company is better because of it.

Now, the key question, as you ask, is, by now everyone should
know that story, so why are not other companies following
Motorola’s example? And in part, I think it goes to a bigger set of
issues, which is that not all corporations share Motorola’s,
committment to investing in their workers, and their long-term vi-
sion for the company. It takes a lot to try to change that, and I do
not know who is responsible for changing that kind of thinking. It
really should come from within the company.

But again, I would have to say we need to keep getting that mes-
sage out there, and bringing out the success stories. You have pro-
vided an opportunity to do that today. I applaud you for having
these hearings today but I do not think we have heard anything
new. The key is we have to get this message out to the people.
Maybe what needs to be done, as an example, is for the Business
Round Table to devote one of its meetings to this issue, and Mr.
Weill to tell his story. Then another CEO may ask himself why
don’t I do that? And he calls his aide over and he says, “look into
that, I want to do that—I want to be like that guy.”

Unfortunately, there are not many people here today to hear Mr.
Weill’s story, and to congratulate him for his efforts. There are no
TV camera crews, and he will not get recognition, outside this
room. Please do not misunderstand me. I applaud the Subcommit-
tee for what you are doing—and we need to have more of this kind
of meeting.

And like I said, the Motorola example is clearly documented, It
is there, we know it works, and it is something that I would think
every businessman who is interested in the future of their company
should want to emulate.

Chairman CRANE. Thank you.

Mr. Rangel.

Mr. RANGEL. Mr. Rosen, I do not know at what point of the hear-
ings you arrived, but in the opening statement, and throughout the
hearings, I have been trying to stress that the chairman has agreed
to have these hearings as exploratory hearings, not only to hear
what is happening out there, but to see how we can have them all
come together, to hear what each other is doing, and what way, if


100

In addition to decentralizing the distribution of the program's benefits, the Federal
government also delegated data collection and program monitoring to the states, making it more
difficult to evaluate the program's effectiveness. An early review of the program by the US
General Accounting Office (GAO) suggested that less than 10 percent of the eligible displaced
workers received benefits under Title IT] of JTPA in the first three years of the program."
Another early evaluation of the program suggested that older workers and those with less
education are less likely to be served by ITPA than would be expected by their representation in
the population of displaced workers. These findings suggest that those individuals who are most
in need of assistance are the ones least likely to receive it under JTPA programs for displaced
workers.”

Economic Dislocation and Worker Adjustment Assistance Act

‘Two important developments relating to JTPA occurred in 1988. The Worker
Adjustment and Retraining Notification Act (WARN), enacted in July 1988, requires certain
firms to provide 60 days advance notice to workers prior to a mass layoff or plant closing. In
addition, Congress enacted significant changes in Title UII of the JTPA program under the
Economic Dislocation and Worker Adjustment Assistance Act, which passed Congress as part of
the Omnibus Trade and Competitiveness Act. These changes call for: (1) the creation and use of
state rapid-response units: (2) states to pass on at least 60 percent of STPA/EDWAA “nds to
sub-state areas; and (3) half of those sub-state funds to be spent on training rather than job search
assistance and related activities.

Under JTPAVEDWAA, the federal government provides most of the program's funding,
but benefits are distributed locally. This separation of responsibilities reflects recent evidence
that locally provided programs are better suited for reaching targeted populations. On the other
hand, it is difficult to measure JTPAEDWAA's true effectiveness at helping workers adjust
because only a small percentage of eligible workers participate in the program. The number of
people who participated in JTPA between 1985 and 1989 represented only 18 percent of the
number of dislocated workers during that period." Although this program may be successful in
assisting those workers who participate, it appears to be much too small to make any difference
in addressing any overall adjustment pressures in the economy at large.

Trade Adjustment Assistance

The thied major labor market program is the Trade Adjustment Assistance program
(TAA). Created in 1962, TAA was an attempt to gamer labor support for the Trade Expansion
Act of 1962, authorizing US participation in the Kennedy Round GATT negotiations. Under
TAA, workers identified as losing their jobs because of trade concessions could apply for income
maintenance payments and training benefits. Strict interpretation of eligibility requirements
prevented anyone from receiving benefits under the program from 1962 until 1969. Even after a
more liberal reinterpretation of these requirements, only 46.000 workers received benefits over
the following five years.

* US General Accounting Office, Dislocated Workers: Local Programs and Outcomes Under
the Job Training Partnership Act, GAO/HRD 87-41, Washington, D.C.: US General Accounting
Office. March 1987

” Margaret C. Simms, "The Effectiveness of Government Training Programs,” paper
prepared for the US Department of Labor, Commission on Workforce Quality and Labor Market
Efficiency.

' See US Department of Labor, "Summary of Title III Program Performance for Program
Year 1989," mimeo, and Herz. Diane, "Worker Displacement Still Common in the Late 1980's,”
in Monthly Labor Review, Vol. 114, No. 5, May 1991



4l

a little bit nervous, but I would hope that you would be able to put
my whole testimony in the printed record.

Chairman CRANE. It will be included, yes, sir.

Mr. WEILL. Thank you very much.

Basically, I would like to say that I am proud to be an American,
I am a great believer in the free enterprise system.

I think that as we face the next millennium, our country is in
a fantastic position vis-a-vis the rest of the world, and I think it
is all of our collective jobs to make sure that we are in that position
50 or 100 years from now, for our grandchildren and our grand-
children’s grandchildren.

That is why I think we all do what we do, but I want to talk
today a little bit about the Academy of Finance and the National
Academy Foundation, a little bit about why it started, what is hap-
pened since it started, and our hope for the future.

Basically, this program started with an idea in 1980. New York
City was the financial capital of the world, and yet financial com-
panies were thinking about moving out of New York City because
they claimed there were not enough people in the work force to
keep a vital kind of economy going in New York.

And yet, when one drove around the five boroughs in New York,
you saw young people playing in the street, young people without

ving a clue of what life was about, and how they can become
part of the system.

That was the beginning of the idea that maybe the private sector
should get together with the public sector and see if we can create
a high school level program that can train young people for a ca-
reer in the financial services industry.

In 1980 I approached Frank Makurola who was then the
Chancellor of the Board of Education, and I said, can you be a little
enough of a bureaucrat that we can work together to try and create
a program where the business sector will be part of writing that
curriculum, so that the program will relate to what is happening
today and tomorrow, rather than what happened 50 years ago.

And we developed that program. Sandy Feldman of the Teachers’
Union cooperated with us, encouraged the teachers to work in busi-
ness during the summer, so that they could understand what they
would be teaching, rather than just teaching from the book, and to
help develop the curriculum so that it would make sense to the
young people.

We started this program in 1982, in John Dewey High School,
with 30 students, and it was an example of public/private partner-
ship. and it was an example of a School-to-Work Program.

e worked in that school for 3 years before we went to the next
school. Today we are in 200 schools in 25 States, with 12,000
students, up from that original 30, 14 years ago.

And, what is even better than that, is, 90 percent of these stu-
dents go on to college or some kind of higher education, because
they have learned in this program the value of School-to-Work Pro-
grams. And part of this program, and our only limitation on the
growth of the program, is getting industry to provide summer
internships.

Because in internships, young people can find out the value of
education, that education can take them beyond the entry-level job