Curious Capitalist

Why We Need to Tackle the Skills Gap

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George Frey / Bloomberg / Getty Images

A worker welding the outside of a safe at the Champion Safe Co. manufacturing facility in Provo, Utah, on Wednesday, Feb. 22, 2012.

I was struck this morning by two Op-Ed pieces: first, Larry Summers prescription for how to nurture the recovery in the FT, and Steven Rattner’s parsing of some new data on American inequality which found – surprise! – the rich got even richer in 2010. A whopping 93% of the additional $288 billion in income created in that year went to the top 1%; the rest of us got an $80 raise.

I was surprised, frankly, that the raise was even that big. As my colleague Bill Saporito and I reported in our Wimpy Recovery cover this week, wages for the average working class person in the U.S. have been flat since the 1970s. The reason – the fact that education isn’t keeping up with globalization and technology – is the subtext in both the Summers and Rattner pieces. And while a recovery may be perceived as time to step off the investment brakes, it’s not. Quite the opposite, especially in areas like education. As Rattner points out, pay for college grads has risen nearly 16% since 1980, while pay for those without a high school diploma has plummeted by nearly 26% in the same time period.

On that note, I’m discouraged by the Republican proposals to cut spending in areas like infrastructure, research, unemployment insurance, and food stamps, and particularly education. Reporting in both in Midwest and the Washington, D.C., area over the last two weeks, the most pressing problem I heard from CEOs I spoke with was the skills gap – at companies like Caterpillar, in the Midwest, they can’t find enough high-tech welders. At IBM, there are hundreds of $40K and above job listings for people with at least a two-year associates degree.

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What’s interesting is that public efforts around education have been so pathetic that both of these companies—and many others—are getting into the education business themselves. Caterpillar is now helping supply and fund local technical programs at high schools that went by the wayside in the 1980s. IBM is going much farther, actually partnering with the New York City educators to develop a grade 9 to 14 combination high school and associate degree program called P-Tech in the economically beleaguered area of Crown Heights, Brooklyn. The school is designed to make sure that not only do high school kids learn the skills that will get them a job at companies like IBM, but that they actually graduate with their associates degree – drop out rates at community colleges are notoriously high.

It says a lot about how much education investment matters that companies are simply picking up the slack left by the public sector. They know they can’t stay competitive if they don’t. I’ll be exploring this issue and talking about the P-Tech model in much more depth in my Curious Capitalist column in TIME magazine later this week.

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