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Bernanke: Lifelong Learning Key To Success

By Theresa Minton-Eversole  9/1/2007
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Staffing Management News

Bernanke: Lifelong Learning Key To Success

It’s time for the business community to step up its support of the U.S. education system to help ensure that the country maintains its competitive advantage in the global economy, Federal Reserve Board Chairman Ben S. Bernanke on Sept. 24, 2007, told business leaders attending a workforce and education summit in Washington, D.C.

“I believe that as we address such challenges as the retirement of the baby boom generation, advancing technology and globalization, our education system will make an important contribution to the adjustment process,” said Bernanke, who keynoted the first day of the three-day event sponsored by the U.S. Chamber of Commerce’s Institute for a Competitive Workforce. And the sooner the country’s business and education communities collectively start addressing education’s impact on competitiveness the better, as delays can only exacerbate the negative economic impact a weak education system can have on the country’s competitiveness and on national workforce capabilities.

“I am speaking not just of education acquired formally in classrooms before entering the workforce but also of lifelong learning that includes … early childhood programs, informal mentoring on the job and mid-career retraining,” Bernanke said. “And when I speak of capabilities, I mean not only the knowledge derived from education, but also the values, skills and personal traits acquired through education, which are as important as, and sometimes even more important than, the specific knowledge obtained. These include such qualities as the ability to think critically, to communicate clearly and logically, and to see a project through from start to finish.”

Economic Impact of Education

The chairman said education and its importance to the U.S. economy cannot be overemphasized. “Although the United States has long been a world leader in expanding educational opportunities, we have also long grappled with challenges, such as troubling high-school dropout rates, particularly for minority and immigrant youths, and frustratingly slow and uneven progress in raising test scores and other measures of educational achievement. If we are to make progress in meeting these challenges, we must be willing to actively debate their causes and continually experiment and innovate to find solutions.”

Education is important because it is so directly linked to productivity, which, in turn, is the critical determinant of the overall standard of living, Bernanke said. The Bureau of Labor Statistics estimates that between 1987 and 2006, improvement in the education and experience of the U.S. workforce contributed 0.4 of a percentage point per year to the increase in nonfarm business labor productivity.

Workers’ skills contribute indirectly to productivity growth by affecting other factors as well. For example, he said, “the state of technology is affected both by the creativity and knowledge of scientists and engineers engaged in formal research and development as well as by the efforts of skilled workers on the shop floor who find more efficient ways to accomplish a given task. Managers who develop a new business plan or find new ways to use evolving technologies can also be thought of as adding to the ‘intangible,’ or knowledge-based, capital of the firm, which by some estimates is comparable in importance to physical capital such as factories and equipment.”

For individuals, the economic returns on education are substantial as well. In 2006, the median weekly earnings of college graduates were 75 percent higher than the earnings of high-school graduates. In turn, workers with a high-school degree earned 42 percent more than those with no diploma.

These differentials are large and have been growing, said Bernanke, roughly doubling over the past 25 years. But the source of the widening wage gap between the more-educated and less-educated is nothing more complicated than supply and demand. While the demand for more-educated workers has been increasing rapidly, the supply of highly educated workers has also risen.

Nevertheless, the supply of educated workers has not kept pace with demand, thus generating an increased salary premium for education. “Because the wages of those at the top of the educational ladder have increased the fastest, increasing our investment in education can benefit not only individuals and society but also might narrow income gaps,” Bernanke surmised.

Education System Interventions

What can be done so that the U.S. education system will continue to play a significant role in supporting economic change? “We must begin by recognizing that learning is a lifelong process and that we have opportunities to improve education at every point along the way,” he said.

Deciding what and how to teach students from kindergarten through high school and then evaluating our schools’ effectiveness in preparing students for the workforce and a lifetime of learning is a daunting task. But Bernanke, who views the issue from the perspectives of a former school board member, the spouse of a teacher and the parent of two young adults pursuing advanced education, offered his observations on the goals that should be kept in mind as ways to improve learning are explored:

    • Encourage experimentation and innovation. “The size and diversity of our country, together with the fact that state and local policy-makers retain significant discretion over how to structure their education systems, provides us a natural laboratory for assessing the effectiveness of alternative educational strategies. … Debate about what works and what doesn’t [is] a crucial part of discovering cost-effective ways to improve our education system.”

    • Involve the business community. “Students at the elementary and secondary levels are being prepared not just for work but for life,” he said. “Such skills and acquired traits as critical as creative thinking, social ability, persistence and satisfaction in accomplishment make not only good employees but good citizens as well. Exposure to the arts and culture and experience in serving the community can help support the development of these broader, harder-to-measure skills, alongside more readily measurable cognitive accomplishments in reading, math and science.”

    • Focus on teacher quality. “We must instill a desire among students to stay in school and to seek more education and training over their working lives,” Bernanke said. High-quality teachers can instill this desire in their young students.

    • Improve the education of disadvantaged students. Longer school hours and supplemental educational offerings such as after-school and mentoring programs have been shown to boost school attendance, he said.

Role of Higher Education
Bernanke noted that higher education represents the strongest part of the U.S. education system, as demonstrated by the fact that students from all parts of the world come here to study.

“The main business of our institutions of higher education is undergraduate teaching. But unlike some countries, we do not separate research and undergraduate education. Thus, our colleges and universities are important sources of research and development,” he said, noting that more than half of U.S. basic research is conducted at universities.

In addition, he explained, “higher education has embraced the broader mission of translating research into new products and enterprises. The innovations that begin on campuses are diffused to businesses through patents, startup companies, and consulting arrangements between faculty and industry.”

One great challenge in higher education, however, lies in making sure high-school graduates are prepared for it and have access to it, said Bernanke. “With college enrollment rates having leveled off in recent years, much debate surrounds how we can move more students into higher education and keep them in school until they graduate. Supplemental programs to help under-prepared college students could improve eventual college completion rates ….”

Community colleges also have made a significant contribution to expanding educational opportunities, Bernanke said, with their lower costs and more-flexible schedules. These schools now enroll almost one-half of U.S. undergraduates, playing a constructive role not only for 18- to 22-year-olds but also for older adults by providing flexible programs for obtaining new skills, specialized training contracted for by individual businesses, remedial education and adult enrichment.

“Attendance at one of these institutions is associated with higher wages, even if a degree is not completed,” he said. “Evidence suggests that each year of credit at a community college is worth almost as much, in terms of increased earnings potential, as a year at a four-year college. And the earnings of graduates who started at two-year schools and transferred to four-year programs ultimately match those who begin their post-high-school education at four-year institutions.”

Role of Business Community

Upgrading skills through continuing education and training outside the job is also important in environments in which workers can face displacement. For older workers looking to retool their skills, classroom instruction has been shown to be effective. Similarly, studies of a number of welfare-to-work programs have reported long-term gains for those who participated in intensive basic education and vocational training.

“Such results suggest that well-designed programs to assist workers who lose their jobs can contribute to cushioning the effects of globalization and technological change,” Bernanke said.

“Education fundamentally supports advances in productivity, upon which our ability to generate continuing improvement in our standard of living depends,” concluded Bernanke. “If we are to successfully navigate such challenges as the retirement of the baby boom generation, advancing technology and increasing globalization, we must work diligently to maintain the quality of our education system where it is strong and strive to improve it where it is not. To do that, we must continually experiment, innovate and evaluate so that we can make rational decisions about what works and what doesn’t in education.”

He added: “Because the quality of your workforces is so vital to the success of your businesses, you as business executives must participate fully in this process, along with other stakeholders—students, parents, teachers and policy-makers.”

Theresa Minton-Eversole is manager of SHRM Online’s Staffing Management Focus Area.

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Video : At a workforce and education summit sponsored by the U.S. Chamber of Commerce, Ben Bernanke, Chair of the Federal Reserve System, spoke of the importance of investing in continual worker development.
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