Every year, U.S. companies who rely on tech talent plead for the government to issue more H-1B visas -- the visas that allow skilled foreign workers, especially in tech fields, to work in the U.S. Each year the push from industry results in a backlash from those who question why we would want more foreign workers. They point out that the recovery in U.S. employment remains sub-par, with the finer points of the employment picture remaining a concern to Federal Reserve officials even as the headline rate continues to drop. Tech firms respond that there simply aren’t enough trained American candidates to fill the positions.
This recurring conflict illustrates a simple truth: U.S. education is failing to give students the skills they need for a job that will secure them a middle-class lifestyle. Much of the difficulty comes from the “single track” nature of the U.S. educational system -- where four-year college programs get all the glory and most of the money, and secondary students are catechized from an early age into the faith that four-year college is the only way to achieve success.
This single-track system is an outlier among the educational systems of industrialized countries, and is showing its inadequacy ever more clearly. But better possibilities are beginning to come into view -- driven not by top-down bureaucracy, but by public-private partnerships, especially with visionary tech firms who see that their long-term interests require an adequately trained workforce. They’re looking abroad -- particularly to countries like Germany, Denmark, and Finland -- to see if systems that have worked elsewhere can be adapted to conditions in the U.S. There are increasing signs that they can be.
If this shift gains momentum:
It could provide a better solution to the problem of America’s training gap, helping ensure continued U.S. competitiveness with other advanced industrial nations in the global economy;
It could ease the pressure on four-year college costs that have come from the increasing flood of easy loan money over the past generation;
- Likewise, it could help reduce the trend of increasingly indebted graduates without the skills to secure the employment that will pay off that debt;
And it could ease public finances, as the student loan debt burden evokes more calls for debt forgiveness and for outright
The U.S. Drops the Education Baton
In 1910, only about one in ten American 18-year-olds had finished high school; by 1940, that proportion was 50 percent. The G.I. Bill cemented the educational dominance of the U.S workforce in the global economy in the post-war years. However, beginning in the 1970s, that lead began to fade. In 1973, people with a high-school education or less made up 72 percent of the nation’s work force; high school graduates could look forward to leaving school and finding employment that would give them middle-class status. Over the next generation, though, as automation rose and the economy shifted into ever-more intensely technical high gear, training demands changed. Between 1973 and 2007, the total number of jobs in the U.S. grew by 63 million -- but the number of jobs held by those with no post-secondary training fell by 2 million. In short, in the last generation, all the net new jobs created required more specialized training than that provided in American high schools.
The U.S. chose to respond to this changing reality by focusing on four-year college as the solution, pumping money into student aid and offering government guarantees of student loans. Simple economics indicates that when effective demand growth outpaces supply growth, prices will go up, and they have -- inflation in college tuition has far outpaced even the rapid growth in medical costs over the period. (Federal Reserve data for tuition go back to 1978.)
Correspondingly, student debt has ballooned, especially over the last decade. (See chart on the following page).
This is the source of the current public debate on student loan debt, which focuses especially on the plight of “millennials,” who are graduating with the highest student loan debt in U.S. history, having been taught since kindergarten that a four-year degree is the only path to success in life, and then given government-guaranteed loans to enable them to pursue it. Now the country is looking at a nearly $1.3 trillion mountain of student debt, and calls for debt forgiveness are beginning to be heard. (We note that such forgiveness would essentially be a massive taxpayer donation to educational institutions, especially the for-profit institutions that have multiplied in the easy-student-loan era.)
Is all that college adding up to anything?
One problem is how few people who embark on four-year college programs finish them. Of those who enroll in a four-year college program, only 56 percent have a degree six years later (you could call this “most of the debt, few of the skills”). Even those who complete the programs often don’t do as well as they’d hoped -- 27 percent of people who simply have a post-secondary certificate or license, and not even an associate’s degree, earn more than the average bachelor’s degree holder.
The message is clear -- the “college for all” mantra is a failure that has led to a generational debacle -- soaring educational costs, staggering indebtedness of graduates, and inadequate preparation for the middle-class jobs the real economy is producing. Students and industry are both being shortchanged.
Fortunately, a new paradigm is emerging in the U.S. The U.S. is beginning to take a page from northern European countries which have long had a two-track educational system -- one track for so-called “vocational” training, and one for university. The U.S. has shied away from “vocational training,” which now carries a stigma. Across northern Europe, though, such training is viewed very positively -- and it has allowed such countries as Germany to cultivate a workforce capable of driving the highest value-added industries on the planet.
The German system has peculiarities that wouldn’t be well received in the U.S. For one thing, students are tested and tracked into one path or the other very early in their educational career -- something that would chafe against U.S. egalitarianism. However, Finland and Denmark, for example, also have two-track systems, but the choice of which track to pursue isn’t made until 9th or 10th grade -- and is made by students and parents, not by state tests. European vocational training is marked by major participation of industry both in designing curricula and in funding the system.
Over the past few years, there has been a major move to create a similar option in the U.S. The flagship of the current movement is “P-Tech,” “Pathways in Early College High School,” which started at a school in Brooklyn and has since spread to many other schools and states. The Brooklyn P-Tech, which opened in 2011 in a high school slated for closure, has just graduated its first crop of students.
The program is designed to take six years, and students will leave with a high school diploma and an associate’s degree in a STEM field -- “science, technology, engineering, and math” -- in this case, computer engineering. Some students have finished ahead of schedule; they’re are allowed to start their college-level classes as early as ninth grade. The corporate partner for the program is IBM, and the company is offering graduates a place at the front of the line for hiring at the company after they graduate. Several graduates from this rough Brooklyn neighborhood are walking, at 18, into $50,000 “middle-skill” jobs at Big Blue. The program has been a success, producing well-trained graduates in a poor urban school who can enter middle-class jobs immediately after graduation -- with no debt.
IBM -- and the school’s visionary principal, Rashid Davis -- have even succeeded in working harmoniously with the teacher’s union. Students are not railroaded into STEM subjects alone, but get a full complement of high-school and college classes, as well as real-world work experience at IBM and the help of IBM mentors during their academic career. So they’re simultaneously absorbing the traditional high school curriculum, practical STEM subjects, and the “soft skills” of functioning in the workplace that disadvantaged students often struggle with. Many students in the program have commented that its project-based, practical nature has galvanized their enthusiasm, given them a clear educational goal, and motivated them to finish the program rather than drop out.
The Brooklyn model has been so successful that it is being rolled out in several other cities and jurisdictions.
Fad or Trend?
Fads in education come and go. Nevertheless, we view the P-Tech phenomenon as an extremely hopeful, practical response to the various crises and inadequacies that currently plague the U.S. education and training system. As more P-Tech graduates find employment in high-growth industries, their success may incrementally shift the negative attitude many Americans have to “vocational training.” And we view this path as far preferable, and far better for the U.S. economy, than doubling down on the failed “college for all” model and putting more taxpayer dollars into the student debt hole -- whether giving them or forgiving them.
Investment implications: The U.S. once led the world in producing an educated workforce to drive productivity. That leadership faded in the 1970s as the U.S. pursued a single-track educational policy focused on four-year college, and devaluing vocational training. As a consequence, the cost of tuition has become prohibitive and the weight of student debt has become crushing for many graduates. However, a new paradigm is beginning to emerge in technical high schools that marry industry participation, real-world training, and hands-on project learning to produce graduates with the middle-level skills needed to take the positions that U.S. industry is desperate to fill. We view this adaptation as a long-term positive signal for U.S. productivity and global competitiveness, against the pessimists who foresee only U.S. decline -- and it will also be better for U.S. finances.
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