The constant drumbeat from the Great and Good on all parts of the political spectrum is: Get an education! Get as much as you can, go as far as you can, the highest degree you can possibly attain, if you want any hope of success in the modern economy. As far back as records go, college graduates have made more money than the non-degreed, experienced less unemployment, and have been better off in every way.
So whenever there is high unemployment, every pundit of note shouts with one voice about the important of retraining; the only topic of debate is how that can best be accomplished.
As the first article in this series discussed, education has now become as important on the factory floor as in a white-collar office. It's no longer possible to start as a minimum-wage entry-level factory grunt and work your way up to engineer, or even to skilled machine operator; the important machines are simply too complex and expensive for on-the-job training. Specialized, full-time, years-long schooling is required with a heavy emphasis on math.
As we know all too well, Americans are simply not getting the training they need, so we don't have the depth of worker knowledge for a full-on manufacturing economy anymore. Apple's late CEO, Steve Jobs, made this bluntly clear to no less than President Barack Obama:
Mr. Jobs’s reply was unambiguous. “Those jobs aren’t coming back,” he said, according to another dinner guest.
The president’s question touched upon a central conviction at Apple. It isn’t just that workers are cheaper abroad. Rather, Apple’s executives believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that “Made in the U.S.A.” is no longer a viable option for most Apple products.
Everyone knows that the Chinese work cheaper than Americans, but that's not the problem - Chinese salary levels are growing enormously and will catch up with us before too many years pass. The problem isn't that Chinese workers are cheaper, it's that they know a lot more than our workers know.
So how can we solve this? The New York Times, predictably, emphasized the same solution they prefer for every problem of every sort and magnitude: more government intervention.
At dinner, for instance, the executives had suggested that the government should reform visa programs to help companies hire foreign engineers. Some had urged the president to give companies a “tax holiday” so they could bring back overseas profits which, they argued, would be used to create work. Mr. Jobs even suggested it might be possible, someday, to locate some of Apple’s skilled manufacturing in the United States if the government helped train more American engineers.
Importing foreign engineers might technically keep the jobs "in America" and produce tax revenue for the IRS, but it doesn't exactly give jobs to Americans. We're always in favor of tax holidays or, better, permanent tax cuts, but they wouldn't be much help if there aren't enough trained Americans available to staff new factories. No, government-paid engineering training has the ring of an idea whose time has come.
Indeed, that's how it's done around the world. China is well-known for its massively multiplying engineering schools, most of which charge a fraction of American tuition or nothing at all. The resulting quality may be questionable at times, but if the "Chinese way" works for manufacturing complex Apple products in huge volume, it can work for anyone.
Germany and several other countries in Europe do the same thing in a different way. Where in America the exhortation for all high-schoolers is "go to college," Germany promotes a vocational-technical and apprenticeship track, except that the students themselves don't usually have to pay for the training.
Unfortunately, as well as that worked in the past, it's having problems now. BusinessWeek reports:
Although apprentices in lower-skilled trades can serve as cheap labor, they are often an expense to their employers in the short term. Siemens spends about $220 million a year training Azubis, some of whom earn as much as $1,500 a month. The company estimates that the productive work done by the trainees equals only about one-third their cost. Siemens, which offers almost all its apprentices full-time jobs, recoups the investment only later...
At the same time, some industries take on too many apprentices. Hair salons, for example, can profit from the cheap labor that trainees provide. So they tend to train more hairdressers than the market can absorb.
Here we have an interesting comparison with American university education: There are a whole lot more people with degrees in Art History, Diversity, Philosophy and so on than there is need for art historians, diversity consultants, or philosophers. That's why we find degreed graduates working off their student loans at Starbucks, a job which doesn't even really need a high-school diploma. Yet you the taxpayer underwrote at least part of the cost of this useless education, just as the German taxpayer helped pay to train all those excess hairdressers.
In fact, by trying to control the "market" for education, governments have simply provided a repeat demonstration of what we thought the Soviet Union conclusively proved: It doesn't work. Where once the Soviets had warehouses filled with excess pencils while people stood in line for hours to buy shoes because some bureaucrat had got the assigned production numbers wrong, we now have too many trained these and not enough trained those.
There is a functional market in education. It's found primarily at community and private colleges where students generally pay their own way with their own money. They choose courses because they fully expect to make the money back in increased wages later on.
So let's sum up: Our current education system is failing in even more ways than we already knew. Government intervention simply makes the problem worse; government subsidy of student loans merely allows students to pile on more debt than they can ever repay; government funding merely produces individuals with worthless and useless degrees that benefit them not at all, at vast expense to the taxpayer.
On the other hand, personal and private provision of education suffers from many of the same problems and offers no guarantee of gainful employment. Is there any other path?
There is, and we'll examine it in the next article in this series.