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AUTHOR Reich, Robert B.TITLE Education and the Next Economy.INSTITUTION National Education Association, Washington, D.C.PUB DATE Apr 88NOTE 28p.

PUB TYPE Viewpoints (12C)

EDRS PRICE MF01/PCO2 Plus Postage.DESCRIPTORS *Economic Climate; Economic Development; Economic

Factors; *Economic Impact; Educational Economics;Educational Trends; Elementary Secondary Education;Futures (of Society); International Trade;Organizational Development; *Productivity;Socioeconomic Influences

ABSTRACTThe features of a mass production -based economy are

traced and contrasted within a competitive global marketplace in thispolitical-economic analysis. The early reform movement's equation of"more" with "better" is no longer appropriate to meet the humanresource needs of a Lation undergoing profound economic changes.Older industrial economies such as the United States have twooptions: stabilize mass production by cutting costs, or increase thevalue of labor. Each path requires a different organization of workand type of work force. Tne second path relies on a work forcecapable of rapid learning in order to compete successfully in theworld market. To prepare the nation's labor force, American educationfaces four challenges: (1) improve basic literacy and numeracyskills; (2) promote collaboration between specialized disciplines;(1) encourage teacher and student responsibility; and (4) avoidfragmentation of elite/less privileged groups. (22 references)(LMI)

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Education and the Next Economy,by Robert B. Reich April len

Robert Reich, political economist, traces the fundamental features of an economy based onmass production and contrasts It with a competitive economy within the global marketplace.He stresses the Importance of basic numerical skills, literacy, critical thinking, andcollaboration among workers in increasing the ability of the labor force to competesuccessfully. Education and the NEA, he suggests, have major roles to play in enhancing thevalue of the U.S. labor force. 28 pp.

EDUCATIONAND TIE

NEXT ECONOMYROBERT B. REICH

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NATIONAL EDUCATION ASSOCIATION

PROFESSIONAL AND ORGANIZATIONAL DEVELOPMENT/RESEARCH DIVISION

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Additional copies may be ordered from the NEA ProfessionalLibrary, P.O. Box 509, West Haven, CT 06516.

Reproduction: No part of this report may be reproduced in anyform without permission from NEA Research, except by NEA-affiliated associations. Any reproduction of the report materialsmust include the usual credit line. Address communications toEditor, NEA Research.

National Education Association1201 Sixteenth Street, N.W.Washington, D.C. 20036

Copyright © 1988

National Education Association of the United States

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Contents

Foreword 5

Introduction 7

The Current Mess 9

Work in the Old Economy 11

Enter the Global Economy 13

The Organization of Work: Two Paths to the Next Economy 15

The New Educational Challenge 17

Basic Numeracy and Literacy 19

Responsibility 21

Collaboration 23

The Danger of Fragmentation 25

Notes 27

Foreword

Since the 1983 publication of A Nation at Risk, pro-posals to reform public education have been ushered inat a breathtaking pace. Often composed with more ofan eye to their political appeal than to their capacity topromote meaningful change, many of these early reformproposals can be summed up in a single word, moremore mathematics, more science, more grammar, moretime spent in school. According to reformers, morewould eventually translate into higherhigher testscores, higher graduation rates, higher literacy rates.

While many of the early goals of education reform (ifnot necessarily the means of attaining them) appeareddesirable, simply to wish for more seemed inadequate.Within the NEA, there exists a strong perception thateducation needs to be different as well as enhanced. Thebasis of this perception is to be found to a certain extentin the profound economic changes that lie ahead for ournation. With intensifying global economic competitionand a national economy increasingly oriented towardservices and information, the work force will have topossess higher-order thinking skills and be able to workcooperatively, in addition to being both literate andnumerate. An education system that developed inresponse to the need to prepare large numbers of peoplefor routinized jobs in American industry does not nowhold much promise for meeting that challenge.

Much has been written about the emerging economyand the significant advantages of new forms of workorganization. However, we discovered that little seriousscholarship existed on how education might be mostprofitably restructured in order to meet the humanresource needs of this new economy. The National Edu-

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cation Association asked Robert B. Reich, a noted politi-cal economist and the author of major works concernedwith the organization of the American economy, to helpus chart a course in this largely unexplored territory.Education and the Next Economy is the product of thatrequest.

This essay traces the fundamental features of the oldeconomy based on mass production and contrasts it withthe type of economy we will need to compete in, withinthe global marketplace. We are shown in vivid termshow the education system that supports an economybased on mass production will prove to be inadequate insupporting what Professor Reich terms the "next econ-omy." In order to address our future economic needs,Mr. Reich develops a provocative series of themes for thefuture of public education that point to some of thecritical areas of development.

We can no longer afford to presume that politicallyexpedient solutions will be sufficient to meet thedemands of tomorrow. In this pathbreaking work, Mr.Reich instructs us on how we as an organization and aseducators might contribute to creating a healthy andequitable national economy. At the same time, it is aninvitation to members of the business and political com-munities, who are concerned with the critical relation-ship between education and the economy, to share theirperceptions and ideas with us as we move into the nextera of American education. Just as the next economywill require higher levels of cooperation, so also will thework we will have to do in order to bring it about. If weare to make changes on the order that this work por-tends, it will have to be a cooperative effort.

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April 1988

Introduction

What kind of education will Americans need in theemerging economy? The conventional view is thatAmericans will need more and better education, butthere is surprisingly little agreement about what moreand better actually mean. The answer should not de-pend on occupational projectionsthat is, on estimatesabout which jobs are likely to be plentiful should theeconomy continue in the direction it is now movingfor that direction is toward a continuing decline in theliving standard of most Americans. We first need todefine where we want our economy to go, and then askwhat kind of education will help to propel us in thatdirection.

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The purpose of this essay is to explore where theeconomy is heading, where it should be heading, andwhat education can and should contribute. Its modestgoal is to provide a framework for continuing discussionabout these vital matters. By focusing on the relation-ship between education and the next economy, I do notmean to suggest that education's only, or most impor-tant, purpose is economic. To the contrary: A truly edu-cated person is motivated by, and can find satisfactionin, a wide array of things that are not traded in marketsor that cost very little. A just and democratic societydepends on a citizenry educated in civic responsibilityrather than in economic aggrandizement.'

The Current Mess

THE STOCK MARKET crashed on October 19, 1987,

but the deterioration of the American economyhad begun long before. America has been busy

consuming more than it has produced. In 1986, forexample, the nation generated some $800 billion morein goods and services than it had in the recession year of1982, but it spent about $900 billion more.

We have been able to ignore this profligacy onlybecause foreigners have kept lending us money, buyingour corporations, and purchasing our real estate. By thetime of the crash, we were $350 billion in debt, almostone-half of the commercial real estate of downtown LosAngeles (among many other cities) was in foreignhands, and foreign creditors were growing sufficientlynervous about our ability to repay our debts that thedollar was heading downward.

A nation living beyond its means faces precisely thesame choice as a person living in the same mannereither it may grow poorer, or it may improve its meansby becoming more productive. America has been exer-cising the first option. The steadily declining dollar hasrendered more expensive everything we purchase fromabroad; in most families, two wage-earners are necessaryto make ends meet, whereas years ago one would do;average family size is shrinking; young peo le are hav-ing difficulty affording houses nearly as nice as thehomes they grew up in; for the first time since the 1930sthe percentage of Americans who ow.: their own homesis declining; over one-fifth of our children are now borninto poverty. The average American family is no betteroff today than it was fifteen years ago, even thoughAmerica is now living off borrowed funds. Were the

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borrowing to stop, our standard of living would fallprecipitously.

As the present work force matures, moreover, the firstoption (to grow poorer) becomes ever more likely. Thenumber of American young people is declining whileretirees are increasing. By the year 2030, when the pro-portion of our population 65 years of age and older willnearly have doubled from what it is now, the number ofworkers supporting each retiree will have dropped from3.3 to a bit over 2. Unless each remaining workerbecomes far more productive than now (or unless retir-ees continue to work long after retirement age, or unlesswe allow into America large numbers of new immi-grants), our average citizen will have to get by on amuch smaller income.

The second option (becoming more productive) hasbeen pursued less vigorously. Our indebtedness to therest of the world would not be alarming were the pro-ceeds invested in our future productivity, but such hasnot been the case. Net investment in plant and equip-ment, as a percentage of gross nations! product, hasbeen no higher in the 1980s than in the perilous 1970s,supply-side predictions to the contrary notwithstanding.Meanwhile, public investments have lagged. Govern-ment spending on commercial research and develop-ment has declined 95 percent from its level two decadesago; even when added to private-sector research anddevelopment, the total is still less than 2 percent ofGNP, lower than comparable research and developmentexpenditures in all other advanced industrial nations.Spending to upgrade and expand the nation's infra-structurethe roads, bridges, ports, tunnels, and corn-

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munications facilities through which our commercetravelshas dropped from 2.3 percent of GNP twodecades ago to 0.4 percent today. Federal support foreducation, job-training, and preschool care has declinedas well.

Thus, while manufacturing productivity has risenslightly as a result of advances in automation and effortsat cutting costs, overall productivity gains, weigheddown by slow or negative gains in the increasinglyimportant service sector, have dropped to only 1 percenta year, from over 3 percent a decade before. In the lasttwo years, even a declining dollar has barely helpedAmerican producers regain market share from foreignerswho continue to supply world markets with relativelycheap, high-quality goods. At this rate the dollar will

have to drop significantly lower if the trade balance is tobe restored.

Most of the panaceas now being offered by politiciansand business leaders are alternative means of growingpoorerfor example, allowing the dollar to continue tofall, cutting wages, reducing environmental and safetyregulations, slashing weffare expenditures, protectingAmerican goods from foreign competition, and evenbringing o-i a rzt-Pssion. These strategies impose the bur-den of becoming poorer on different groups of citizensover slightly different periods of time, but their overalleffects are much the same. There is no secret to becom-ing poorer. To repeat: The only becoming-richer strat-egy is to become more productiveadding ever-greatervalue to the world economy.

Work in the Old Economy

pRODUCTIVITY, HOWEVER, IS no longer simply a

matter of making more of what we already makeat less cost per unit. To add greater value to the

world economy, we have to provide highcr qualitygoods, and tailor our products and services to the partic-ular needs of consumers. This is a new challenge, entail-ing a very different organization of work.

In the early postwar years, most young people couldlook forward to jobs requiring only that they be able tolearn some relatively simple tasks that could be repeat-ed, over and over. That's because the American econo-my was organized around economies of scale. The goalwas high-volume, standardized production in whichlarge numbers of identical items could be produced overlong runs, allowing fixed costs to be spread as widely aspossible. Whether it was wheat, steel, or even insurance,the same overarching rule prevailed: Every step alongthe production process was to be simple and predict-able, so that it could be synchronized with every otherstep. Productivity was a function of high volume andlow cost.

There was little room or need for innovation. Once ina while someone came up with a major inventione.g.,continuous casters for making steel, automobile stamp-ing machines, plasticsbut these big breakthroughswere relatively few and fat hetween. Indeed, innovationoften was seen as a prob.= rather than as a solution.Innovation meant change; in products and productionprocesses, and such changes cost motley. If the changeshappened too often, it was difficult to achieve the econ-omies of scale necessary to pay for them and still make aprofit.

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Sometimes competitors quietly agreed not to inno-vate very much for fear of rocking the profitable boat.These were the days when most industries were domi-nated by a few large companies the Big Three auto-makers, a handful of steel producers, three or fourmajor food processorswho roughly coordinated pricesand investments in order to achieve the kind I stabilityand predictability necessary for vast economies of scale.The tailfins on our cars grew longer, but underneath thehoods the autos remained about the same year afteryear, and it didn't matter very much which brand youbought.2

Under high-volume, standardized production, a fewpeople at the top made all the decisions. They designedthe system and planned all the standard operating pro-cedures by which it would run. Most peop.e followedorders. Indeed, for the production system to be stableand predictable, the majority had to follow ordersexactly. Rigid work rules and job classifications posed nochallenge to this hierarchical system, because every jobwas rigid to begin withlike cogs in a wheel.

A primary goal of public education within this stablesystem was to prepare most young people for such"cog" jobs. They had to be trained to comprehend andaccept instructions, and then to implement them consci-entiously. Discipline and reliability were core virtues

A much smaller number of young people had to beprepared to act as decision makers at the top. Theyneeded to be trained to gather information, translatethe information into abstract symbols, manipulate thesymbols to find answers, turn the answers into operatinginstructions, and then communicate the instructions

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downward. Here, abstract logic, clarity, and firmnesswere the core virtues.

Our schools were reasonably effective at preparingAmericans for these two kinds of jobs. Most childrengraduated from high school or vocational school ready

to accept cog jobs. A few were set on an advanced tackthrough high school and into colleges that preparedthem either for careers as professional managers or fo;the related professions of law, banking, engineering,and consulting. Productivity soared.3

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Enter the Global Economy

HIGH-VOLUME, STANDARDIZED production canno longer provide the productivity gains weneed to maintain our standard of living. There

has been a sea change in the world economy. Beginningin the 1960s and continuing to the present day, the costof sending things or information around the globe hasfallen dramatically. This is a result, principally, of rapidadvances in the technologies of transporting and com-menicatingof innovations such as container ships,satellites, and computers that allowed the productionprocess to be fragmented and parceled out around theglobe to wherever pieces of it could be undertaken mostcheaply and efficiently. Until recently most goods wereproduced close to where they were to be consumed; themain exceptions were certain minerals, agriculturalgoods, and economically unimportant exotica. This pat-tern has been breaking down at an increasing pace.Consumers of cars, refrigerators, televisions and televi-sion programs, insurance policies, and even money, of-ten live in different nations or on different continentsfrom the producers. The producers, in turn, often de-?end on far-distant sources for components, designs,and information. It is now often cheaper to ship rawsteel across an ocean than across the United States.Slight differences in interest rates may induce a NewYork corporation to raise money in Tokyo or in Bonninstead of on Wall Street.

Two decades ago international trade hardly figured inthe American market; today, more Lhan 70 percent ofthe goods we produce are actively competing withforeign-made goods. Whoever can do it best and cheap-

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est, anywhere in the world, now sells to whoever is will-ing to pay the best price, anywhere in the world. Theelegant curves of supply and demand that so charmeconomists are meeting up in the oddest of places.

In world where routine production is footloose andbillions of potential workers are ready to underbidAmerican labor, we can no longer expect to be competi-tive by simply producing more of the same thing weproduced before, at lower cost. As the production ofcommodities shifts to other nations, America's competi-tive advantage correspondingly must shift toward workwhose value is based more on quality, flexibility, preci-sion, and specialization than on its low cost. For exam-ple, only a small fraction of the American work force isstill employed on the farm. But the food industry never-theless accounts for close to one-quarter of the jobs inthe United States. That's because most of what Ameri-cans and consumers in other advanced nations nowspend for food goes to the people who process, package,market, and retail it, and to the agricultural epidemiol-ogists, geneticists, international bankers, commoditytraders, chemists, and process engineers who supply thetechnology and money for producing it, rather than tothose who actually grow and harvest it. Similarly, mostof what is spent on appliances, clothing, cars, comput-ers, air travel, or a host of other things is for designing,engineering, fabricating, and advertising, rather thanfor standardized, routine work. In fact, much of thegrowth in what has been termed services within theAmerican economy is attributable to just suchbusinesses.

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Nor can we hope to be competitive by relying, asbefore, on major inventions that occur from time totime. These days, breakthrough inventions get away.Americans continue to lead the worlci in big break-throughs and cutting-edge scientific discoveries. But thebig ideas that start in this country now quickly travelabroad, where they get prockced at high speed, at lowcost, and with great efficiency. All too often, Americansget bogged down somewhere between invention andproduction. We fail to incorporate new ideas into ourproducts and processes nearly as fast as we should. Sev-eral product histories make the point. Americans invent-ed the solid-state transistor in 1947. Then in 1953,Western Electric licensed the technology to Sony for$25,000and the rest is history. A few years later, RCAlicensed seNzral Japanese companies to make color televi-sionsand that was the beginning of the end of colortelevision production in the United States. Routineassembly of color televisions eventually shifted toTaiwan and Mexico. Americans came up with video re-corders. basic oxygen furnaces, microwave ovens, andcomputerized machine tools. But these big ideas andmany others found their way into routine, standardizedproduction in other nations.'

Keeping a technology requires elaborating upon itcontinuously, developing variations and smal' improve-ments in it that better meet particular needs. Whereinnovation is continuous, and products are ever morersiiczed to customers' needs, the distinction betweengoods i'nd serv.ces further blurs. Thus when robots andcomputerized machine tools are linked through software

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that allows them to perform unique tasks, customer ser-vice becows a part of productien. When a new alloy ismolded to be a specified weight and tolerance, serviceaccounts for a significant part of the value added.

Reports that American workers can no longer com-pete in manufacturing and must shift to services arethus only half right. More precisely, they can ketep highwages only by producing goods with a large componentof specHized services, or to state the same thing differ-ently, by providing services integral to the productionand use of specific goods. There is no longer any mean-ingful distinction between the two categories, goods andse, ices.

The point is this: In the new global economy, nearlyeveryone has access to big breakthroughs and to themachines and money to turn them into standardizedproducts at about the same time, and on roughly thesame terms. The only factor of production that is rela-tively immobile internationally, and on which thefuture standard of living of the nation uniquelydepends, is 10-011: competence, our insights, ourcapacity to work productively together.

The older industrial economies like America thushave two options: (1) they can try to match the wagesfor which workers elsewhere are willing to labor, or (2)they can compece on the basis of how quickly and howwell they on transform ideas into incrementally bettergoods and services. Both paths can boost profits andimprove competitiveness in the short run, but only thesecond can maintain and improve the standard of livingof most Americans ovet ime.

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The Organization of Work:Two Paths to the

Next Economy

THE FIRST PATHtoward stable mass produc-tionrelies on cutting labor costs, and leapinginto wholly new product lines as old ones are

played out. For managers this path has meant undertak-ing (or threatening) massive layoffs, moving (or threat-ening to move) to lower-wage states and countries, par-celing out work to lower-cost suppliers, automating tocut totql employment, and diversifying into radicallydifferent goods and services. For workers this path hasmeant defending existing jobs and pay scales, grudging-ly conceding lower wages and benefits, shifting burdensby accepting lower-pay scales for newly hired workers,seeking protection from foreign competition, and occa-sionally striking.

The second path involves increasing labor's value. Formanagers this path means continuously retraining em-ployees for more complex tasks, automating in ways thatcut routine tasks and enhance worker flexibility and cre-ativity, diffusing responsibility for innovation, takingseriously labor's concern for job security and givingworkers a stake in improved productivity via profit-linked bonuses and stock plans. For workers this secondpath means accepting flexible job classifications andwork rules, agreeing to wage rates linked to profits andproductivity improvements, and generally taking greaterresponsibility for the soundness and efficiency of theenterprise. The second path also involves a close andmore permanent relatIonship with othe. parties thathave a stake in the fi:msuppliers, dealers, crtditors,

even the towns and cities in which the firm resides. Onthis second path, all those associated with the firmbecome partners in it! future, sharing downside risksand upside benefits. Each member of the enterprise par-ticipates in its evolution. All have a commitment to itscontinued success.

The second path requires a fundamentally differentorganization of work from that which has come before,as well as a different work force within that new organi-zation. The old hierarchical arrangement in which a rel-atively few well-trained individuals planned and main-tained the production system from the top, and almosteveryone else undertook cog jobs below, is not up to thechallenge. The technologies upon which we must con-tinuously improve, and the tastes to which we must con-tinuously respond, are changing so rapidly that no set ofdecision makers at the top can hope to keep up. Muchof the relevant information lies belowamong produc-tion workers, production engineers, sales people andothers in direct contact with suppliers, production pro-cesses, and customers. There is not enough time for allthe relevant information to be passed upward to the topdecision makers and then down again in the form ofnew operating instructions. With valuable informationand expertise dispersed throughout the organization,top managers cannot hope to solve problems and pro-vide answers; their jobs must Lc to create environmentsin which people can identify and solve problems forthemselves.

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Thus the division between workers and managers willblur. Because production is a continuous process of rein-vention, efforts will focus on many thousands of smallideas rather than on just a few big ones. Small-scaleinnovations will occur everywhere in the organizationand must occur quickly and continuously, in response tochanging opportunities. One idea should lead to anoth-er. Producing the latest generation of automobilesinvolves making electronic circuits that govern fuelconsumption and monitor engine performance; devel-opments in these devices might lead to improved sens-ing equipment and software for monitoring heartbeatsand moisture in the air. Producing cars also involvesmaking flexible robots for assembling parts and linkingthem by computer; steady improvements in these tech-nologies, in turn, may lead to expert production systemsthat can be applied anywhere. What is considered to bean "automobile manufacturer" thus is transmuted intoa broad collection of skills evolving toward all sorts ofapplications that flow from the same strand of techno-logical development.

Ideally, individual skills are integrated into a group;this collective capacity to innovate becomes somethinggreater than the sum of its parts. Over time, as groupmembers work through various problems and approach-es, they learn about each others' abilities. They learnhow they can help one another perform better, whateach can contribute to a particular project, and how theycan best take advantage of one another's experience.Each participant is on the lookout for small adjustmentsthat will speed and smooth the evolution of the whole.The net result of many such small-scale adaptations,

effected throughout the organization, is to propel theenterprise forward.

Workers also learn how they can better meet custom-ers' needs: Sales people no longer simply "sell" goodsand services. They help customers clarify and redefinewhat they need, and devise new solutions based uponwhat the firm might potentially provide. Thus sales peo-ple must have a complete understanding of the enter-prise's capacity to design and deliver specialized prod-ucts; and designers and engineers must be equallyfamiliar with sales and marketing. In short, the firm'sability to adapt to new opportunities and capitalize onthem depends on the capacities of all of its employees toshare information and involve themselves in a system-wide search for ways to improve, adjust, adapt, andupgrade.

As workers add value through judgment and knowl-edge, computers become tools that expand their discre-tion rather than further simplify their jobs. Computer-generated information can give workers rich feedbackabout their own efforts, how they affect others in theproduction process, and how the entire process can beimproved. One of the key lessons to emerge from theGeneral MotorsToyota joint venture in California isthat the Japanese automaker does not rely on automa-tion and technology to replace workers in the plant. Infact, human workers still occupy the most critical jobsthose where judgment and evaluation are essential. In-stead, Toyota uses technology to allow workers to focuson those important tasks where choices have to bemade. Under this approach, technology gives workersthe chance to use their imagination and their insight onbehalf of the company.

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The NewEducational Challenge

HE SECOND PATH to the next economy increas-ing the value of labor rather than cutting itscostsrelies, abGve all, on a work force capable

of rapid learning. The most important skills will betransferred informally among workers as they gain expe-rience on the job, rather than gleaned through formaleducation and training. But the ability to learn on thejob will depend on learning skills and attitudes devel-oped long before.

The old system of education mirrored the old organi-zation of production: Most people spent eight to twelveyears of their childhood training for cog jobs, while afew were propelled toward top policy and planning posi-tions. The new system must prepare far more people totake responsibility for their continuing education, andto collaborate with one another so that their combinedskills and insights add up to something snore than thesum of their individual contributions.

Today's education is different from what it was twoor three decades ago, of course. We sum tly spend moreon educationabout 8300 billion in 19F8 alone, whichis almost 7 percent of our to-al annual output of goodsand services, or about the same amount of money wespend on national defense.5 Between the early 1950sand the mid-1980s, per pupil expenditures in Americanpublic schools tripled, as measured in constant dollars(although they have hardly increased at all since then).6

And we are getting a lot more education than before:Over 57 million of us are formally enrolled in schoolsand colleges, with millions more in job training and less

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formal educational activities. Three-quarters of ouradults have completed high school; over 86 percent ofyounger adults in their twenties have done sotwice thepercentage of 1940. Six out of ten of our high school

graduates begin some form of more advanced educa-tion, and one-quarter of our younger adults have com-pleted four years of college 'ip from 12 percent asrecently as 1960.7

The quality of public education also has changed,particularly over the last several years. In 1983, theNational Commission on Excellence in Educationreported that American schools were failing to educate(23 million adults and 13 percent of our 17-year-oldswere functionally illiterate); they compared badly withthose of our trade competitors (our children came in lastin 7 out of 19 academic tests, first or second in none);and they failed to teach our children the basics of Amer-ican history and culture." In response to this report andto others that followed, broad reforms have been initiat-ed: All but five states have raised the minimum require-ment for graduation from high school. Most states havealso bolstered math and science curricula. Two dozenstates, mainly in the South, have inaugurated compre-hensive educational reforms including tightened stan-dards, more academic discipline, and higher teacher sal-aries.9 Forty states now have programs in technologicaleducation; New York even requires all junior highschool students to take a year of introductory technol-ogy.10 Efforts have been made to reduce truancy anddropout rates, introduce computer literacy and foreign

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languages in the early years, establish after-school pro-grams, require more basic academic courses for a highschool diploma, extend the school year, and enhancejob-readiness programs.

There have been modest gains. Although, as we shallsee, standardized examinations are questionable criteriaof success, they offer useful comparisons. In South Caro-lina, which in 1984 enacted one of the most comprehen-sive reforms, average Scholastic Aptitude Test scoreshave risen by 36 points. In Florida, where the highschool clay has been lengthened, SAT scores have in-creased modestly over the same period. In New York,which also imposed more stringent academic require-ments, scores on the Pupil Evaluation Performance testfor third graders rose from 77 to 79 percent. In Califor-

nia, the number of students taking three or more yearsel mathematics has increased by 15 percent and ofscience by 20 percent."

But the task has just begun. The gains so far havebeen small. Education is so central to our place in thenew world economy that we will have to do a betterjobparticularly in two respects: helping all our chil-dren to become minimally numerate and literate, andpreparing them for jobs involving responsibility and col-laboration. The challenge is not simply or even most im-portandy to provide our children with more education,but to provide them with a different kind of educationfounded upon new premises about the world they willmeet in the future.

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Basic Numeracyand Literacy

ALTHOUGH A HIGHER proportion of our young

people are better prepared for productive livesthan ever before, the worst-prepared third of

our young peopledisproportionately lower income - -

are almost totally unprepared. They cannot do simplecalculations, understand written directions, or read roadsigns, charts and maps." And they often lack certainbasic information about history, literature, geography,and the natural sciences."

These deficiencies are already affecting Americanbusiness. When the New York Telephone Companyundertook a large-scale recruiting effort in 1987, forexample, it found that over 80 percent of its New YorkCity applicants failed entry-level examinations in basicreading and reasoning skills. Some 1,700 of Polaroid'semployeesabout one-third of the firm's hourly workforceare enrolled in a company program teachingthem elementary reading and writing. All told, one ofthree American corporations now provides some form ofbasic skills training for its employees. The AmericanSociety for Training ,,nd Development Study predictsthat American indust:v will have to sptnd as much as$25 billion yearly on remedial educatiot:.

Perhaps we are too impatientmaybe the reformsneed more time to take hold. Or perhaps they are inad-equate to the task of dealing with all the problems thataccompany poverty and broken homes. Twenty-two per-

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cent of our children are now born into poverty, up from15 percent in 1970, and it is projected that 60 percent oftoday's 3-year-olds will live in a single-parent homebefore they turn 18.

Or it may be that formal schooling comes too late inthe lives of our neediest children, by which time learn-ing habits and attitudes are already firmly established.While there is overwhelming evidence that preschoolprograms designed to develop the intellectual and social

skills of poor children have large payoffs later on, lessthan one-half of 1 percent of our national spending oneducation goes to children under the age of six." Orperhaps the reforms have backfired upon the neediest:Stricter promotion and graduation requirements mayhave prompted more of them to drop out. In many ofour largest cities, nearly half fail to graduate. Forty per-cent of Florida's students drop out, as do almost half ofLouisiana's. Overall, between 15 and 25 percent of ouryoung people never finish high school."

Whatever the cause, raising the lowest achievers tominimal levels of productive competence is a large partof the challenge of American education in the nexteconomy. Not only do we need a larger population ofproductive people to help pay off our internationaldebt, but we also need them to support a growing pop-ulation of retirees.

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Responsibility

ACHIEVING BASIC NUMERACY and literacy is only

part of the challenge. If our economy is totransform itselfif we are to take the second

path, toward higher-value productionwe can no long-er train the majority of our young people for cog jobsrequiring primarily discipline and reliability. They mustbe prepared to take advantage of whatever opportunitiespresent themselves for improvements in product andprocess. To recognize such opportunities, they must beeducated to think critically and to continually learn onthe basis of new data and experience.

In some respects, the training of young people in theold economy resembled the system of high-volume,standardized production in which they were to take partwhen their training was complete: Responsibility wasexercised by a very few, at the top. The majority of stu-dents were pushed, as if on an assembly line, through apreestablished sequence of steps. Each step involvedparticular routines and practices. Teachersthe produc-tion workershad little discretion over what they had todo to each batch that passed through; students passivelyreceived whatever was doled out. Inspectors tried toweed out the defects, sometimes returning them to anearlier step for reworking. Most got to the end of theassembly line, more or less ready to take their placesalong real assembly lines somewhere in the economy.

The premises of education in the next economy mustbe quite different. Just as productivity can no longer hea matter of making more of what we already make atless cost per unit, productivity in education cannot besolely a function of the numbers of children who passstandardized examinations at a lower cost per unit.

Because our future economy will depend to an evergreater extent on thinking rather than repeating learnedinformation, future reforms must motivate teachers andstudents alike to love learning, and not prescribe tothem exactly what should be learned and how and whenthe information should be doled out. Responsibilitymust be pushed downward, to students and teachers.They must be allowed and encouraged to take more ini-tiative in deciding what is learned, and when and how itis learned. Education modeled around long lists of factsthat "every adult should know" and standardized testswill produce robots adept at Trivial Pursuit but unableto think for themselves or to innovate for the future.

First, instead of giving students information along apreestablished sequence of steps, and then asking themto "play back" the information on tests, the emphasisin teaching should be on educating young people to for-mulate problems and questions for themselves. Thus,rather than teach students to assume that problems andsolutions are generated by others (as they were underhigh-volume, standardized production), students shouldbe taught to understand that problems and questionsare created, that students can have an active role increating them, and that such critical and creativeapproaches can guide them through their careers.16

Second, instead of teaching through repetition anddrill, the emphasis should be on allowing students toexperiment for themselves with solving the problemsthey help define. Thus, rather than conveying particularpieces of information or imposing established routinesa type of teaching and learning relevant to high-volume,standardized productionteachers must help students

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gain the experience of working through problems, andthus discovering underlying principles that help defineand solve related problems.

The difference between absorbing information andgaining understanding depends on how much responsi-bility students are taught to accept for their own con-tinuing leardmg. It is like the difference between learn-ing how to get from one location to another in a city byhaving someone drive you or by driving yourself with aguide sitting beside. In the first instance you may even-tually learn the way, but you probably will learn soonerby being in the driver's seat. Indeed, if your guide alsoallows you to experiment a bit, warning you only whenyou're going down blind alleys or heading in the wrongdirection, you may gain even more understanding of theterrain, and thus learn how to find other places aswel1.17

An understanding of underlying principles and pat-terns allows discovery of other information, and gives

that new information added context and meaning. Thenew information, in turn, permits deeper insight intothe principles and patterns. As Michael Polanyi haswritten, IN* cannot comprehend the whole withoutseeing its parts, but we cannot see the parts withoutcomprehending the whole.''

The habits and techniques of experimentationof it-erative discovery of parts and wholeswill be critical inthe next economy, where technologies, tastes, and mar-kets are likely to be in constant flux. Informal, on-the-job education will be a central aspect of work. Formaleducation and training will no longer be limited toyoung people, but will be available on a continuingbasis to workers throughout their working livesanaccepted and expected aspect of one's career. A workforce capable of taking responsibility for its own contin-uous learning will prove a more precious national assetthan countless new factories and equipment.

21)

Collaboration

SPECIALIZED SKILLS ALSO will be needed, of course.

More of our young people will have to be able tocommunicate in foreign languages (for every

American who now speaks Japanese, there are at leastten Japanese who speak English), and gain a workingknowledge of foreign nations and cultures. More ofthem will need advanced education in mathematics,science, and engineering. (Despite a growing need,fewer bachelor's degrees were awarded in science andengineering in 1987 than on average during the 1970s.)There will be a greater need for people who can crossdisciplinesfrom, say, physics to computer program-ming, from biology to Chinese language and culture.

But our culture has never had much difficulty educat-ing the most talented and fortunate fifth of our youngpeople to do complex intellectual tasks. Analyticallysophisticated students already graduate from our univer-sities, trained for narrow specialties in which theymanipulate symbols and concepts in wondcrous ways.We may want to change the mix somewhatmore engi-neers and foreign experts, fewer lawyers and financiersbut there is no fundamental problem mustering tal-ented people and getting them educated. The greaterchallenge is to transform the individual talents andspecialized skills of the top 20 percent into collectivecapacities broadly shared across American enterprise.

In the old economy, a relatively few people at the topcould analyze and plan the production process by them-selves. and then issue operating instructions to everyoneelse. So long as professional managers and their profes-sional aidesbankers, lawyers, accountants, and engi-neersgot it "right" on paper, it was assumed..that the

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rest would follow automatically. But paper professionalsare far less relevant to the future. As we have seen, theweakest link in the American economy is between ideasand implementation, between paper and product. Thusif our business enterprises are to be as flexible and inno-vative at all levels as they need to be, our youngstersmust be prepared to work with and through large num-bers of people. While there will always be a need for acertain number of solo practitioners, the more usualrequirement will be that combinations of individualskills are greater than their sums. Most of the importantwork will be done by groups, rather than by individualexperts.

Learning to collaborate suggests a different kind ofeducation than one designed to prepare a relatively fewtalented young people to become professional experts.Instead of emphasizing the quiet and solitary perfor-mance of specialized tasks, a greater emphasis should beplaced on interactive communications linked to groupproblem-definitions and solutions." Students shouldlearn to articulate, clarify, and then restate for oneanother how they determine questions and find answers.Rather than be *rained to communicate specialized in-structions and tcquestsskills relevant to high-volumestandardized productionstudents should learn how toshare their understandings, and build upon each others'insights."

Communication skills are only one aspect of collabo-ration. Young people also must be taught how to workconstructively together. Instead of emphasizing individ-ual achievement and competition, the emphasis in theclassroom should be on group performance. Students

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need to learn how to seek and accept criticism from theirpeers, to solicit he!p, and to give credit to whets, whereappropriate. They must also learn to negotiateto artic-ulate their own needs, to discern what others need andsee things from others' perspectives, and to discovermutually beneficial outcomes.

The "tracking" system, by which students aregrouped in the classroom according to the speed of theirlearning, is another vestige of high-volume, standard-ized productionthe deluxe models moving along adifferent conveyor belt from the economy cars. This maybe an efficient way to cram information into youngminds with differing capacities to absorb it; but trackingor grouping can also reduce young peoples' capacities to

learn from and collaborate with one another. Ratherthan separate fast learners from slow learners in theclassroom, all childvn (with only the most obviousexceptions) should remain together, so that class unityand cooperation are the norm. Faster learners wouldthus learn how to help the slower ones, while the slowerones would be pushed harder to make their besteffort.2'

In sum, it is not enough to produce a cadre of youngpeople with specialized skills. If our enterprises are to bethe scenes of collective entrepreneurshipas they mustbeexperts must have the ability to broadly share theirskills and transform them into organizational achieve-ment; and others must be prepared to learn from them.

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The Danger ofFragmentation

NUMERACY, LITERACY, RESPONSIBILITY, and col-

laboration: this is a tall order for public educa-tion. But it is a necessary one if we are to suc-

ceed in the world economy in coming years. It willrequire that we do in our schools what we must do inour business enterprises: push responsibility downwardtoward teachers and students; invite continuous, incre-mental innovation at all levels; foster collaborationamong parents, teachers, principals, community groups,and the private sector; and encourage flexibility.22

Meeting the challenge also requires that we investsubstantially in one another. We will have to pay moreto educate our childrenespecially to attract and retraintalented teachers to do the educating. Between 1987and 1993, American schools must recruit some 1.3 mil-lion new teachersover half of the current force.According to present trends, the labor market will notmeet this need. The choice will be either to lowerrecruitment standards or to raise teachers' salaries. Theformer choice will be far more costly to the nation thanthe latter. (It is worth noting in this regard that startingpay for Japanese school teachers exceeds that for anyother public servants in Japan, and is higher than orequal to that of engineers.) Teachers and educationaladministrators, in turn, will have to accept even moreaccountability.

We also will have to bear more of the cost of educat-ing our fellow citizens before and after their formalschooling. If our children are to be adequately preparedfor school, Head Start and other preschool programs forages 3 and 4, and day care for toddlers, must become

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the norm. If our older workers are to be adequatelyprepared for jobs that are continuously changing, theymust have easy access to retraining and continuingcducation.23

Do we have the will to make the needed investmentsand undertake the necessary changes? Much depends onthe extent to rhich we consider ourselves one peoplewhose fates are linked.

I have before emphasized our choice of path towardthe next economyeither cutting labor costs or increas-ing labor value. The first path will result in a lower stan-dard of living for most Americans; the second requiresthat we all sacrifice in the short term in order to reaplong-term gains. It should be noted, however, that thefates of our most talented and fortunate citizens are notnecessarily linked to the educational attainments of therest. The new world economy makes it possible for thetop fifth of our population to sell their expertise directlyin the global market, and thus maintain their standardof living and that of their children, even as that ofother Americans declines. Improvements in the technol-ogies of communications and transportation are facilitat-ing the development of global corporations, partner-ships, and consulting businesses that transcend theorganization of production within any single nation.The most talented and fortunate fifthsitting astridethese global businessesare thus losing any unique con-nection to the American economy.

There are signs that a two -tier society is already devel-oping. Increasingly, our largest cities are inhabited bypaper professionals at the toplawyers, financiers, con-

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sultarts, managersand by unskilled service workers atthe bottomsales clerks, fast-food employees, custodi-ans, hospital orderlies, cab drivers. Nationally, the gapappears to be widening. For 80 percent of Americanfamilies, the last decade was a time of declining realincome. But the wealthiest fifth of our population expe-rienced no decline. In fact, the richest tenth enjoyed anincrease of about 16 percent; the top twentieth, anincrease of 23 percent; and the real income of America'srichest 1 percent rose 50 percent." Since 1980 themedian incom: of a married couple, each of whom hashad five or mete years of education beyond high school,has risen to 561,130; the median income of a couple

with only high school degrees ha.:. risen more slowly, to$36,888. Since 1980 the bottom fifth of the income dis-tribution has lost, on average, one dollar out of every sixin earnings, while the top fifth has increased its share oftotal national income by 8 percent. 5

Without the active support of the most talented andfortunate fifth of our population, however, it will bedifficult to muster the political will necessary to changethe present direction. But unless we change, the gapbetween the top fifth and the rest of us will widen fur-ther; and most Americans will continue to grow poorer.Therein lies one of the sharpest dilemmas of our time.

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Notes

'"[H]owever deserving of attention may be the economical view ofthe subject which I have endeavored to present, yet it is one thatdwindles Into insignificance when compared to those loftier andmore sacred attributes of the cause." Horace Mann, Fifth AnnualReport of the Board of Education (Boston: Board of Education,1842).

'For a more detailed description of this stable production system,see my The Next American Frontier (New York. Penguin Books,1983).

'Almost one-fifth of the growth in net national product per workerbetween 1948 and 1973 was a result of increased education of thework force. See Edward Denison, The Interruption of Productiv-ity Growth in the United States," The Economic Journal 93(1983).

'See my "Entrepreneurship Reconsidered: The Team as Hero,"Harvard Business Review 65, no. 3 (May-June 1987).

'In 1987, about $184 billion Was spent for public and private ele-mentary and secondary schools, about $124 billion for colleges anduniversities. For these and related data, see Center for EducationalStatistics, U.S. Department of Education, Digest of EducationalStatistics 1986-1987 (Washington, D.C.: Government PrintingOffice); U.S. Bureau of the Census, Educational Attainment inthe United States, Current Population Reports, Series P-25(Washington, D.C.: the Bureau, various years).

'Between 1980 and 1986, states and local school districts intreasedtheir educational expenditures by about $4.2 billion. in constantdollars, while the federal government's contribution declined byapproximately the same amount. Digest of Educational Statistics1986-1987. See also, National Education Association, Estimates ofSchool Statistics, 1985-1986 (Washington, D.C.: the Association,1987).

'See U.S. Bureau of the Census, Educational Attainment in theUnited States, Current Population Reports (Washington, D C.:the Bureau, 1986, 1987).

'National Commission on Excellence in Education, A Nation atRisk (Washington, D.C.: U.S. Government Printing Office,1983).

'As recently as 1980, 10 of 15 states belonging to the SouthernRegional Education Board required no more than one year of highschool scienm Now every state requires at least two years, andseveral requite three.

'°"Reading, 'Riting, and 'Rithmetic and Now Technological Educa-tion," Business Week (October 19, 1987): 114.

"As reported in the New York Times, August 8, 1987, A14.

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"See, for example, Irwin S. Kirsch and Ann Jungeblut, Literacy:Profiles of America's Young Adults (Princeton Educational Test-ing Service, 1986).

"See, for example, Chester Finn, Jr and Diane Ravitch, What DoOur 17-Year-Olds Know? (New York: Harper & Row, 1987),Committee for Economic Development, Children in Need: Invest-ment Strategies for the Educationally Duadvantaged (New York:1987).

"The Committee for Economic Development, op cit., recommendsthat more emphasis be placed on preventing teenage pregnancy,providing better nutrition and medical care to poor pregnantwomen, giving them advice on parenting, providing better post-natal care for high-risk mothers, and making quality child care andpreschool programs more available. On the economic effects ofpreschool education, see, for example, J. R. Bareuta-Clement etal., Changed Lives: The Effects of the Perry Pre-School Program onYouths Through Age Nineteen (Ypsilanti, Mich. High/ScopePress, 1984).

"Only one in four finishes high school on schedule; there are noclear data on how many who do not finish on schedule finish lateron.

"A description of this method of teaching question-raising can befound in Marcia Heiman, "Learning to Learn: A BehavioralApproach to Improving Thinking." Paper presented at theHarvard Conference on Thinking, Cambridge, MISS , 1984.

"There is a rich literature on "experiential" learning. See, for exam-ple, D. A. Kolb, "On Management and the Learning Process," inOrganizational Psychology: A Book of Readings, 2d ed., edited byD. Kolb et al. (Englewood Cliffs, NJ : Prentice-Hall, 1974);Arthur Whimbey and Jack Lockhead, Problem Solving and Com-prehension (Philadelphia: Franklin Institute Press, 1982); LillianC. McDermott, "Helping Minority Students Succeed in Science,"Journal of College Science Teaching (January, March, and May1980).

"Michael Polanyi, The Study of Man (Chicago University of Chi-cago Press, 1958), 29.

"The emphasis in Japanese schools upon teamwork in the classroomis thought to explain Japan's low rates of absenteeism on the job,and its firms' quick responsiveness to new opportunities. See Ban -

jam in Duke, The Japanese School: Lessons for Industrial America(New York: Praeger, 1986)

"See generally, Ernest L. Boyer, "Reflecting on the Great Debate of'83," Phi Delta Kappan (March 1984), Boyer, High School (NewYork: Harper & Row, 1983).

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"Japanese children are not grouped or "tracked"; the assumption inthe Japanese classroom is that it is better for all the children tohave the class as a whole progress together. See Mary White, TheJapanese Educational Challenge: A Commitment to Children(New York: Free Press, 1987).

"See generally, Judith Little, "Norms of Collegiality and Experi-mentation: Workplace Conditions and School Success," AmencanEducational Research Journal 19, no. 3 (Fall 1982).

"The sacrifices we will be called on to make in the years ahead arenot only pecuniary, of course. We will have to spend more timewith our children and perhaps with other children as well It willbe necessary for us to work closely with our childrens' teachers andprincipals. We will need to join with other parents to ensure both

that the schools are meeting our expectations and that our chil-drens' lives outside of school are adequately stimulating andemotionally and physically secure

"Calculated from data supplied by the Congressional Budget Office,November 1987. See also Frank Levy, Dollars and Dreams: TheChanging Amencan Income Dumb:a:on (New York: Basic Books,1988). In 1969, a man three-quarters of the way up the incomeladder earned $28,659 (in 1984 dollars); a fellow worker at the25th percentile earned $8,981. The ratio between them was about3 to I. But in 1984, the ratio between them became 4 to 1

"Calculated from data from the U S Department of Labor, Bureauof Labor Statistics.

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Robert B. Reich

ROBERT B. REICH teaches courses in law, politicaleconomy. and public management at Harvard's John F.Kennedy School of Government. His current researchfocuses on the government's role in helping a nationaleconomy adjust to changes in world markets and on therelationships between law and industrial structure.While in government, Mr. Reich served as Director ofPolicy Planning for the Federal Trade Commission(1976-81); Assistant to the U.S. Solicitor General (197'-76); and law clerk to Judge Frank M. Coffin ChiefJudge of the U.S. Court of Appeals for the First Circuit(1973-74). As a Rhodes Scholar, Mr. Reich studied eco-nomics at Oxford University from 1968 to 1970; there-after he received his J.D. from Yale University.

Mr. Reich is the author of The Next American Fron-tier (1983) and Tales of a New America (1987), coauthorof Minding America's Business (1982) and New Deals:The Chrysler Revival and the American System (1985),and the editor of The Power of Public Ideas (1987).He has published numerous articles on regulation,economic policy, and public administration.

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National Education Assciation1201 Sixteenth Street, N.W.Washington, D.C. 20036