Arts United States. Congress. Senate. Committee on Labo.

Education's impact on economic competitiveness : hearing before the Subcommittee on Education, Arts, and Humanities of the Committee on Labor and Human Resources, United States Senate, One Hundred Fourth Congress, first session ... February 2, 1995 online

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Online LibraryArts United States. Congress. Senate. Committee on LaboEducation's impact on economic competitiveness : hearing before the Subcommittee on Education, Arts, and Humanities of the Committee on Labor and Human Resources, United States Senate, One Hundred Fourth Congress, first session ... February 2, 1995 → online text (page 14 of 15)
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fiscal 1993. Interest payments simply steal resources that could be used to invest in the
development of our children, youth and adults - 'knowledge capital' - and actually weaken our
national competitiveness;

• expenditures for military defense and atomic energy for fiscal 1995 of S235 billion are
down 7.7 percent over the previous 1993 budget. (A relatively modest amount of this total can
be counted as technical training and, therefore, savings for postsecondary education, or making a
contnbution to industrial R&D which can be counted as competitive investment in "knowledge
capiul.") With the end of the cold war and the collapse of communism, global competition has
shifted from the military front to the global market place, where a nation 's comparative
economic advantage is now defined by its investment in the 'knowledge capital' of its citizens;

• expenditures in physical resources (regarded as competitive investment) for fiscal 1995
of S127 billion - up 3.5 percent - is more than three times as much as is invested in human
resources. Incentives to invest in physical capital, such as cuts in income and capital gains taxes


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and increases in deductions for investment in plant and equipment directly reduce iheJUnds
available in the public sector for the much more productive investment in human capital for the
knowledge economy:

• expenditures for general government services amounted to S15 billion in fiscal 1995, a
decrease of 12.6 percent from the fiscal 1993 budget;

• expenditures for federal law enforcement and judicial activities cost S17 billion in
tlscal 1995, and increase of nearly 16 percent from the fiscal 1993 budget;

• expenditures for foreign affairs totaled $17 billion in 1993, and increase of 5.8 percent
over the 1993 budget.

• expenditures in fiscal 1995 will total close to $1.5 trillion. Of this amount, only about
$40 billion (just 2.5 percent) was spent on investment in the nation's human resources - building
"knowledge capital" for education and training of children, youth, and adults. Investments for
education actually declined by 3.2 percent from fiscal 1993. Investment in training increased by
17.5 percent, while investment in R&D and General Science and Basic Research also declined

To repeat our theme, competitive knowledge is the know-how demonstrated by workers
through education, training and experience on the job. It enables them to learn new skills,
create new products and services, and design new ways to produce goods and services more
efficiently. Competitive knowledge is the key resource Amencans need to compete successftilly
in the global marketplace - to enhance their personal independence and prosperity, improve
their standard of living, enrich their family, and build their community.

The average citizen understands this relationship intuitively. In the New York Times/CBS
poll, published on December 15, a national sample was asked whether or not they favored a
balanced budget amendment. It came as no surprise that 81 percent of respondents favored a
balanced budget. When asked if they favored cuts in education spending to balance the budget,
only 22 percent of those polled favored balancing the federal budget by cutting spending on
education, a drop of 59 percent!

If congressional policymakers fail to recognize education as an essential federal priority
and the most strategic public investment, our nation 's economic competitiveness will be
damaged. Today 's global knowledge economy requires the Congress focus its attention on
assisting states and grassroots parent-voters to reform public schools. Most importantly we must
demand accountability by educators showing that public schools are making significant progress
toward helping all America 's children to achieve world-class standards by the year 2000.



1. Peter Dnickcr, "The Age of Social Transformation," Ailamic Monthly (November 1994);
"The Rise of the Knowledge Society," The Wilson Quarterly, Spnng 1993; Post-Industrial
Society (1993); and see also Robert Reich, The Work of Nations: Preparing Ourselves the 21st
Century Capitalism (1991).

2. Kent Lloyd, Diane Ramsey, Sven Groennings, KNOWLEDGE REVOLUTION for All
Americans: Winning the War Against Ignorance - Empowering Public Schools (1992).

3. Education Commission of the States' Information Clearing House, January 1991.

4. Building a Nation of Learners, 1994. The National Education Goals Report

Against Ignorance — Empowering Public Schools.

6. For an analysis showing the U.S. near the bottom of industrial nations in the percentage of
GDP spent on public schools see M. Edith Rasell and Lawrence Mishel of the Economic Policy
Institute, Shortchanging Education: How U.S. Spending on Grades K-12 Lags Behind Other
Industrial Nations (1990) and Measuring Comparative Education Spending: A Response to the
Department of Education (1990). Comparative measures of special education spending are
difficult to determine. European nations segregate severely disabled students into institutional
care paid for from other budgets. The U.S. Department of Education has undertaken .. more
accurate of real comparative K-12 cost categones and will report their findings in I99S.

7. Hon. Justin S. Morrill, "ADDRESSES," Delivered at the Massachusetts Agricultural College
(Amherst, Mass.: J.E. Williams, Book and Job Printer, 1887, p. 26).

8. Roland Shirm, Hcrw Do Education and Training Affea a Country's Economic Performance?
A Literature Survey. Rand Institute on Education and Training (1994), p. 9.

9. U.S. Bureau of Labor Statistics, "Comparative Real Gross Domestic Product, Real GDP Per
Caoiu, and Real GDP Per Employed Person: Fourteen Countries, 1950-1990,: Memorandum,

10. This analysis is based on the work of John W. Kendrick, Ph.D., who is an internationally-
recognized authority on measuring productivity (see Kendrick, John W., "Total Capital and
economic Growth," .4tlaruic Economic Journal (Presidential Address, March 1994, pp. 1-18)
(see also Baumol, et al.. Productivity and American Leadership).

U. This analysis in based on the work of John W. Kendhck, "Total Capital and Economic
Growth," Atlantic Economic Journal (March 1994, presidential address), pp. 1-18, who is
internationally recognized as a leading authority on measuring productivity. Baumol has


concluded that only about one-fifth of the productivity gain since 1948 came through an increase
in education (26 percent) and on-the-job training (55 percent). Baumol, W. J., S.A. Blackman,
and E.N. Wolff, Productivity and American Leadership (1989).

12. Quotes from Thomas A. Stewart, "Your Company's Most Valuable Asset: Intellectual
Capital. Fortune October 3, 1994. Edmund Jenkins of Arthur Andersen, and Larry Pnisak of
Earnest & Young.

13. Selected conclusions by Dr. Kendrick include:

• Official measures of capital investments in all sectors exclude human capital that
improves the quality and productivity of tangible capital. Nontangible capital in humans includes
education and training, health and safety, and mobility outlays.

• When these human factors are considered, total investment was four times (4.1) the
official gross business domesuc mvestment reported in 1990. Traditional measurements badly
underestimate the nation's productive capacity;

• Growth of nontangible capital productivity (average compounded annual growth rate
of 4 percent) can be attributed to human capital growth;

• By 1990 total tangible and nontangible human capital accounted for 53 percent of the
nation's productivity;

• Of those factors that attribute to the increase in human capital, education accounts for
82 percent;

• Research and development expenditures are the chief form of nonhuman, nontangible
investment. R&D has grown 7 percent annually since 1929. (R&D is a direct result of previous
investments in human capital); and,

• Rates of return on investment in nonhuman capital are between 7 and 7.5 percent
compared to 14 percent on human capital in 1948, following heavy national investment in the
G.I. Bill. By 1990 return on investment in human capital had declined gradually to about 10

14. The U.S. Bureau of the Census estimated the average annual earnings by level of education
using 1992 dau (1994).

15. Gary S. Becker, Economic Viewpoint, Business Week (February 6, 1995).

16. William J. Beeman and Isaiah Frank, New Dynamics in the Global Economy (CEC 1988).

17. Sven Groennings, Kent Lloyd, Jack Carlson and Diane Ramsey, "Education Reform and
Investment. New England's Economic Stake," Connection (Winter 1992).

18. Data was provided by the Office of Management and Budget and defined by Dr. Carol
Frances according to major budget functions and subfiinctions. Payments to retired persons
under Medicare, for example, are mcluded under transfer payments while outlays for health and
safety in the workplace are allocated to investment in human resources. Investments in
education focus mainly on K-12 and postsecondary education programs of the U.S. Department
of Education and exclude most other welfare and training expenditures outside the Department,
such as Headstart, Department of Defense DegeadoA Schools, and portions of science, arts,
humanities, and military education scattered in 150 department and agency programs throughout
the federal government.


Senator Jeffords. Thank you all for very excellent testimony. I
cannot tell you how helpful statistics are. We are living in the age
of 8-second and 30-second news clips and information, and in order
to be able to articulate our messages as well as we can, we need
the statistical information to verify what we are talking about.

Mr. Kominski, do vou see any evidence of hope that there is a
change in those trenas which you discussed?

Mr. KoMENSKi. Well, not really. I think for a lot of the reasons
that you have heard today, the marketplace value of individuals
who nave a high school degree or less particularly is in serious
danger. I do not think there is any reason to expect that those indi-
viduals would fare better in the future.

On the other hand, even among persons with some education be-
yond high school, the marketplace has become tougher over time.
The returns are clearly the best for persons with the highest
amounts of education. Depending upon which set of research find-
ings you would like to believe, college graduates, bachelor's degree
holders, are either doing okay or also sit precariously on the edge.
Some of that may have to do with secondary effects such as the
field of training that they are involved in and the type of creden-
tials they have actually acquired, the quality of education.

I think certainly, as some of these individuals have pointed out,
because of the cost constraints, more and more students turn to
public colleges; more and more poor students turn to whatever al-
ternative they can find. Quite often, that includes things like public
2-year schools with lower tuition rates and other noncollegiate
kinds of schooling. Either those schools have to be able to provide
high-quality education, or else those individuals are really involved
in an activity that may not be in their best long-term interest.

Senator Jeffords. Dr. Schapiro, one of the items that is being
picked on for budget cuts is the in-school interest subsidy. Do you
nave any judgment as to what impact it would have if we were to
do away with subsidies such as this?

Mr. Schapiro. A lot of educational researchers, myself included,
have been looking at these issues for quite some time, and I think
some people would be surprised by how much agreement there is
with the simple fact that cuts in financial aid or increases in tui-
tion faced by low-income students have an outstandingly large ef-
fect on whether or not they are going to enroll.

I talked a little bit about where they are going to enroll, and now
disproportionately they are showing up in 2-year community col-
leges, public community colleges. But whether they go anywhere or
not, which as we heard, is now critical than ever, depends critically
on the net price of higher education that they face. There is some
confusion about what the effects are for middle-income students,
but in the absence of the Pell program, for example, the estimates
are that we would have one million fewer people in higher edu-
cation today, and most of those people come from families with in-
come below $30,000.

Given the profound increases in the lifestyle and social and eco-
nomic status between people who get B.A.S and people who do not,
cuts in Federal financial aid, however it is posed, in terms of tui-
tion subsidies or whatever, are going to have a disastrous effect on


a very large segment of our population, and that has profound im-
pacts not only personally, but also on economic growth rates for the

Senator Jeffords. We tend to distingfuish between college and
noncollege post-secondary education, and vet now we are seeing the
increasing need for skill training generally, which is really under
the category of college. Have you studied the impact of cost in-
creases on students in training or vocational education?

Mr. SCHAPIRO. Educational researchers know less about what
was called before the taxpaying schools, or usually called for-profit
schools, proprietary schools. We have not had very good data to es-
timate what the income effects are from attending there, and you
heard a lot of talk about some college versus none, or B.A. versus
some college. In fact, we know a lot less about the for-profit sector.
However, I would agree with what Senator Pell said before that it
is very easy to tarnish a whole, very large sector with the same
brush. And while we are all very well aware of what has been
going on in terms of loan defaults and all sorts of advertising prob-
lems, unless we know more about exactly what the educational im-
f>acts of attending those kinds of institutions are, we should be a
ittle worried about what we do with them, particularly given the
data that I reported on before, that our new study shows that low-
income students are increasingly found in that sector, because not
only can they not usually, quite often, afford the private sector, but
they can no longer generally afford public colleges, 4-year colleges
and universities. There has been a profound change in the last 10
years, and it is part of our written testimony — we have some fig-
ures there — a profound change in the last 10 years in the distribu-
tion of low-income students across educational types. They are in-
creasingly showing up in the for-profit sector and in community col-

Senator Jeffords. Will there be an effort to study those kinds
of situations and demographics?

Mr. ScHAPiRO. Well, I think there have been attempts in the
Federal Grovernment to collect better information, particularly on
the proprietary sector, and there are some attempts and some stud-
ies there, but it is nowhere as advanced. I think we understand a
lot about the impact of higher education at the collegiate level, but
we know much less about proprietaries. A number of us are inter-
ested in that; the limitation so far has been in availability of data

Senator Jeffords. Dr. Bishop, you gave very interesting testi-
mony. One thing that intrigues me is that I know that even though
we spend many school days less than other nations, we spend siw-
stantially more hours in school. And maybe I read the statistics
wrong, but it seems to me that we spend a lot more time in school
than the days we are in school. Is that accurate, and if so

Mr. Bishop. From my work?

Senator Jeffords. Yes.

Mr. Bishop. We spend more time doing math and science in mid-
dle school than Europeans do, and the reason that that is the case
is because they are studying foreign languages, and we are not.
And we do poorly relative to them, even though we spend more
time at the study, and that is essentially due to setting lower


standards, caused in large part by the lack of a curriculum-based
exam at the end of secondary education, which most European
countries have those kinds of exams as sort of a standard-setting
experience for everybody, the students and the teachers and the

Senator Jeffords. Are their school days shorter or about the
same as ours?

Mr, Bishop. I think the students are in school roughly the same
amount of time in Europe. They are in school longer in Asia, but
in Northern Europe, they are in school about the same amount of
time. But they are less involved in physical education and other
sort of nonacademic activities.

It would be typical in France, for example, that you would be
studying your second foreign language; a large number of students
will have learned both English and Grerman as well as, of course,
French, and will take a philosophy course senior year.

Senator Jeffords. Are there well-defined standards in Europe
and Asia as to what they are trying to have as a level of

Mr. Bishop. They are much higher. For example, vocational high
school in Japan teaches calculus. You study linear algebra if you
are in the math/science track in Grermany. Linear algebra is the
second-year course that you would take in college, typically, in an
American university.

The upper secondary school students who do the BOC in France,
which now, 70 percent of the age cohort takes the BOC examina-
tion, and about 50 percent of the age cohort passes it in France
now. Some of those are vocationally-oriented BOCs, but in the aca-
demic area, it counts for perhaps 30 percent of the age cohort.

The standard of the BOC in the academic side is equal to the AP
standard in the U.S., which only 3 percent or so of students take
an AP examination in science, maybe about 3 or 4 percent do in
math, and about 5 percent or so do it in history.

So that essentially, they are teaching a standard that we teach
3 percent of our kids to 30 percent of theirs. And it is not just the
French. The Canadians teach a standard of science to 28 percent
of the age cohort that we teach to just 2 to 3 percent.

So it is quite customary toward the end of secondary school for
very high standard science and math to be taught, and to large
shares of the age cohort, which we are currently only teaching in
the AP classes, which go to a very small segment.

So the standards at the end of secondary school are really dra-
matically higher in math and science and in foreign language than
in the U.S.

Senator Jeffords. And they are well-defined; everybody knows

Mr. Bishop. Yes. You can get the curriculum and lay what they
are expecting against — they are reasonably comparable to the AP
exams, and in fact the curriculum for the AP exams can be laid
against it, and would be reasonably comparable.

Cornell gives advanced placement credit to students with the
BOC in the subjects that they specialized in, for example, and so
we treat it as essentially that they have had an additional year of


Senator Jeffords. Dr. Lloyd, as Mr. Gorman and Mr. Wurtzel
were testifying, one of the things that startled me, and that I had
not really thought about, was the multinational aspects of our cor-
porations — that where to locate a plant can well be decided upon
whether or not you have the skilled work force available, and if
your skilled work force in this Nation seems to be lacking, it is
more than likely that plants will be located overseas. Did I under-
stand that correctly, and is that a large factor?

Mr. Lloyd. I think it is a large factor, and if you have to spend
5 to 7 percent of your potential profits on retraining workers — and
in American industry, the estimate is $30 billion a year — for failure
in the high schools, you are talking to a businessman directly about
his profit margins. If he can relocate that plant in Scandinavia or,
say, Norway, where they speak fluent English and the workers
have high math and science skills, what would possibly prevent an
international corporation fi-om making that choice?

Senator Jeffords. I think that is an important thing for us to
get out to the people in this country: How important it is to im-
prove our educational standards.

Mr. Lloyd. Senator Jeffords, as you have said today and as I
think all of the witnesses have underscored, the problem is not
standards. Every college and university has standards for the AP
examinations, the advanced placement examinations. The 3 percent
of high school students that prepare for them in this country un-
derstand what the standard is. Our problem is that we need to get
the word out and bring the consensus of the culture together, and
the leaders and the parents of America, to know that the standards
we are expecting out of our young people are simply so low that
they have no future, and that our children and grandchildren are
sacrificing their future because we adults do not let them know
that there are world-class standards.

I think this is a political problem, I think it is a communication
problem, and it seems to me that data is not the problem. The
problem is communication and making very sure that we under-
stand what the consequences are — early death and poverty if you
are not getting a higher education today to be competitive in this
world of the knowledge economy.

Senator Jeffords. Thank you.

Senator Pell.

Senator Pell. Thank you very much, Mr. Chairman.

Dr. Bishop, in answer to the chairman's question about hours
spent in class, I understood you to say the hours are about proxi-
mate between Europe and the United States. I do not think that
that is correct. I always carry those statistics around in my blue
book here, and in the United States, we have 180 days a year in
general education; the Swedes have 200; the Soviets, 210; Canada,
200; Thailand, 220; South Korea, 220; Japan, 243; Israel, 260.
Those are just a sample taken. But that does not square with your
thought that they are about equal.

Senator Jeffords. My question was each day.

Mr. Bishop. The other aspect of it is looking at the amount of
time per day, how long the school day is. I am just not familiar
with what the numbers are for total, although I could get it for
you, when you put the two together. In a paper that I think Sen-


ator Jeffords may have seen, I looked at the amount of time that
is allocated to math and science instruction in middle schools in
the United States relative to European countries, and we do fine
in terms of the amount of time that we are spending on science.
We learn less in more time, and I attribute that to the lack of real
big rewards for studying math and science in this country that
exist presently in Europe and in Asia. These subjects are the key
to getting into the high-wage majors in college.

A college graduate — this is from Bob Kominski's work — a college
graduate in engineering earns twice as much as a college graduate
in humanities. The market is saying we need more of these people,
that desperately we want more of these people, and we are willing
to pay twice as much for them. And yet, despite that, we are not
supplying more. In fact, the reason why the wage differential is so
high for the math/science majors in college — it is not just the engi-
neers; it is people with physics or chemistry or computer science
degrees as well — is that we just do not supply as many of our own
kids into those fields. And the fundamental reason is that they can-
not handle calculus in freshman year; and the reason they cannot
handle calculus in freshman year is because they did poorly — they
got a poor math education in high school.

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Online LibraryArts United States. Congress. Senate. Committee on LaboEducation's impact on economic competitiveness : hearing before the Subcommittee on Education, Arts, and Humanities of the Committee on Labor and Human Resources, United States Senate, One Hundred Fourth Congress, first session ... February 2, 1995 → online text (page 14 of 15)