JOB TRAINING HAS TO BE REWORKED

By Michael Kramer

We need a policy that covers all our workers, not just executives What you earn depends on what you learn." Bill Clinton has intoned that line almost as a mantra since before he became President. "Nothing could be more important than getting Americans prepared for the increasing global competition," Clinton said during the 1992 campaign. He seemed to really believe it, offering a scathing critique of the status quo. The theme was first expressed by Robert Reich, who would become Labor Secretary, and then enunciated in Clinton's book Putting People First. There the candidate declared, "While our global competitors invest in their working people, seven of every 10 dollars American companies spend on employee training goes to those at the top of the corporate ladder. High-level executives float on golden parachutes to a cushy life while hardworking Americans are grounded without the skills they need." After that, Clinton promised an "urgent" and "simple" solution: "We will require every employer to spend 1.5% of payroll for continuing education and training to all workers, not just executives."

It never happened. Reich's view (that a rising economy does not lift all boats) became a quaint anachronism, as President Clinton tacked rightward. Today the Administration is wary of any proposal that might tinker with an economy performing better than ever. Unemployment, currently at 5.3%, is lower than at any other point in the past two decades. "Why mess with what's working?" says Budget Director Franklin Raines. "The growth rate is O.K. We should let things proceed as they are."

Still, in a knowledge-based economy, vibrant growth depends most on innovation and worker competence. Clinton knows this in his gut, so he talks about "collapsing overlapping and outdated training programs into a G.I. Bill for America's workers." But even in its most ambitious iteration, the President's current plan would basically target only displaced workers; it would do little for the vast majority of employees whose wages are stagnant primarily because they have no opportunity, on the job or on their own, to upgrade their skills and therefore their prospects.

"But merely going on as we are now couldn't be more shortsighted," says Rob Shapiro, the Progressive Policy Institute vice president who helped define the economic prescriptions Clinton embraced five years ago. In theory, the nation's companies should understand this best and should therefore be leading the charge toward comprehensive training on the job. "Since better-trained workers are usually more productive, markets should provide all the incentives" for companies to make economically efficient training decisions, says Shapiro. Unfortunately, in the real world, businesses invest less in training their workers than logic would demand, mostly because workers are free to change jobs once their skills have been upgraded.

"If McDonald's trains a burger flipper to use a computer to monitor inventory," says Shapiro, "the employee's new skills may enable him to win a better position with Red Lobster or K Mart, and the competitor reaps the benefit of McDonald's training investment." This market failure hits average workers hardest. As Clinton has noted time and again, large corporations spend whatever is necessary to ensure that their executives are up to date on management techniques because, says Shapiro, "improving the decisions of supervisors produces higher returns from the workers they direct." Those at the top receive the education and training they need to advance and prosper, while most everyone else gets far less. "In the end," argues Shapiro, "growth is less than it could be," and the economic inequality Reich bemoaned anew as he left office last week is greater than it need be.

What could be done? No vast new government programs are necessary, says Shapiro, "but a new, government-mandated bargain could be struck." A rule of tax policy already holds that when a company provides a tax-free compensation, such as health-care coverage or pension contributions to its employees, it must cover virtually its entire work force. Training is not currently viewed as a tax-free compensation, but it should be. If it were, companies wouldn't be directly compelled to train workers; but if they provided training for some employees (as they do now), they would then have to offer training to all--or lose their tax write-offs. Another part of the bargain could assuage industry concerns. To ameliorate the problem of burger flippers' moving on, trained employees could be required to sign employment contracts (as many professionals must do now). By forcing trained workers to stay put for a year or two, the companies would benefit from their training investment as worker competence improved--a fair exchange benefiting everyone.

First, then, the tax code should be reinterpreted--and the President should urge Congress to do so. Might he? "I'm not a fan of the Big Bang school of policymaking," says Raines, whose view is shared by Treasury Secretary Robert Rubin. "I'm for economic self-interest working its will." There's nothing wrong with that, especially in a free-market system. But sometimes self-interest needs a push.