U.S. Maintains Competitive Edge but Falters in Education

By Staff Report

Nov. 14, 2006

Although the U.S. maintains a global lead in innovation and entrepreneurship, it is falling behind other countries in the level of education its people achieve, a factor that could undermine future living standards, according to a new report.

During the past 20 years, the U.S. has accounted for one-third of all growth in the global economy, a figure that is “nothing short of astounding,” says Michael Porter, a professor in the Harvard Business School and co-author of “The Competitiveness Index: Where America Stands.”

The report, sponsored by the Council on Competitiveness, was released in Washington, D.C., on Monday, November 13. It shows that the U.S. leads the world in productivity and household wealth growth, job creation and foreign direct investment.

Even though U.S. companies are sending research and development operations overseas, they’re increasing R&D at home by comparable levels—and America is receiving more foreign investment than any other country.

Porter cautioned that wealth is growing in the U.S. only for people who have a college education. Technological change and globalization have increased the demand for higher-level skills, such as complex communication and creative thinking.

But the U.S. is losing its lead in the percentage of people who complete higher education. In addition, the U.S. invests more in education–$83,910 per student–than most other countries, but produces lower test scores than many of them.

“This is our No. 1 economic problem in America,” Porter says. “There’s no doubt about it.”

For now, U.S. talent has a quality advantage. China graduates more engineers, but only a fraction of them are qualified to work for a multinational company.

Quantity and quality, though, may diminish over the years if more U.S. students don’t enter a math and science track.

Such a decline may not have a deleterious effect on a multinational company like DuPont, which has the wherewithal to reach further than many other firms for talent.

But its chief executive, Chad Holliday, is concerned about the possibility 10 years down the road of a lower-skill domestic labor supply that will earn less income.

“A DuPont will be fine because we can go to India; we can go to China,” says Holliday, who also is chairman of the Council on Competitiveness and was in Washington for the report rollout. “The issue is not DuPont; the issue is the country. We need a better feeder supply for all the companies here.”

The challenge goes beyond graduating enough engineers. They key is to change the way they’re educated so that they can handle higher-level jobs and stay ahead of the global economic “churn,” according to the leader of a major U.S. university.

Wayne Clough, president of Georgia Tech, says that today’s engineers need a background in humanities, communication, teamwork and leadership so that they are more adaptable.

With that kind of flexibility, they can go into nontraditional fields such as health care.

“They can help this country run better,” says Clough, vice chairman of the Council on Competitiveness. “They can fix systems. We need engineers who can get out of their comfort zone.”

A corporate executive who visited Washington last week, however, had a different view. George David, CEO and chairman of United Technologies, favors a laissez-faire approach to a possible engineering shortage. If such a shortage develops, salaries will rise and more students will go into the field, he argues.

“Markets will respond,” he said at an event at the Institute for International Economics in Washington on November 8. “Markets will take care of anything.”

Holliday is not convinced. That may work for United Technologies, but “I’m not sure it’s good for the overall standard of living,” he says.

Porter, too, favors a proactive approach. He recommends an overhaul of the K-12 educational system, beginning with reform of what he views as anachronistic local control of schools.

“We have to make structural changes,” he says. “We can’t just tinker. I don’t know whether the country is ready for that.”

Mark Schoeff Jr.

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