The United States has long relied on rising educational attainment in a rapidly growing labor force to help propel our economic growth. Over the last four decades of the 20th century in particular, steady increases in the education level of our labor force contributed very significantly to steady productivity gains, sustained economic growth, and formidable national competitiveness in an increasingly global economy. All those gains are today under threat because of a complex mix of factors that boil down to a single reality—the American workforce is steadily becoming less educated just when better and more diverse educational opportunities are essential for our labor force to maintain its justifiably famous productivity, flexibility and ingenuity.
Unless the United States makes critical adjustments now to its national human capital investment strategies, our education attainment levels will stagnate and future economic growth will slow. Policy changes are necessary to compensate for much slower labor force growth over coming decades, to boost adult worker productivity that can fuel economic growth, and to head off further increases in income inequality that will result if future demand for an educated workforce outstrips the supply.
The labor force, which more than doubled over the past forty years, will grow very slowly between now and 2040. The young cohorts moving through school and then into and through the labor force are much smaller than in the baby boomer years and (reversing the trends of the past four decades) will almost certainly have lower educational attainment than the older groups who will be aging out of the workforce. The demographic factors that worked to our nation’s advantage in the past are turning against us in the future.
The upshot: the United States can no longer pursue an education policy that essentially gives up on adults. We must leave no children behind, of course, but future gains in labor force educational attainment will come only as we get much better at educating our working adults.
More than half of America’s 120 million workers between the ages of 25 to 64 have no postsecondary degree; in fact, no postsecondary credential of any kind. To put this in perspective, over the next 10 years a total of about 30 million young people will graduate from high school in the U.S. hopefully, many prepared for college—but there are today twice that many adults already in the workforce who have no postsecondary credentials.
The adult literacy problem is equally severe. Findings from the 2003 National Assessment of Adult Literacy indicate that 31 million people, or 14 percent of Americans age 16 or older in the U.S. have “below basic” prose literacy and 48 million (22 percent) have “below basic” quantitative literacy. Especially in a global economy, these low literate adults are at very serious risk of never escaping subsistence or below-subsistence labor markets, and their limited job skills are a drag on national economic growth.
Unfortunately, America does not offer effective systems for adults already in the labor force to increase their educational attainment. This paper argues for new and better federal policy to support the education of working adults: basic education for those hampered by low literacy; English instruction for the non-language proficient; and postsecondary education for those needing educational and occupational credentials for job advancement and increased productivity.
Current federal policies designed to ameliorate these problems are failing. Adult basic education and language training programs serve only a tiny fraction of those who need help. Postsecondary student-aid policies are sharply skewed toward traditional students—recent high school graduates without dependents and with no labor market attachment. These policies promote postsecondary educational practices, such as program structures and delivery methods, which simply do not work for most working adults. We have no system in place that might encourage employers to invest more in the skills of their less prepared workers. And we offer little help to those low-skilled adults who are prepared to invest in their own education.
The problem of under-educated and under-skilled adults workers is getting worse, not better, which is why it is immediately necessary to put new strategies in place. This paper offers five suggestions. First, create new economic incentives for employers to help finance basic skill training, English as a Second Language or ESL training, and credentialed postsecondary education for their employees. To facilitate these new incentives, this paper proposes an employer tax credit in the amount of 50 percent of certain educational investments, up to $2,625 per employee per year.
Second, it is essential to strengthen existing incentives for individuals themselves to invest in their basic skills and their credentialed postsecondary education. This paper proposes an increase in the percentage of education expenses allowed under the Lifetime Learning Tax Credit from 20 percent to 50 percent, making LLTC tax credits of up to $2,000 per year available to far more working adult students. And we urge that the credit be made fully refundable for low-income workers.
Third, the United States needs more effective ways to encourage postsecondary institutions to develop more flexible programs and degree strategies that work for working adults. The answer: a five-year program of federal matching grants to those states that are most committed to helping their public postsecondary institutions create innovative and effective degree and credential pathways for working adults.
Fourth, adult basic education requires a new strategy centered on the deployment and utilization of technology to accelerate English-language proficiency among non-English speakers and employer-defined basic skills for low-literacy adults. This paper proposes that Congress revamp the existing federal adult basic education program, beginning anew with a more employment-focused and technology-based program that supports individual and employer investment in basic skills and English acquisition. The LLTC should be used as the primary funding vehicle for adult basic education and ESL instruction.
Finally, the U.S. government must launch a national marketing campaign to help millions of working adults and their employers better understand their shared interest in more and better education and learn about effective ways to plan, finance, and complete that education. A few years ago the state of Kentucky launched an aggressive adult education marketing campaign known as Go Higher! The remarkable success of that program offers a model for the national effort we propose.
These five proposals are bold only in their departure from current policy; they represent a measured and necessary response to a huge problem. These new approaches are “demand-side” strategies—market-oriented policy interventions that seek to stimulate and organize effective demand for education rather than simply trying to increase “more of the same’ supply-side offerings. Our new strategies aim to influence, as directly as possible, the ways that less-educated workers and their employers spend their money so that together they invest more in education.
This is a big job that requires unambiguous and substantial economic incentives, unfiltered by intermediating agencies or institutions. The combination of targeted tax credits for both individuals and their employers, modest grants to states to support reforms in higher education, a new start for adult basic education and English language acquisition—all supported by an aggressive marketing campaign—offers an efficient method of incentive and reward.
What’s more, this is a comprehensive educational strategy that over time will pay for itself many times over. If thousands of employers and millions of workers respond to our combination of tax credits and state-directed incentives, then reduced tax revenues and new appropriations might cost as much as $10 billion to 12 billion annually. Yet the downstream return on that human capital investment will be enormous—in the form of rising productivity, higher wages, a growing economy and widening tax base. We simply cannot afford not to make this investment.
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