Dec 3, 2008

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Robert Reich: Where’s the Focus on Human Capital?

Former Labor Secretary (and current Obama adviser) Robert Reich had a great commentary on the public radio show Marketplace this evening.  His premise: bailing out the financial industry is short sighted; the only way to improve America in the long-term is to invest in its human captial.  In other words, if you want the jobs, fund the schools.

From the commentary:

Education is largely funded by state and local governments whose revenues are plummeting. As consumers cut back, state sales and income taxes are shrinking; three quarters of the states are already facing budget crises. On average, state revenues account for half of public school budgets, and most of the funding of public colleges and universities. On top of this, home values are dropping, which means local property taxes are also taking a hit. Local property taxes account for 40 percent of local school budgets.

The result: Schools are being closed, teachers laid off, after-school programs cut, so-called “noncritical” subjects like history eliminated, and tuitions hiked at state colleges.

It’s absurd. We’re bailing out every major bank to get financial capital flowing again. But we’re squeezing the main sources of our nation’s human capital. Yet America’s future competitiveness and the standard of living of our people depend largely our peoples’ skills, and our capacities to communicate and solve problems and innovate – not on our ability to borrow money.

In the end, Reich wonders if the reason the crisis in human captial gets put on the back burner is because there’s no imposing, Ben Burnanke-like figure warning us of the dire consequences of inaction. 

So what are those consequences?  With education costs rising in the U.S., more students are dropping out of high school and less are finishing college.  Since most European countries have government-funded higher education, this means the next generation of skilled workers will probably be based overseas.  All this is ocurring at a time when the U.S.’s labor markets that aren’t tied to collegiate degrees are falling apart or going overseas anyway.  So, within a generation, the bulk of the U.S. workforce could either underprepared or skilled in the wrong fields.

But look on the bright side – maybe our kids can get it right the next time around, when they repeat all the mistakes we didn’t teach them in history class.