Human Capital Policies for the Knowledge Economy

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Human Capital Policies for the Knowledge Economy

• Presentation prepared for
• National Governors Association Conference
  Reaching New Heights Advancing Workforce Policy
  through Innovation and Reauthorization
• Washington D.C., December 9 11, 2002

Graham S. Toft, Ph.D. Senior Fellow Hudson
Institute graham_at_hudson.org 317-549-4185
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Outline

• Recap The Knowledge Economy
• Conditions Trends
• Implications of the Knowledge Economy for
• Workers
• Employers
• Educators
• States and Localities
• Key Ingredients of a Human Capital System for the
  Knowledge Economy
• Six Bold Policies
• What to do with WIA, TANF, Perkins Vocational and
  Applied Tech. Education Act, Adult Education and
  Family Literacy Act and Higher Education Act?

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1. Recap The Knowledge Economy

• Knowledge is the ingredient that underlies the
  competitiveness of regions, nations, sectors or
  firms. It refers to the cumulative stock of
  information and skills concerned with connecting
  new ideas with commercial values, developing new
  products and, therefore, doing business in a new
  way. At its most fundamental level, the
  knowledge-base of an economy can be defined as
• The capacity and capability to create and
  innovate new ideas, thoughts, processes and
  products, and to translate these into economic
  value and wealth.
• World Competitiveness Index

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1. Recap The Knowledge Economy (cont.)
Some Attributes of the Knowledge Economy

• High productivity low inflation.
• Rapid technological change.
• High capital-labor ratios (capital deepening).
• Deregulation and market liberalization.
• Global marketplace.
• Sub-national regionalism.
• Mobility of
• Capital
• Innovations / Ideas
• Business
• People

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1. Recap The Knowledge Economy (cont.)
Some Attributes of the Knowledge Economy (cont.)

• Churning
• Business starts business failures.
• Business in-migration out-migration.
• Job gains job losses.
• People come people go.
• Theoretical Underpinnings
• Joseph Schumpeter Wails of creative
  destruction.

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1. Recap The Knowledge Economy (cont.)
Goals of Economic Development and Workforce
Development

• Old Economy
• Create jobs.
• 80s any jobs shoot anything that flies,
  catch anything that falls.
• 90s Quality jobs high skills, high pay.
• Knowledge Economy
• Create, attract, and retain talent in good and
  bad times.
• Capitalize on sectoral and regional growth
  opportunities.

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2. Conditions and Trends
Conditions

• Global economic malaise slower growth than 90s
  likely.
• Intense global competition impacting both
  domestic and international business many
  businesses are losing pricing power cost
  containment growth in wages and salaries slow to
  moderate.
• Globally, a potential surplus of skilled and
  knowledge workers employers seek the best from
  wherever gradual equilibration of wage rates.

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2. Conditions and Trends (cont.)
Trends

• Significant aging of the population in developed
  countries Will older citizens work? How
  productive will they be?
• High quality and global leadership of American
  higher education and research institutions likely
  to continue.
• Good global supply of quality high end knowledge
  workers.
• Quality and supply of qualified entry and middle
  level workers remains questionable within the US
  very variable career technical education system
  (public and private) have to live with it!

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2. Conditions and Trends (cont.)
Trends

• Changing ethnic and cultural composition of the
  American population.
• Expectations of younger workers different from
  older generations Generation X, Generation Y,
  and Nexters.
• May not be enough affordable traditional college
  to go around for the boomlet generation rising
  costs of traditional college.
• Rapid expansion of e-learning significant
  implications for the traditional campus.
• Adults learn on the run learning must be
  convenient, modular, affordable, credentialed and
  relate directly to wage and job advancement.

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3. Implications of Knowledge Economy Under
Conditions of Slower Economic Growth
For Students/Workers/Learners

• Lifelong learning continuously learn nibblets
  of knowledge, information, skills.
• Save-Spend for learning throughout life.
• Hire on with employers with commitment to
  learning e.g., tuition reimbursement a key
  fringe benefit.

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3. Implications of Knowledge Economy Under
Conditions of Slower Economic Growth (cont.)
For Employers

• Adopt a supply chain management approach to human
  capital retention critical in good and bad
  times.
• Market organization as an employer of choice.
• Hire for desired attributes target attitudes,
  outlook, work ethic (go for raw talent).
• Then invest in workers and their work environment
  for retention offer the good worker a compelling
  case to stay with the organization.
• Create internal pools of learning funds tied
  directly to employee benefits.

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3. Implications of Knowledge Economy Under
Conditions of Slower Economic Growth (cont.)
For Employers (cont.)

• Make sure information is available to employees
  about learning choices, e.g. contract with a
  learning exchange.
• Business location influenced by where the quality
  workers are Businesses must shape the talent
  pool beyond their doors.
• Collaborate selectively with other businesses on
  issues of common need, e.g. diversity training.
• Learn how to develop long range human capital
  asset plans.
• Design the work environment for high level
  productivity and job satisfaction, e.g. flexible
  work hours, cafeteria benefit plan, ways for
  working at home.

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3. Implications of Knowledge Economy Under
Conditions of Slower Economic Growth (cont.)
For Educators and Trainers

• Deliver skillettes wherever there are learners
  (modularize) at home, on the way home, at work
  etc.
• Radically reconfigure senior high school.
• Professor be nimble, Professor be quick.

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3. Implications of Knowledge Economy Under
Conditions of Slower Economic Growth (cont.)
For State and Local Policy Makers

• New mantra
• We do learning right.
• We do diversity right.
• We placemaking right.
• Yell louder and they will succeed will not
  work high stakes testing is forcing more young
  people out of high school dont define the
  problem away with education reform.

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4. Key Ingredients of a Human Capital System for
the Knowledge Economy

• A portable save-spend tax advantaged account for
  life.
• Creative mixes of individual, employer, govt.
  dollars.
• Viable learning paths for those not immediately
  college bound.
• Highly accessible and affordable adult learning
  for incumbent workers and displaced workers to
  achieve credentials.
• Subsidized labor market information, information
  on educational offerings, financial aid etc.
• Integrated metro/regional development initiatives
  energizing workforce development, economic
  development, amenity development, national
  resource development.

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5. Six Bold Policies

• The Career Learning Account (CLA) established at
  birth, no later than enrollment in kindergarten
  (Modified Coverdell Education Savings Account)
  funded by personal, family, civic contributions
  and government assistance.
• Youth Tuitionships guaranteed learning
  resources to the equivalent of year 12 at school,
  accessed from the CLA available for all
  state-approved programs, matched by employers,
  community foundations/CDCs for .
• Adult Tuitionships Financial aid to incumbent
  and dislocated workers, accessed from the CLA
  available for all state-approved programs,
  matched by employers, community foundations/CDCs
  for .

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5. Six Bold Policies (cont.)

• ProCollege an alternative, comparable learning
  path to traditional college.
• A Learn-ware Marketplace on the Internet.
• Labor market information
• Education and training information (include
  placements, pay, etc)
• Self assessment tools
• Financial aid information
• Job search and matching
• Linkages to e-learning
• Regional Investment Boards (combines WIBs,
  Economic development Districts, Regional Planning
  Authorities, Small Business Development Centers,
  Technology Transfer Entities).

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What To Do With What Weve Got?

• Pool the resources from many categorical programs
  under education, workforce, economic development
  and small business development legislation.
• Repackage funding for tuitionships, learn-ware
  site development, block grants to states/regions
  for locally planned and directed regional
  development initiatives.
• Todays categorical grant structures lack the
  flexibility and spontaneity required for the
  knowledge economy.