Education and the market economy
Last week, U.S Federal Reserve chairman Ben Bernanke was asked about rising income inequality in the United States and he explained: “Today we have two societies, the educated and the uneducated. It is based on educational differences and employment. With the current economic recession, if you are a college graduate, unemployment is about 5 percent but if you are a high school graduate, unemployment rate is 10 percent or more. However, if you do NOT even graduate from high school, then the unemployment rate is about 35 percent or more. It is a big difference regarding employment, incomes, and life styles because we are living in an information age where knowledge and skills are essential for survival.”
What he said is NOTHING NEW, many scholars have been saying about it for years but no one would pay attention. Certainly education affects people's earning potential in a world where the economy is changing from product manufacturing to service delivery. Manufacturing depends on the mass production process and the low cost of labor but service industry depends on the technology, the knowledge and skills of workers. According to Robert Reich, a former U.S secretary of labors, unequal in education explains about 60 to 70 percent of widening inequality in the world today. He warned that when many things can be automated and controlled by information systems then the uneducated will be left with fewer jobs, fewer opportunities, and countries without good education systems to transition into the information age could be left behind, their societies will become chaotic with huge number of unemployed people and extreme poverty.
Most people know that education is a key factor in economic competitiveness and the advancement of the society but in some countries, the focus on education as solution to economic problems have failed. The reason is their education system are NOT effective at building the knowledge and skills needed to establish the development of knowledge workers. Many education systems are still designed around old concepts of “Testing” and “Rote memorization” which measure certain knowledge, commonly referred to as “book smarts”, rather than “skills smart”. In these countries, there are plenty of well-educated graduates with multiple degrees who do NOT possess the skills to make effective contributions to the economy. The interesting fact is in these countries, there are very high number of college graduates that cannot find jobs but on the other hand, their businesses also cannot find qualified employees for their works.
For example, with globalization, the entire business world is connected by a vast amount of information networks. Most jobs requireinteractions with computer or computing devices such as PDA, cell phones etc. Therefore, the knowledge of information technology (IT) is the fundamental of all educational subjects, just like mathematics was the key concept in the industrial age of the last century. Today, IT is no longer about managing data network or programming applications but it is part of every businesses. Actually, every business needs IT and people with IT skills. It is not surprised that the U. S. Bureau of Labor Statistics is predicting that by 2012 there will be a shortage of 500,000 IT professionals in the U.S. The shortage number could reach few millions if we add Europe and Asia into the total. Even countries such as India and China where they graduate over a million of IT people each year, are also saying that they need more IT professionals but could not fill their needs.
Today the demand for IT skills is ubiquitous as they may not necessarily need electrical or software engineers, but rather people who knows how to apply IT into the business. In other word, the “Educated” workers of the future are professional that have a solid understanding of both the technological and business sides. Of course, they must also have the soft skills such as communications, teamwork and their desire to continuously learn to keep up with technology changes. Therefore, new education system must be based on information technology as the foundation with the focus on solving business problems in a globalized world where competition is high.
However, the problem is many countries are still debating on how to improve their education systems rather than make it happens. Many are working on large scale plans based on what they wish rather than looking at their market needs. For example, few years ago many people had predict that China would become a significant competitor to India as an IT outsourcing destination. The country would overcome the English language problem by an aggressive education improvement program, government has spent a large amount of money to build many new universities that could graduate million of workers. Today, these education programs are beginning to take shape but the progress is much more slower than what one would expect because the strong resistance from the academic community who do not wish to change their traditional education system. They have argued on the issue of “testing for knowledge” instead of “training for skills” and the over-relying on tests continues to produce more “Book smart” graduates. Currently China has a significant shortage of experienced managers with business skills to interact with global customers. Although, China has over 5 million graduates from universities each year but the vast majority are NOT employable due to their lack of practical skills.
According to a recent study by the Everett Institute, Chinese education system is still “locked” into the manufacturing concept where they educated workers to follow a mass-manufacturing process rather than transition to the service delivery model, with knowledge workers who work in team and solve problems. The key disadvantages are the lack of exposure to the business context and the unfamiliar to global business environment. These serious limitations will take China at least several more years to overcome. In the mean time, more aggressive countries such as India, Brazil, Singapore, Malaysia are quickly adopt a much faster approach that meet the industry demands to capture the market.
Sources
- Blogs of Prof. John Vu, Carnegie Mellon University
