[Senate Hearing 109-136]
[From the U.S. Government Printing Office]


                                                      S. Hrg. 109-136
 
THE 21ST CENTURY WORKPLACE: PREPARING FOR TOMORROW'S EMPLOYMENT TRENDS
                                 TODAY

======================================================================

                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                                   ON

 EXAMINING ISSUES RELATING TO THE 21ST CENTURY WORKPLACE, FOCUSING ON 
            PREPARING FOR TOMORROW'S EMPLOYMENT TRENDS TODAY

                               __________

                              MAY 26, 2005

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and 
                                Pensions




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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                   MICHAEL B. ENZI, Wyoming, Chairman

JUDD GREGG, New Hampshire            EDWARD M. KENNEDY, Massachusetts
BILL FRIST, Tennessee                CHRISTOPHER J. DODD, Connecticut
LAMAR ALEXANDER, Tennessee           TOM HARKIN, Iowa
RICHARD BURR, North Carolina         BARBARA A. MIKULSKI, Maryland
JOHNNY ISAKSON, Georgia              JAMES M. JEFFORDS (I), Vermont
MIKE DeWINE, Ohio                    JEFF BINGAMAN, New Mexico
JOHN ENSIGN, Nevada                  PATTY MURRAY, Washington
ORRIN G. HATCH, Utah                 JACK REED, Rhode Island
JEFF SESSIONS, Alabama               HILLARY RODHAM CLINTON, New York
PAT ROBERTS, Kansas

               Katherine Brunett McGuire, Staff Director

      J. Michael Myers, Minority Staff Director and Chief Counsel

                                  (ii)



                           C O N T E N T S

                               __________

                               STATEMENTS

                         THURSDAY, MAY 26, 2005

                                                                   Page
Enzi, Hon. Michael B., Chairman, Committee on Health, Education, 
  Labor, and Pensions, opening statement.........................     1
Garczynski, Gary, Past President, Home Builders Institute, 
  National Associaton of Home Builders, prepared statement.......     4
Erickson, Tamara J., Executive Officer, and Member, Board of 
  Directors, the Concours Group, Watertown, MA; Diana Furchtgott-
  Roth, Director, Center for Employment Policy, the Hudson 
  Institute, Washington, DC; and Jared Bernstein, Director, 
  Living Standards Program, Economic Policy Institute, 
  Washington, DC.................................................     8
    Prepared statements of:
        Ms. Erickson.............................................     9
        Ms. Furchtgott-Roth......................................    22
        Mr. Bernstein............................................    30
Kennedy, Edward M., a U.S. Senator from the State of 
  Massachusetts, opening statement...............................    47
    Prepared statement...........................................    48

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Isakson, Johnny, a U.S. Senator from the State of Georgia, 
      prepared statement.........................................    65

                                 (iii)




 THE 21ST CENTURY WORKPLACE: PREPARING FOR TOMORROW'S EMPLOYMENT TRENDS 
                                 TODAY

                              ----------                              


                         THURSDAY, MAY 26, 2005

                                       U.S. Senate,
        Committee on Health, Education, Labor and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:00 a.m., in 
room SD-430, Dirksen Senate Office Building, Hon. Michael B. 
Enzi (chairman of the committee) presiding.
    Present: Senators Enzi, Isakson, and Kennedy.

                   Opening Statement of Senator Enzi

    The Chairman. Since it is 10 o'clock, I will call this 
hearing to order.
    I want to welcome everybody to this hearing on the 21st 
century workplace. A lot of the information that we will be 
gathering today will be usable not only in the Workforce 
Investment Act, but in a number of issues that we will be 
considering throughout the year. This committee has one of the 
biggest workloads, I think, with 38 reauthorizations that we 
need to do before the end of September, and we are well into 
those and have passed quite a few out of committee already.
    Today we will be looking for the answers to several 
questions about the workforce of tomorrow. Among them, how will 
tomorrow's workforce differ from today's? What kind of jobs 
will tomorrow's employers be looking to fill? What skills will 
tomorrow's workers need to fill those jobs? And, most 
importantly, what can we do now to be sure that we are ready 
when tomorrow arrives at our national doorstep?
    Our ability to compete effectively in an ever growing 
global marketplace has always been tied directly to our most 
valuable natural resource--the working men and women of 
America. Our workforce is and always has been the enduring 
strength of our economy. If we are to maintain a leadership 
role in the global economy, our workers will need to develop 
the skills and training they will need to be a part of 
tomorrow's workforce. They will need to keep these skills 
current through the use of education and training programs that 
will keep them in touch with the dramatic advances in their 
career areas that are sure to come in the years ahead.
    We have already seen the advances that have sent ripples of 
change through every sector of our society. Those changes are 
likely to not only continue but to come at faster and faster 
paces. The new prize employee will be the one who can learn the 
fastest, adapt to change the easiest, and apply those skills to 
the job the quickest.
    Tomorrow's workforce must possess problem-solving, 
communication, and technological skills far more advanced than 
its predecessor. To ensure the existence of such a workforce, 
we must not only provide adequate lifelong opportunities for 
education and training, we must also foster a culture that 
values education and encourages the development of skills.
    The future will also change the face of tomorrow's 
workforce. We cannot afford to ignore the profound changes that 
demographics will bring. An extraordinarily low birth rate and 
the continuing exodus of the baby boom generation have caused 
one observer to remark that our labor pool may soon be a 
shallow puddle. These predictions are neither speculative nor 
alarmist. They are simply another aspect of the future 
workforce that must be anticipated and addressed.
    One way to address these changes is to encourage the entry 
of more nontraditional workers into the workplaces as well as 
to tap the growing supply of older workers. Both will need 
their own inducements to join the workforce that will range 
from flex-time schedules to changes in Government policies that 
currently serve to punish instead of encourage the 
participation of seniors in the workforce. Both groups will 
want advances and improvements in their quality of health care, 
their retirement benefits, and other similar programs, if we 
are successfully to convince them to remain in or return to the 
workforce.
    Additionally, individuals who had planned on spending their 
golden years traveling and visiting with grandchildren can be 
attracted back to work by innovative policies. For example, one 
large nationwide retailer allows employees to work 6 months in 
one location and then transfer to another location. Through 
this policy, an employee gains freedom and travel 
opportunities, and the employer retains a trained and valuable 
employee.
    Employers will also be affected. The best way to address 
their need for the more highly skilled employees will be to 
offer and maintain their own training programs. With the cost 
of high-tech equipment and the inherent need to keep machinery 
active and operational as much as possible, business can no 
longer afford a skills and talent gulf between skilled and less 
skilled employees. While we may have some idea of what is 
coming in the future in this area, we must admit that many of 
the developments are unforeseeable. Employers will continue to 
use technology to maximize effectiveness and to improve 
employees' lives, but we must be sure that America's youth gain 
the skills they will need to work in the even more technical 
world to come.
    Technological developments will continue to transform our 
world as well as our workplaces. The developments of the past 
century or maybe even just the last 5 years could not have been 
predicted decades ago. These changes have enabled innovations 
like telework, created the opportunity for greater workforce 
participation for the disabled, and increased the speed and 
efficiency in virtually all work applications.
    Make no mistake, the global marketplace is not a thing of 
the future. It is a fact of life today. The jobs it will create 
will determine the standard of living of tomorrow's worker. If 
we do not fully prepare our workforce to meet the challenges of 
the future, our failure will soon be seen in a reduced living 
standard of our workers. How we deal with these changes will 
play a great role in determining the future of our Nation and 
the strength of our economy. If we are to continue to maintain 
our role as a leader in today's global marketplace, the 
competition for skilled workers and advanced technology jobs is 
a battle we dare not lose.
    During today's hearing, we will be looking to our witnesses 
to help navigate us through the lessons of the past, current 
trends, and projected changes in a wide range of employment 
factors to make sure we win this battle.
    Senator Kennedy will not be able to be with us at the start 
of the hearing this morning. He is doing a markup in Judiciary. 
That is where they make amendments or approve nominees, and 
that requires a quorum, which we had to do yesterday by calling 
some people even out of Judiciary. So when he comes by, we will 
give him an opportunity to make a statement at that point, and 
his staff is here and will be taking notes, as is other staff.
    We are very pleased to have the three witnesses here today 
to help us understand what the workplace will look like in the 
coming decades. I will introduce the witnesses all at once, and 
then each of them will give statements, hopefully summarizing 
their testimony to be about 5 minutes in length, and then we 
will have questions.
    First I would like to welcome Tamara Erickson, the 
executive officer and member of the board of directors of 
Concours Group, a management consulting firm based in 
Watertown, MA. She holds a bachelor's degree from the 
University of Chicago and an MBA from Harvard University. Ms. 
Erickson has researched and published extensively on the topics 
of coming demographic shifts, the ability of employers to 
attract and retain older workers, and what she has titled ``The 
New Employer-Employee Equation,'' a phrase which summarizes the 
changing nature of what employees expect from work and how 
employers can attract, retain, and engage quality employees.
    We are also pleased to welcome Diana Furchtgott-Roth--did I 
get that right?
    Ms. Furchtgott-Roth. You did.
    The Chairman. All right. Director of the Center for 
Employment Policy at the Hudson Institute here in Washington, 
D.C. Ms. Furchtgott-Roth holds master's degrees in philosophy 
and economics from Oxford University and earned her B.A. cum 
laude in economics at Swarthmore College. She has held several 
important positions in three administrations, including chief 
economist of the Department of Labor, chief of staff to the 
Council of Economic Advisers, and associate director of the 
Domestic Policy Council and Office of Policy Planning under the 
former President George H.W. Bush.
    We are also pleased to have Jared Bernstein, director of 
the Living Standards Program at the Economic Policy Institute 
here in Washington, D.C. Dr. Bernstein holds a Ph.D. in social 
welfare from Columbia University and held the position of 
deputy chief economist at the Department of Labor under the 
Clinton administration.
    We also invited to testify today Gary Garczynski, a past 
president of the Home Builders Institute, which focuses on 
workforce development for the construction industry, on behalf 
of the National Association of Home Builders. Unfortunately, 
due to an unavoidable conflict, Mr. Garczynski is not able to 
join us today. However, his testimony will be submitted for the 
record. This testimony details some of the creative ways the 
home-building industry has reached out to nontraditional 
employees to fill the severe and growing skilled employee 
shortage facing the industry.
    For example, the industry has worked with Job Corps Centers 
to train and employ 2,000 kids a year, and they have created 
programs targeting the homeless, court-involved youth, adult 
ex-offenders, people with disabilities, people over age 55, and 
women veterans. The goal of these outreach programs is twofold: 
first, it spreads the message that the construction industry 
offers good-paying jobs for skilled employees; simultaneously, 
the programs test drive recruitment methods among 
nontraditional employees that industry members can replicate in 
the face of the upcoming 1-million-worker shortfall. In short, 
it is a win-win and something I think many other industries 
could learn from.
    [The prepared statement of Mr. Garczynski follows:]
                 Prepared Statement of Gary Garczynski
    Mr. Chairman, Ranking Member, and members of the committee, thank 
you for this opportunity to testify. It is an honor and I am delighted 
to have been invited to share with you what we in the home building 
industry are doing to develop our workforce, address our labor 
shortages and plan for the new century.
    The National Association of Home Builders' (NAHB) 220,000 member 
firms are involved in home building, remodeling, multifamily 
construction, property management, subcontracting, design, housing 
finance, building product manufacturing and other aspects of 
residential and light commercial construction. Known as ``the voice of 
the housing industry,'' NAHB is affiliated with more than 800 State and 
local home builder associations (HBAs) around the country. NAHB's 
builder members will construct about 80 percent of the more than 1.6 
million new housing units projected for 2005, making the housing 
industry one of the largest engines of economic growth in the country.
    One of the most pressing problems facing our industry today is a 
shortage of skilled workers. Factors contributing to this shortage 
include record high numbers in the demand for the construction of new 
homes, retirements in our industry, and dwindling interest in the 
skilled trades among America's younger generations. Compounding the 
problem has been insufficient training opportunities for those 
considering a career in the industry. As you know, the number of 
construction career programs offered by high schools, postsecondary 
vocational schools and community colleges has declined dramatically 
over the past 25 years, and training through the public workforce 
development system is limited.
    According to the Bureau of Labor Statistics, more than 240,000 new 
workers are needed each year to meet the Nation's demand for housing. 
Importantly, it is also estimated that within the next decade, our 
Nation will need to construct 18 million new homes to meet demand, a 
goal that will only be met by the addition of over a million new 
skilled workers to our industry.
    Many of you will recall that a few years ago Labor Secretary Elaine 
Chao released the Department's workforce plan calling for the active 
engagement of industry and the private sector in developing the 
workforce of the 21st Century. NAHB has been involved in developing our 
industry's labor force for more than 30 years through the Home Builders 
Institute (HBI), our workforce development arm, and working with the 
Department of Labor in particular, to address the need for skilled 
workers.
    Following Secretary Chao's announcement, NAHB's Immediate Past 
President Bobby Rayburn met with the Secretary and her staff to 
reassert our industry's commitment to working with the Department, and 
to discuss the dire situation faced by the housing sector. Faced with 
record demand, and confronting an ongoing shortage of workers, we were 
very pleased when the Department subsequently identified construction 
as a High Growth Industry. NAHB and HBI have continued to work with the 
Department in a number of positive workforce development efforts.

Job Corps Training and Placement

    For example, since 1974, HBI has partnered with the Department of 
Labor to provide skilled trades training to young people enrolled in 
Job Corps. Training is only part of what we do in Job Corps. HBI 
instructors offer a direct connection to careers in our industry while 
providing support and hope to some of our Nation's most at-risk youth.
    HBI offers craft training programs in seven trades--brick masonry, 
carpentry, electrical wiring, facilities maintenance, landscaping, 
painting, and plumbing--and as the largest training partner in Job 
Corps, HBI currently offers 148 programs at 69 centers in 40 States and 
the District of Columbia.
    Through our 800 State and local home builder associations, many HBI 
programs on Job Corps campuses offer students access to work-based 
learning and internship opportunities, as well as free membership to 
NAHB through the NAHB Student Chapters program; and of course, access 
to unsubsidized employment.
    HBI's Job Corps programs help more than 2,000 students each year 
start careers in our industry, and have resulted in a remarkable job 
placement rate of over 90 percent. For those who qualify, there is the 
HBI/Lowe's Building Careers Scholarship Fund which helps students 
transition to the workplace by covering basic costs such as rent, 
household goods or a car to get to work.
    The commitment of the National Association of Home Builders and the 
Home Builders Institute to help disadvantaged and at-risk youth find 
stable and successful careers in our industry could not be stronger, 
and we are proud of the partnership we have enjoyed with the Department 
of Labor through Job Corps.

Project CRAFT for Court-Involved Youth

    HBI has worked through similar public and private partnerships to 
address our industry's need for qualified employees by targeting 
specialized populations. Project CRAFT, (Community, Restitution, 
Apprenticeship-Focused Training) is an award-winning program that helps 
court-involved youth by teaching them construction skills and providing 
them with a gamut of support services to ensure their successful 
transition back into the ``real world.'' The building industry offers 
these young people--who otherwise might have no options--a unique 
ladder to economic success and independence.
    Since the mid 1990s, there has been an increased awareness among 
the private and public sector stakeholders of the need for vocational 
education as a complement to educational remediation in the 
intervention programs for adjudicated youth. A young person who earns a 
GED must additionally acquire a set of work-based skills in order to 
achieve career success. Career and vocational education programs like 
Project CRAFT give these young people the extra training and 
information they need to turn what they learned in their GED program 
into a successful life-long career.
    In 1994, the Department of Labor awarded a Youth Opportunity 
Demonstration Grant to HBI to implement Project CRAFT pilots in 
Maryland, Tennessee and North Dakota. The program brought together for 
the first time business, juvenile justice, education and workforce 
development in one program approach. Its essential components then, and 
today, remain:

     Partnership Building and Linkages
     Industry-Driven Training
     Community Involvement
     Leadership Development
     Job Placement
     Comprehensive Service Delivery
     Followup Services

    Project CRAFT incorporates the apprenticeship concept of hands-on 
training and academic instruction, including numeracy, literacy and 
employability skills curricula. Students learn residential construction 
skills while completing thousands of hours of community service 
construction projects.
    The replication of the CRAFT model began soon after the three pilot 
sites evidenced their first 12-month outcomes. State and local agencies 
began to partner with HBI to offer adjudicated youth the vocational and 
holistic training piloted by Project CRAFT. The program is being 
implemented at residential facilities, as well as a community-based 
aftercare program for juveniles.
    During program year 2003 (July 2003-June 2004), Project CRAFT 
trained more than 400 youth in:

     Florida, on four sites through the State Department of 
Juvenile Justice
     Dallas, in partnership with SER-Jobs for Progress, the 
Dallas County Department of Juvenile Justice and Work Source Dallas
     Monroe Township, funded by the New Jersey Juvenile Justice 
Commission
     Nashville, Tennessee, through a Youth Offender 
Demonstration grant from the U.S. Department of Labor, with the 
Davidson County Drug Court, the Tennessee Department of Correction and 
the Tennessee Board of Probation and Parole
     Jackson, Miss., funded by the State Department of Human 
Services, established in May 2004

    Cumulative outcomes for these Project CRAFT programs in program 
year 2003, not including the newest program in Mississippi, saw an 
average wage upon placement of $8.58/hour with 85 percent of students 
placed in jobs in the industry after graduation.
    Job Corps and Project CRAFT are youth-focused programs where 
industry and government produce tangible positive outcomes. These 
programs have earned a reputation as worthwhile investments of 
taxpayers' hard-earned dollars, a significant resource to the Nation's 
building industry and a major contributor to the future success of 
thousands of young people.

HEART for Homeless Veterans

    HBI's HEART (Homeless Employment and Related Training) was 
developed as a model pilot program funded by the Department of Labor 
and is currently serving 30 homeless veterans and ex-offenders a year 
in Columbia, South Carolina. Like our other training programs, HEART 
provides these veterans with important skills training and career 
information to obtain employment in our industry. The program is 
conducted in cooperation with the Home Builders Association (HBA) of 
Greater Columbia and the Alston Wilkes Society. After 7 successful 
years, this program is hoping to secure continued funding after year's 
end. HBI continues to hope that additional resources will become 
available for us to be able to continue this worthwhile program.

Reentry Through TRADE

    Serving a different population is Project TRADE (Training, 
Restitution, Apprenticeship Development Employment), a program that 
currently trains and places 210 adult ex-offenders a year in industry 
jobs. TRADE is implemented in Colorado Springs in partnership with 
ComCor, the State's largest community corrections provider and in 
Sheridan, Illinois, in partnership with the Illinois Department of 
Corrections.
    Other programs that HBI has implemented include:

     CRAFT SKILLS (Community Restitution Apprenticeship-Focused 
Training Seniors Keeping Intensive Life Long Skills) which in 
collaboration with the National Council on Aging (NCOA), offers adults 
55 and over training and job placement in facilities maintenance.
     Doors to Success introduces women veterans to the world of 
careers in the residential building industry. HBI was funded by the 
U.S. Department of Labor's Office of Veterans' Employment and Training 
Services to help veterans transition to new careers in housing. This 
program in particular, if replicated, has the potential for great 
success as thousands of our military personnel, male and female, return 
from tours of duty abroad and seek skills training and employment in 
civilian industries.
     Project HOPE (Homebuilding--Opportunities for Positive 
Employment) trained and placed people with disabilities for employment 
in the home building industry in Denver with the Home Builders 
Association (HBA) of Metro Denver, the Colorado Department of 
Vocational Rehabilitation and the U.S. Department of Education's 
Projects With Industry; and in Columbus, Ohio, in collaboration with 
the Ohio Rehabilitation Services Commission (ORSC), the Hilltop 
Community Development Corporation and Reynoldsburg Public Schools.

    NAHB through HBI, has long worked with its State and local 
affiliates to target non-traditional populations to help address the 
industry's worker shortages. Many projects are still going strong 
thanks to the industry's commitment, and the commitment shared by the 
Federal and State Agencies and policymakers, who through their support 
make it all possible.

Postsecondary Schools Meet the President's High Growth Job Training 
                    Initiative

    In September 2004, the U.S. Department of Labor (DOL), under the 
President's High Growth Job Training Initiative, awarded HBI a $4.2 
million dollar grant to develop a new approach to building our Nation's 
construction workforce.
    The program ``Building Today's Workforce for Tomorrow,'' will be 
implemented at 10 sites over 3 years--the first four official grant 
partners are located in Florida, Idaho, South Carolina and Virginia. 
The sites will strive for virtually identical goals:

     Recruit 250 participants into the program;
     Develop an Associate's Degree that combines craft skills 
training with academic credit;
     Provide hands-on training in carpentry, electrical wiring, 
plumbing and HVAC; and
     Disseminate best practices and products nationwide to 
assist others in replication.

    Students will be instructed using HBI's widely popular Residential 
Construction Academy Series textbooks and other instructional materials 
developed by HBI with noted publisher Thomson/Delmar Learning. I have 
brought an example of our teaching text with me today. The Series is 
based on the first set of trade skill standards developed by NAHB's 
members and educators following the guidelines outlined by the National 
Skills Standards Board.
    Another element making this new project exciting is the level of 
collaboration among the various stakeholders. Facilitated by HBI, NAHBs 
local associations, community colleges, local schools and workforce 
development boards, the program will work to ensure that students 
receive a well rounded education and exit with the ability to find 
employment in the construction industry.
    The $4.2 million will be disbursed at each of the 10 sites over the 
next 3 years. Plans are to have the final six new sites start operation 
on December 1, 2005.

Building on Skills to Build America's Future

    In April of last year, the ``Skills to Build America's Future'' 
Initiative was launched as an outreach effort sponsored by the U.S. 
Department of Labor and industry partners to educate young people and 
workers in transition to the career opportunities available in the 
skilled trades. NAHB is a principal partner in this effort along with 
the Construction Industry Roundtable and the National Heavy & Highway 
Alliance and its seven international unions.
    To build on this outreach initiative, HBI will soon be launching a 
similar effort to educate young people on the many career opportunities 
available in the residential construction industry. Beyond the 
traditional trades commonly associated with our industry, other 
``skilled'' trades are also critical. The industry is in need of 
accountants, engineers, estimators, managers, schedulers and marketing 
people among many others. In all, there are more than 100 careers to 
choose from in residential construction. The building industry today 
more than ever, offers opportunities for people of all ages with every 
kind of aptitude and skill, to build a successful career.
    To conclude, yes, the housing industry is booming and full of 
possibility. However, we must ensure that there are sufficient training 
programs to train the 1 million new workers and to build the 18 million 
new homes needed over the next decade. As a dramatic shortage of 
workers in our industry leads to fewer homes being built, NAHB is 
greatly concerned that the cost of housing will increase sharply, 
forcing thousands of Americans out of eligibility for a mortgage and 
hurting their ability to own a home.
    NAHB and the Home Builders Institute work aggressively with all 
available resources to provide information, programming, and 
educational opportunities to those interested in starting a career in 
our industry. Each year, HBI partners successfully with government to 
help prepare the workforce for one of the Nation's fastest-growing and 
most dynamic industries. Together, through the joint efforts of NAHB, 
HBI and government, combined with the energy, focus and determination 
of thousands of young workers, we are helping to build America.
    Thank you, Mr. Chairman, Ranking Member, and members of the 
committee for your time and interest in our efforts.

    The Chairman. Welcome, all of you. Thanks for taking time 
out of your busy days to share with us. Your full statements 
will be a part of the record, and now we will hear from the 
panel. Ms. Erickson?

   STATEMENTS OF TAMARA J. ERICKSON, EXECUTIVE OFFICER, AND 
MEMBER, BOARD OF DIRECTORS, THE CONCOURS GROUP, WATERTOWN, MA; 
DIANA FURCHTGOTT-ROTH, DIRECTOR, CENTER FOR EMPLOYMENT POLICY, 
  THE HUDSON INSTITUTE, WASHINGTON, DC; AND JARED BERNSTEIN, 
DIRECTOR, LIVING STANDARDS PROGRAM, ECONOMIC POLICY INSTITUTE, 
                         WASHINGTON, DC

    Ms. Erickson. Thank you, Mr. Chairman. I am deeply honored 
to be with you here today to discuss the 21st century 
workplace. Our research very much supports the points you made 
in your opening statement.
    Senator, we in the American workforce are older, fussier, 
and busier than ever. At the core, reshaping the relationship 
between employees and employers is critically important. 
Today's workforce already experiences alarmingly low levels of 
engagement in work. Improving engagement--finding ways to 
encourage individuals to invest more psychic energy in work--is 
the single most powerful lever that most corporations have to 
improve productivity.
    The 21st century workforce will be significantly different 
than the workforce of the past century. It will be 
chronologically older. Individuals over 55 will represent 
progressively larger proportions of the workforce--11 percent 
just 5 years ago in 2000, 20 percent 10 years from now in 2015, 
and nearly one-third by 2050.
    Lacking key skills. The workforce will not have the optimum 
mix of talent needed by our industries. Many high-skill areas, 
such as engineering disciplines, are already approaching 
critical shortages.
    Global. In part as a result of labor and talent shortages 
and in part to take advantage of cost arbitrage or market-based 
opportunities, offshoring of work will continue to grow.
    Highly diverse. The U.S. workforce in the 21st century will 
be diverse in virtually every conventional dimension--race, 
gender, age, religion, and cultural identity. But even more 
significantly, it will be populated by individuals with widely 
different values and assumptions about work itself.
    Profoundly disengaged from work. Many employees today are 
emotionally pulling away--detaching from work and depriving 
businesses of immeasurable energy, innovation, and drive. Our 
research indicates that only 20 percent of the U.S. workforce 
today is currently significantly engaged in their work. 
Improving engagement is probably the single most powerful lever 
that many corporations have to improve productivity today.
    The problem? Corporations as we know them today are not 
ready. Hierarchical structures, rigid job designs, top-down 
decisionmaking, and, particularly, unilateral employment 
relationships are at odds with the values and needs of the 21st 
century working. Fortunately, over the last several years, 
significant advances in technology give us astonishing options 
for altering the way businesses operate. Soon their spread will 
make good on the promise of free, instant, and continuous 
communication. Ubiquitous connectivity, digital, virtual, 
personal, everywhere on everything and always on, will provide 
extraordinary opportunities for coordination and collaboration.
    With this, we can make work environments more competitive 
and better for people at the same time. Over the next several 
decades, small firms will proliferate. Growth will emerge from 
lateral collaboration and bottoms-up creativity and innovation. 
Organizations will be able to conduct their governance 
processes in fundamentally different ways, with opinion 
polling, market-based mechanisms, and even democratic elections 
coming into the workplace.
    As a result of these two forces, unprecedented demographic 
change, coupled with astonishing technology-driven options for 
how to run corporations, the nature of the relationship between 
employees and employers will change substantially. Retirement 
will be retired.
    Now, I must say I feel like I am preaching to the choir on 
this one. Senators seem to be a particular group of people who 
already understand that the concept of retirement is outdated. 
But, actually, 34 percent of all U.S. workers say they never 
plan to retire. Today the average American can expect 20 or 
more years of active, healthy life after traditional retirement 
age. We need this talent, and we will adopt a more flexible 
view of work to coax more to stay. Career paths will be bell-
shaped. Individuals will be able to continue to contribute to 
businesses into their 70s, 80s, and beyond. Counterintuitive 
entry points will be the norm. Individuals will begin entry-
level jobs at multiple points throughout their lives.
    Cyclical and project-based work will proliferate. Already 
49 percent of the workers who want to work after traditional 
retirement say they would prefer cyclical work--3 months on, 3 
months totally off--to part-time.
    Job-sharing and other accommodations to blended lives will 
be widely available. Health will be a core value, and health 
care benefits will be the single unifying desire of the 21st 
century workforce. And, overall, work arrangements will be fair 
but not identical. Corporations will vary how individuals are 
compensated, managed, and matched with different tasks.
    How we as a society choose to invest in the unprecedented 
pool of energy and capability that will be available in our 
older workforce will have a major impact on our productivity as 
a nation this century. Thank you for your leadership and 
foresight in preparing for this exciting future.
    The Chairman. Thank you very much.
    [The prepared statement of Ms. Erickson follows:]
                Prepared Statement of Tamara J. Erickson
                           executive summary
    The business challenge of the 21st Century is using the skills and 
capabilities of our workforce effectively. This will require new and 
more flexible approaches to the ``deal'' between employers and 
employees and new and more ``democratic'' forms of corporate 
organizations. Most importantly, it involves new assumptions about work 
and workers.
    On the positive side, a rich pool of talent will be available. 
Although it won't be the type of workforce we've come to rely on--
unlimited numbers of eager youth--many highly skilled individuals will 
have the energy and desire to ``work.'' This century will usher in a 
new life stage: for the first time in human history, we will have a 
significant stage of non-child-rearing, productive adult life. Already 
today, by the time their children leave home, most adults will have 25 
years more of active, healthy life. How we as a society choose to 
invest this unprecedented pool of energy and capability will have a 
major impact on our productivity as a nation in this century.
    On the negative side, corporations as we know them today are not 
well aligned with the values of many individuals within this century's 
workforce. Hierarchical structures, rigid job designs, unilateral 
employment relationships, and cascading decisionmaking are at odds with 
the idealistic values of the Baby Boomer cohort and the independence of 
cohorts to follow. Our business organizations and employment policies 
face significant challenge to adapt to the needs and values of the new 
workforce.
    At the core, reshaping the relationship between employees and 
employers is critically important. Today's workforce already 
experiences alarmingly low levels of engagement in work. Improving 
engagement--finding ways to encourage individuals to invest more 
psychic energy in work--is the single most powerful lever that most 
corporations have to improve productivity. After decades of downsizing, 
rightsizing, and re-engineering, most corporations have virtually 
exhausted their ability to squeeze increased productivity out of the 
system through top-down pressure. The opportunity today is to raise our 
engagement with work--to tap into the creativity and passion of the 
American workforce.
    Creating higher engagement levels is all about recognizing 
individual strengths, needs, preferences, and values. Companies need to 
shift the human resource paradigm from a focus on ``equality'' played 
out by treating everyone the same, to ``fair, but customized'' 
reflecting different arrangements suited to individual needs and 
preferences.
    Our landmark research has identified six archetypal relationships 
between employees and employers. Individuals reflected by these six 
segments differ in terms of the role that work plays in their lives and 
the type of work experience that is most likely to create high levels 
of engagement.

The Changing Workforce

    The 21st Century workforce will be significantly different than the 
workforce of the past century.

     Chronologically older--Individuals over 55 will represent 
progressively larger proportions of the workforce. We've just passed an 
important crossover point. After a steady decline in the proportion of 
older workers through the 1990s, the percent is now on the rise. The 
proportion of over-55 workers declined from 18 percent in 1970 to 11 
percent in 2000. By 2015, this group will have rebounded to represent 
20 percent. Fueled by ever-longer life spans and lower birth rates, 
older workers will continue to grow as a portion of the available labor 
pool throughout the century. We can't afford not to leverage this 
talent--our businesses will need both the numbers and, more 
importantly, the skills represented in this growing cohort. And, as our 
research shows, most mature employees are more satisfied and engaged, 
happier on the job and better adjusted to the workplace than average 
younger workers.
     Limited in availability--The workforce will grow slowly or 
decline in size in most developed markets. In the U.S., the workforce 
is forecast to grow by only a fraction of a percentage point a year for 
most of the first half of the century. The total working age population 
will grow at 2-3 percent per decade from now through 2030 and then 
increase to 3-4 percent per decade through 2050--still only a fraction 
of a percent per year. By comparison, the rates have been 12-15 percent 
per decade for most of the second half of the 20th Century. Industrial 
growth will be constrained by the availability of labor if we continue 
to operate in a 20th Century model.
     Lacking key skills required to align with business needs--
The workforce will not have the optimum mix of talent needed by our 
industries. There will be shortages of many key skill sets, and 
excesses of other less-strategic capabilities. Many high skill areas, 
such as engineering disciplines, are already approaching critical 
shortages. For example, the average age of petroleum engineers in the 
U.S. is approaching 54, while many of the oil companies still have 
lucrative early retirement programs that will allow these scarce 
resources to leave the workforce at 55. We are on the brink of critical 
shortages in a number of key skill areas, assuming retirement 
approaches remain unchanged.
     Global--In part as a result of labor and talent shortages 
and in part to take advantage of cost arbitrage or market-based 
opportunities, off shoring or ``smart shoring'' of work will continue 
to grow. By mid-century, most corporations will operate as connected 
communities, with amorphous corporate boundaries encompassing a wide 
variety of partners and contractor relationships. Regional ``hot 
spots'' will form around the world--nodes of connectivity, talent, and 
infrastructure.
     Physically dispersed--Even within one geographic location, 
work will increasingly be done anywhere, anytime, rather than in fixed 
locations on 9 to 5 schedules. Managing the workforce will become more 
and more analogous to the challenge of managing customers--developing 
relationships and maintaining active connections will be key.
     Wrestling with complex lives--Away from work, nearly half 
of employees today wrestle with parenting responsibilities, and more 
than one-fourth struggle with personal or family health issues. Two-
thirds say they are coping with financial crises or trying to reduce 
their debt. As life spans increase, the complexity of individual lives 
will only increase. Balancing the needs of multiple generations and 
competing priorities will continue to grow as a challenge.
     Inventing a new life stage--As a result of increasing 
health and longevity, most individuals will experience a new life 
stage--a prolonged period of time after primary parenting duties are 
fulfilled but before they will look, feel, or act ``old.'' This 20-30 
year period, unprecedented in history, will offer exciting 
opportunities for creation and contribution.
     Highly diverse--The U.S. workforce in the 21st Century 
will be diverse in virtually every conventional dimension--race, 
gender, age, religion and cultural identity. However, our research has 
found no significant differences by these conventional measures of 
diversity in terms of overall job satisfaction, satisfaction with one's 
immediate manager, or engagement level. Nor are there any significant 
differences in how people relate to work or the workplace conditions 
that bring out the best in employees. Yet the workforce is populated by 
individuals with widely differing values and assumptions about work 
itself. These divergent attitudes toward work will be the most 
important forms of workplace diversity this century, challenging 
employers to find innovative ways to understand and respond to 
disparate needs.
     Profoundly disengaged from ``work''--Many employees today 
are searching for ``more'' than they are able to draw from their work 
experience. Mid-life's pivotal point today is more-often-than-not a 
reflection on the impact of one's life on the world. As employees reach 
whatever milestone triggers a sense of middle age, more and more are 
reprioritizing to live up to the idealistic values formed as youth. 
Increasingly, employees are asking whether the paths they have taken 
are indeed consistent with the values they formed earlier in life. 
Coupled with a general disillusionment with corporate life, many 
workers are emotionally pulling away--detaching from work, and 
depriving businesses of immeasurable energy, innovation, and drive. Our 
research indicates that only 20 percent of the U.S. workforce is 
currently significantly engaged in work.

    These workforce trends represent a major challenge for U.S. 
corporations--and a major opportunity. Our research provides compelling 
evidence that meeting the evolving needs of employees effectively will 
result in significantly higher engagement and, as a result, higher 
productivity and bottom-line financial results.

Technology, Corporations, and the Nature of Work

    While the characteristics of the workforce are changing, so too are 
significant advances in technology driving the way our businesses 
operate. These advances will both reinforce and enable the desires of 
individual workers, allowing greater personal flexibility, autonomy and 
participation and, as a result, increased corporate productivity.

     Free and instant coordination--Technologies including 
service-oriented web architecture, radio frequency identification 
chips, and sensor nodes will provide extraordinary opportunities for 
coordination and collaboration. Soon, smart objects, intelligent 
sensors and ubiquitous connectivity will be everywhere, on everything, 
and ``always on.'' Instead of processing data, businesses will be based 
on processing information about events in real time. Instead of waiting 
for operator input, sensor networks will respond directly to their 
environment.
     Highly efficient markets--The pressure on corporations for 
increased levels of productivity will be unrelenting. The easy 
availability of inexpensive coordination technology will make the 
relationship between business and consumers much more efficient. More 
efficient markets will threaten any firm whose business model embraces 
inefficiencies. Consumers will find it easier to collect information, 
compare prices, and select multiple providers based on the core 
competencies of each.
     True participative decisionmaking--Technology will allow 
organizations to conduct their governance processes in fundamentally 
different ways--ways that are more compatible with the values and 
preferences of this century's workforce. Over the next several decades, 
hierarchy will give way to lateral communication among relatively 
autonomous, entrepreneurial groups. As it becomes both economically and 
logistically feasible to obtain input from a large number of people, 
opinion polling and even democratic elections will come into the 
workplace. Market-based mechanisms allowing individuals to make their 
own mutual agreements, as contractors and freelancers around specific 
projects, will be commonplace within several decades.
     A plethora of small, highly focused firms--Networked 
technology facilitates the unbundling of integrated corporations, 
leading to more focused companies. Smaller firms, specialized around 
core competencies, will proliferate this century. Coordination-intense, 
networked organizational structures will allow firms to adjust 
continuously to changing requirements for different combinations of 
skills and resources.
     Strategies based on agile experimentation--Top-down 
direction and annual strategic planning cycles will be replaced by 
rapid waves of near-term experimental initiatives, brought into focus 
by a shared view of a company's long-term strategic direction. Growth 
will emerge from the creativity and innovation that comes from a shift 
in control: top down to bottoms up--driven by engaged employees, 
partners, and even customers.

    The nature of work in this century will be both driven by and 
responsive to the desires of the evolving workforce. Smaller 
organizations and more flexible, participative processes reflect core 
values and preferences of the coming cohorts of employees. At the same 
time, the need to create a highly engaged network of diverse talent 
will become critically important to meeting the agile operating styles 
required for the 21st Century corporation.

The New Relationship Between Corporations and Employees

    As a result of changes in the people who comprise our workforce and 
of the technology that enables our work, the nature of the relationship 
between individuals, the work they do, and the companies that they form 
will change substantially during this century.

     The end of ``retirement'' as we know it--Retirement is a 
modern social experiment and our parents were the guinea pigs. For 
almost all of history, until the early 1900s, people worked until they 
died. Today, the average American retires at 62--and, with rising life 
expectancies, can expect 20 or more years of active life. Over this 
century, we will retire the concept of ``retirement'' as we know it 
today--to be replaced by a more flexible view of work, intermingled 
with periods of leisure throughout all of adulthood. Already, 34 
percent of all U.S. workers say they never plan to retire. Our research 
shows that the better educated the employee, the more likely he or she 
is to want to work in retirement.
     Bell-shaped-curve career paths--Rather than the cliff-
shaped career paths of the past century--individuals on an ever-upward 
path toward ever-greater ``success''--21st Century careers will be 
bell-shaped. A career deceleration phase in one's 50's through 80's 
will parallel the career development phase of one's 20's through 40's. 
After achieving peak levels of responsibility in one's mid-career, 
individuals will be able to continue to contribute to businesses in 
legitimate, respected, although less intense ways.
     Counterintuitive hiring options--Individuals will enter 
into new careers at multiple points throughout their lives. Older 
workers will accept ``entry'' level jobs, as ways into new lines of 
work or flexible options suited to a preferred lifestyle.
     Flexible work arrangements--Going forward, more flexible 
work arrangements are both necessary and possible. Corporations will 
provide personal variability around how individuals are compensated, 
managed, and matched with different types of tasks.
     Cyclical or project-based--Project-based work will become 
the norm--many workers will operate as ``intellectual mercenaries'' 
assembled by project over the Web, as needed. Already, 49 percent of 
U.S. workers who plan to work during traditional retirement years say 
that they would prefer cyclical arrangements--periods of full-time work 
interspersed with periods of no work--over more conventional part-time.
     Small firm employment--Those employees who do affiliate 
with a single corporation will be increasingly likely to be employed by 
small firms. Small firms will become more prevalent over the century 
based on changes in technology. They also tend to be more attractive to 
employees. Today, small firms on average have 2\1/2\ times more highly 
engaged workers than do large corporations (32 percent versus 13 
percent). Although large employers offer significantly more benefits, 
they get less engagement in return.
     Virtual work--More workers will work from home or other 
flexible locations as technology continues to enable remote and mobile 
work and workers who are accustomed to interacting through technology 
become a dominate presence in the workforce. Today, almost three-
quarters of the U.S. workforce still work at a fixed location. However, 
this percent will decline over the century as a confluence of 
technological enablement, employee preference, and corporate cost 
pressures drive organizations to seek ways to shift away from ``bricks 
and mortar'' and associated overhead.
     Personal technology--Young workers entering the workforce 
today ``own'' their own technology--it is as much a part of their 
personal being as wallets are to their parents. Soon the concept of 
corporations supplying computers or cell phones will be as outdated as 
the clothing allowances of the 1950s or company calculators of the 
1970s. All tomorrow's employees will ask is that business ``beams them 
in.'' Security will be replaced by selection as a core concern, since 
hiring ethical individuals will be more effective than trying to 
control access in an increasingly ubiquitous world.
     Job sharing and other accommodations to blended lives--
Each for somewhat different reasons, today's worker cohorts are less 
willing to devote all of their life's passion to ``work.'' Baby Boomers 
want to devote a part of their energies to idealistic goals. Younger 
cohorts have an inherent reluctance for institutional affiliation, and 
a tendency to prefer independent relationships. Workers in this century 
will be increasingly articulate in demanding work relationships with 
corporations that allow them to retain the degree of control and 
flexibility required to pursue other activities equally successfully.
     Growing expectations for broad-based participation--The 
new workforce will increasingly expect to participate in the business 
in new ways, including democratic or market-based decisionmaking 
processes and hands-on ability to experiment with new strategies and 
the creation of products and services.
     Fundamentally different patterns of personal learning and 
corporate growth--The manner in which today's younger workers have 
learned to learn is radically different from their parents' approach. 
Rather than linear learning from authoritative sources, younger workers 
tend to learn through a process termed ``bricolage''--pulling pieces of 
information from a variety of sources and piecing them together. This 
experimental learning approach, coupled with technology's increasing 
micro-interactions and perfect recall--will carry over into the way 
work gets done. Workers will move from episodic interactions to 
persistent experiences.
     Health as a core value--Health will continue to be a 
growing touchstone for decisions in the home, workplace and community. 
In the U.S., health care benefits will be the single unifying desire of 
the 21st Century workforce. Among more detailed elements of the deal, 
health care coverage is employees' top priority today by far, with half 
again the preference accorded any other element. Our work identified 
individuals who are working today only to receive health care benefits.
     Fair, but not equal--Customized ``deals'' will be the 
norm--fair, but not equal. Many human resource practices over the past 
decades have been aimed at ensuring that all employees are treated 
``equally.'' In fact, as our research convincingly demonstrates, 
although fairness is important, people don't want to be treated the 
same. The reasons people work, their sources of pleasure or 
satisfaction, and the returns that they most appreciate differ quite 
significantly. Understanding and responding to these differences is at 
the heart of creating an engaged workforce.

    The key to productivity is going forward is recognizing the variety 
of reasons that people work--the different roles of work in our lives--
and shaping the employee/employer relationship in ways that 
appropriately reflect this diversity.
    Our work has identified six fundamentally different archetypes of 
the relationship with work found within the workforce. The six segments 
have distinct traits and preferences regarding work and its role in 
their lives. There are significant differences in the levels of 
engagement within each segment. And there is a significant correlation 
between the extent to which employee preferences are met and their 
engagement levels. Understanding and responding to these segments 
represents the foundation for improving engagement.

The Employer/Employee Equation Segmentation Model

    Today's workforce is made up of six employee segments, each with a 
different set of drivers--ranging from the straightforward and 
immediate need for money, to the longer-term desire to build a lasting 
legacy for the future. Our proprietary segmentation model recognizes 
the different role that work plays in people's lives. Employees in each 
of these segments want different things from their work experience and 
are engaged by a different set of employee ``deal'' elements.
    Importantly, our work has shown that average engagement levels vary 
from segment to segment. For example, in general, people who view work 
solely or primarily as a source of money have the lowest levels of 
engagement. Those who view the role of work in their lives as a 
mechanism for meeting social needs or creating a lasting legacy, have 
significantly higher levels of engagement. One bottom-line conclusion 
from our research is that more money does not, by itself, produce 
higher engagement levels. Even more significantly, our work has found 
that the reasons why people are more or less engaged vary by segment 
and has identified which factors are most important to each type of 
employee.
    These results are significant and very encouraging. Just as with 
the segmentation of consumer markets, employers can understand the 
segment distribution in their workforces. They can target segments that 
are best suited to the nature of the work within their business and 
shape powerful employer brands to attract the desired talent. They can 
then adjust work situations and elements of the employment deal to meet 
the needs and expectations of key segments so as to bring out the best 
in terms of engagement and therefore performance.


    The six segments are introduced below, starting with the group with 
the highest average engagement level and ending with the lowest.
    Self-Empowered Innovators represent individuals for whom work is 
about building something with lasting value. Workers in this segment 
are entrepreneurial, hard-working, creative, well-educated and self-
empowered. They are an organization's most engaged group of employees. 
They consider themselves leaders and have frequently assumed the role 
of senior-level manager, with many self-employed or heading their own 
companies. For them, work is a source of great personal satisfaction. 
They are the most likely to define success as being true to themselves, 
and agree that a good deal of their pride comes from their work and 
careers. They are the most likely of all employees to say they are 
impassioned and energized by their work, and that time passes quickly 
on the job. Half say they will never retire. Individuals in this 
segment are not highly motivated by traditional rewards, such as 
additional compensation, vacation time, or even a better benefits 
package. Instead, they are looking for work that continues to empower 
and stimulate them, enables them to continue to learn and grow, and has 
a greater social purpose.
    For Fair & Square Traditionalists work is about the American 
dream--a steady, predictable path to success. These individuals are 
highly reliable and loyal workers seeking traditional rewards. They got 
where they are by putting their noses to the grindstone, working hard, 
and being team players. In return, they want to be fairly rewarded for 
their efforts through concrete, traditional compensation like good 
benefits and a solid retirement package. The group is slightly below 
average in terms of education but above average in household income. 
They are pleased with their success, and often describe themselves as 
family men and women, high achievers, and leaders among their peers. 
They have less interest in ``softer'' work benefits like stimulating 
work, enjoyable workplaces, work that is worthwhile to society, or even 
flexible work arrangements. And they are the least drawn to riskier 
compensation like stock or bonuses. They seek stable and secure 
environments, have the longest average tenure with their employers, and 
have the second highest engagement level among the six segments.
    Accomplished Contributors view work as an opportunity to be part of 
a winning team. These individuals are engaged by their work and by 
contributing to the organization's success. They take pride in what 
they do, are willing to put in extra effort, value teamwork, and seek 
an atmosphere that is cooperative and stimulating. To them, 
``contribution'' is the name of the game, and they like to do work that 
is worthwhile to society. This group is loyal, hard-working, reliable, 
capable, and typically very experienced. They place less value than 
most others do on individualistic rewards such as more money or 
vacation, and express less need for flexible work arrangements. 
Instead, they place strong emphasis on work that is personally 
stimulating, work environments that are congenial and fun, colleagues 
who cooperate, and employers who provide stability and job security.
    Maverick Morphers seek lives filled with change and adventure--work 
is one of multiple opportunities to achieve these goals. These 
individuals tend to be well-educated, successful, and restless. They 
thrive on exciting work and personal success. They're not afraid to 
take chances, try new things, and shape the rules to fit their 
lifestyles. Frequently working for smaller organizations or self-
employed, they are often senior-level managers, despite their relative 
youth. Growth and opportunity and variety are what drive them, and they 
value organizations where they can work with other bright people and do 
work that is inherently worthwhile. They own their careers and pioneer 
new ways of working. They are the most likely to want flexible 
workplaces and work schedules that enable them to work on their own 
terms and pursue their own interests. Confident in their abilities, 
they are the most likely to seek out bonus compensation and stock to 
reward their accomplishments. Organizations need to work hard to retain 
them, as they actively explore their career options and their tenures 
with employers on average are brief.
    For Stalled Survivors, work is a source of livelihood but not yet 
(or not currently) a very satisfying part of their lives. For a variety 
of possible reasons, work for these individuals is largely ``on hold.'' 
The youngest workforce segment, many are just starting off in their 
careers, getting married, having children, or pursuing interests 
outside of work. They are busy trying to balance their lives--
personally, financially, and emotionally. They tend to feel that they 
are pulled in too many directions, and often describe themselves as 
stressed out from their many obligations. At this time in their 
careers, they are looking for employers who can make it a little easier 
to cope. They frequently seek out an improved work/life balance through 
more flexible work arrangements, and they value additional pay and 
vacation and family benefits such as childcare and maternity/paternity 
leave. They also value employers who offer environments that are more 
congenial and fun. They likely view their current challenges as a 
temporary phase, and many are seeking new roles and positions at work 
that will enable them to get more in control of both their careers and 
lives.
    Demanding Disconnects view work as generally frustrating and see 
its value largely in terms of near-term economic gain. They derive the 
least satisfaction from their employment and return the least 
commitment to their employers. Although they wish for stability, 
security, and greater recognition and reward, many are frustrated by 
the nature of their work, lack of opportunity, or perceived unfairness 
in their employment arrangements. Some are simply disgruntled. Many 
feel dead-ended--that they have gotten as much as possible out of their 
current positions and want to move on. They admit they are not high 
achievers or leaders. Most feel that their organizations do not bring 
out the best in them. Some are struggling with low income, more focused 
on making ends meet than on deriving personal fulfillment from their 
work. They expect a lot in return for their labor and place high value 
on traditional compensation and benefits packages, while expressing 
less interest than other segments in work that is enjoyable, personally 
stimulating, or worthwhile to society. We believe some could be more 
highly engaged with different work designs.
    This groundbreaking segmentation offers specific insight into how 
best to engage each group in the evolving workforce. There's simply too 
much potential energy, commitment, and productivity going to waste not 
to consider a fundamentally new relationship between employees and 
employers.

Why Engagement Matters

    Informed by our comprehensive body of research, several things are 
clear about engagement in the 21st Century workplace:

     Engaged workers are more productive and contribute 
positively to financial success. For many companies, improving 
engagement is undoubtedly one of the single most powerful levers 
available to improve productivity.
     Today, low engagement represents a major opportunity for 
improvement across corporate America. If not addressed, low engagement 
will be a growing limitation for most corporations--hindering a 
business' ability to operate effectively in 21st Century conditions.
     Different people are ``engaged'' by different things. Not 
everyone wants the same things from work.
     Customization of the employee experience broadly--
including the nature of the work itself, management style, as well as 
components of compensation--is possible, practical, and the key to 
improving engagement.

    A truly engaged employee expends discretionary effort to help 
accomplish the goals of the enterprise. The engaged employee is excited 
by the work, spreads that excitement to others, and is committed to 
both personal accomplishment and group success. The engaged employee is 
motivated to go ``above and beyond'' what the job requires.
    Engagement is above and beyond simple satisfaction with the 
employment arrangements or basic loyalty to the employer--
characteristics that most companies have measured for many years. 
Although satisfaction and engagement often trend together, they're 
different phenomena arising from different sources. Satisfaction is 
about sufficiency--enough pay, benefits, and flexibility to work and 
live, and no major problems or sense of unfair treatment to sour one's 
attitude toward the employer. Satisfaction is the cost of entry into 
the business environment of the future.
    Engagement, in contrast, is about passion and commitment--the 
willingness to invest oneself and expend one's discretionary effort to 
help the employer succeed. For engaged employees, time passes quickly; 
they identify with the task at hand, resist distractions, spread their 
enthusiasm to others, and care deeply about the result.
    Today, neither satisfaction nor engagement levels are high among 
American workers. A slight majority of employees tell us that they're 
somewhat satisfied with their jobs. But only 20 percent are really 
engaged. The components of engagement present a dismaying pattern 
American workers feeling disengaged from their work.


    A growing body of research unequivocally demonstrates the strong 
correlation between employee engagement and tangible results, including 
customer satisfaction, productivity, profitability, and shareholder 
return. Engaged employees are simply good for business. The costs of 
low engagement are difficult to calculate but must be enormous. They 
add up day-by-day and employee-by-employee as people do the minimum 
necessary to get by and withhold the discretionary behaviors--insight, 
originality, judgment, humor, leadership, friendship--that can make for 
a high-performance organization.

Making Work More Engaging

    Why are employees not enjoying their work more? Why are only 20 
percent genuinely engaged in their work and committed to their 
employers? Why do well under 50 percent say that their work includes 
collaboration with bright and experienced people, provides 
opportunities to learn and grow, or that it is worthwhile to society? 
Why do fewer than 50 percent say their workplace is congenial and fun, 
that employees cooperate and teamwork is the rule, or that people are 
respected for their abilities and given ample chance to exercise them? 
Why are one in five looking for a major career change, and one in five 
looking for a new job? Why do 42 percent say they experience feelings 
of burnout? Why do more employees (33 percent) feel that they're at 
dead ends in their jobs than say they're working on exciting new 
projects or assignments (28 percent)?
    Low engagement levels demonstrate that for most employees the 
current ``deal'' isn't working well. Our research shows that employers 
place too much emphasis on compensation and benefits and the tangible 
elements of the employment relationship, and too little emphasis on the 
heart of the deal--the human relationships, values, and work design 
itself and what the integrated experience of all these factors does for 
the heart and soul of the employee. Is the employee experience 
inherently stimulating and meaningful?
    Employers chronically underestimate the fundamental importance to 
employees of stimulating work, and very few employers have a realistic 
sense of how many employees feel dead-ended and why. In fact, employees 
place extremely high value on work and workplace. When our nationwide 
survey had employees state their relative preference for 10 basic 
elements of the employment deal, the security items--comprehensive 
benefits package and comprehensive retirement package--topped the list. 
But the next three items were all about work and workplace: work that 
enables me to learn, grow and try new things; workplace that is 
enjoyable; and work that is personally stimulating. The most innovative 
and accomplished and already-engaged employees value work and workplace 
the highest, often above the security items.


    A successful employee experience starts with the job itself--work 
that is inherently meaningful and interesting to each employee, work 
that enables individuals to exercise their personal capabilities and 
strengths. People who love their work invest more of themselves in 
their jobs, perform better, improve more, and stay longer. Putting 
aside specific skills and educational accomplishment, the best 
employees--those that businesses most want to keep--are those who enjoy 
performing. They like to accomplish their work, and along the way they 
like to learn, teach, improve, invent and serve.
    Unfortunately, work seems more likely to be enervating, rather than 
energizing, for most workers today. Driven by the quest for cost 
control and efficiency, many employers still err on the side of 
designing work processes too much around the output and too little 
around the worker. Employers err on the side of demanding scripted or 
repetitive action by workers, rather than asking workers to engage 
their energies and their brains. And the result is robotic performance 
and high turnover. Some people will stay in jobs despite the inherently 
uninteresting and unenjoyable work. They may be dependent on the 
compensation and benefits, unconfident in their chances of finding 
better work elsewhere, or just hanging on until retirement. Such people 
may stay with an employer, but they're not engaged, not giving their 
all, and so the organization performs below potential.
    Most of us probably know from experience or can imagine what 
unexciting work feels like--repetitive, tedious, no variety, no 
learning, no visible result, no connection to what you do best. We also 
know that exciting work has the opposite characteristics. Nevertheless, 
does everyone want work to be highly stimulating, variable, 
challenging? To some degree, yes. Granted, people vary greatly in their 
preference or tolerance for pace, pressure, ambiguity, and variation 
from the norm. Many people prefer routine and many jobs provide it, but 
``routine'' doesn't have to mean boring, unvarying, or unchallenging.
    Good work design has the right mix of human skill and flexible 
options with automation and standardization, bringing out the best in 
both. It's far better to enrich jobs and enable people to use their 
skills than to render work routine and treat people as cogs in the 
wheel of automation. Enriching work is how you engage people's 
intellect, energy, effort, and commitment. The fundamental idea of this 
century is not to take people out of the equation, but rather to get 
more out of technology and more out of people. Unlike the late 1980s 
and early 1990s, when the people side of process redesign went largely 
ignored in the headlong rush toward computer systems installation and 
corporate downsizing (which often backfired when too few people were 
left to do the same old work), today there is an opportunity to combine 
flexible technology with engaged employees and create the work of the 
future.
    The quality of management--the ability of managers to connect with 
individual employees in meaningful ways--is a critically important 
element of the employee experience. Unfortunately, the performance of 
managers today is perceived as poor: only 36 percent of employees say 
they are satisfied with the support and guidance received from their 
direct managers. Opinions of top management are lower still, and most 
employees do not trust the top management of their organizations. Only 
17 percent strongly agree that ``top management displays integrity and 
morality'' and only 13 percent believe that ``top management is 
committed to advancing the skills of our employees.'' Previous research 
has found a strong correlation between engagement and ``good'' 
management. Our hypothesis is that the inherent definition of ``good'' 
reflected in these studies is the ability of one individual to 
understand and relate effectively to the unique needs and preferences 
of another.
    Customization counts. It is unequivocally clear that different 
people want different things in return for their work. Paradoxically, 
corporations that offer everything to everyone--typically our largest 
firms--are also the ones that tend to have the lowest levels of 
engagement. By creating more focused and individually-specific 
``deals''--ways of compensating employees for the work they do, 
companies can heighten engagement--and potentially save money, as well. 
Compensation approaches need to blend the appropriate mix for the 
firm's targeted segments, ranging from tangible economic returns to 
psychosocial benefits such as a sense of building something meaningful 
or simply fun or adventure, and from long-term rewards such as pensions 
and a lasting legacy to short-term necessities of salary and health 
care benefits.
    Finally, the overall values of the corporation--the philosophy of 
senior management and the messages they send--must be internally 
consistent with the other elements of work, and clearly communicated to 
current and prospective employees.
    Our work found a number of very encouraging examples of firms with 
high levels of employee engagement. Interestingly however, there was 
almost no consistency among these firms around specific practices--each 
firm seemed to have very different human resource approaches. What 
these firms did have in common was alignment--every element of their 
employees' experience was internally consistent and aligned one with 
the other--and geared to appeal to a specific slice(s) of the 
workforce.
    Bottom line, what must U.S. companies do for success in this 
century? Focus on people.
    Going forward, companies must put the same energy into optimizing 
the relationships with and within the workforce as they have invested 
in optimizing processes and technologies in the 20th Century. By all 
means, companies must continue to employ technology to its fullest 
potential, ensuring that every member of the corporation, from the 
Board of Directors to entry-level employees, has the skill to employee 
technology comfortably and appropriately. But this century will be 
about something fundamentally different--rather than standardizing work 
and work relationships, the 21st Century will both require and allow 
greater variation. Having people do what each individual is good at--
collaborating, understanding variable and complex information, and 
putting their intelligence, creativity and social skills to work, is 
now the key. Aligning all the elements of the employee experience--
everything that touches or influences the workforce, including the 
style of management, the nature of the job, forms of compensation, and 
even the fundamental messages and philosophies of the firm's leadership 
team--with each other and with the preferences of targeted employees, 
is at the core of creating a highly engaged and productive workforce.
    That is--or should be--the promise of the 21st Century workplace.

Our Underlying Research: A Comprehensive Study of the Workforce

    Our conclusions are based on three major research studies related 
to the evolving workforce, stretching over a 3-year period. These 
projects encompassed hundreds of individual interviews and focus 
groups, as well as a comprehensive and statistically-valid survey of 
the U.S. workforce. This work has yielded an unprecedented 
understanding of what employees want from work and how corporations can 
create the ``ideal deal.''
    Our initial project, Demography is De$tiny, examined the impact of 
demographic trends on the workforce and assessed the key values that 
each generational cohort brings to the workplace. One of the major 
conclusions of this research was that low engagement is a major--and 
growing--issue facing corporations, especially among the Baby Boom 
generation, who, as they enter their 40s and 50s, are increasingly 
beginning to question the role of work in their lives. This work also 
found that the workforce is increasingly diverse--not only in terms of 
gender and ethnicity, but also in age and generation, background and 
experience, lifestage and lifestyle, and what people need and want in 
the employment relationship.
    Excelling at Employee Engagement identified leading practices for 
increasing engagement from dozens of firms in the U.S., Canada and 
Europe. A principal conclusion from that research was that 
customization of the workplace experience for each individual lies at 
the heart of engagement success. This research also revealed the link 
between engagement and various measures of business success; anecdotal 
evidence, for example, suggests that there is a powerful link between 
engagement and productivity. We also found influences on many 
``softer'' performance variables, such as innovation and resilience.
    The New Employee/Employer Equation (Project EEE) is a 
groundbreaking research effort undertaken jointly by The Concours Group 
and Age Wave, with the assistance of Harris Interactive, to develop a 
deeper understanding and superior segmentation of the American 
workforce. It was conducted in 2004 and sponsored by a consortium of 24 
major organizations. This work developed a powerful proprietary 
approach to segmentation of the workforce. Our research confirmed the 
importance of employee ``fit'' and how the right employee ``deal'' can 
enhance engagement for each segment.
    The nationwide survey of employees at the heart of Project EEE was 
one of the most ambitious attempts ever to understand the American 
workforce. Our scope included (1) the psycho-demographic 
characteristics of each individual, (2) current levels of engagement, 
and (3) preference and satisfaction with elements of the employment 
deal. Interviews were conducted online June 2-16, 2004, with 7,718 
adult employees who work 30 hours per week or more for a primary 
employer. Results were weighted to ensure that the data accurately 
represent the U.S. adult workforce (those working 30+ hours per week). 
Figures for age, sex, race, education and income were weighted where 
necessary to bring them into line with their actual proportions in the 
working population. ``Propensity score'' weighting was also used to 
adjust for respondents' propensity to be online.
    Although specific projections are my own, this testimony is based 
on extensive collaboration with numerous colleagues at The Concours 
Group, particularly Robert F. Morison, Executive Vice President and our 
firm's Director of Research, as well as with Ken Dychtwald, Ph.D., one 
of the world's leading demographers and founder of the firm Age Wave. 
The research was sponsored by 24 of the world's leading corporations.

    The Chairman. Ms. Furchtgott-Roth?
    Ms. Furchtgott-Roth. Mr. Chairman, I am extremely honored 
to testify before your committee today on the challenges of the 
21st century workforce.
    America's dynamic workforce has always faced changes. 
Americans once worked primarily in agriculture, and then in 
manufacturing, and now in services. Transitions from declining 
to growing industries have been relatively easily achieved 
because of the flexibility of the U.S. economy and U.S. labor 
markets. As a result, the United States has one of the lowest 
unemployment rates, as you can see from Figure 1, in the 
industrialized world, and one of the highest rates of job 
creation. We are home to millions of entrepreneurs.
    As we move further into the 21st century, challenges will 
come in the aging of our workforce and increased global 
competitiveness. We need to consider the best strategies for 
promoting the flexibility of our labor markets to deal with 
them.
    The consumption demand of an aging and increasing 
population could lead to tight labor markets unless we have 
high productivity growth, increased labor force participation, 
and additional immigration. In America's dynamic and flexible 
economy, we already see two of these forces--higher 
productivity growth and increased labor force participation of 
older Americans--all working to help offset the demographic 
changes that are underway.
    Fortunately for the United States, the labor force 
participation of older Americans is increasing. A higher 
percentage of older Americans work than do senior citizens of 
many industrialized countries. In Figure 2 over here, we can 
see that 14 percent of Americans 65 and older remain 
economically active, a figure in major industrialized countries 
only exceeded by Japan. In France, Italy, Germany, Canada, and 
Australia, the percentage ranges from 1 to 7 percent.
    One noteworthy trend has been toward a higher proportion of 
older workers working full-time. This may be a result of the 
removal of the Social Security earnings test for workers age 65 
and older in 2000. In 2004, on average, 77 percent of workers 
age 55 or older worked full-time. Figure 3 shows that the labor 
force participation rate of older Americans has increased 
steadily over time, reaching a high of 37 percent in April 
2005.
    Some may say that older Americans have to work more because 
they are less well off, but data show the opposite. The 
economic conditions of older Americans is above average and 
steadily improving.
    The flexibility of U.S. labor markets enables older workers 
to choose the pattern of labor force participation that best 
fits their needs. The removal of Social Security earnings tests 
ensures incentives to remain in the labor force. And income tax 
reductions since 2001 have increased the incentive for everyone 
to remain economically active.
    But the flexibility and range of choices needs to be 
further increased, not just for older Americans but for 
everyone. Removing restrictions that prevent private sector 
workers from having the choice of comp time or overtime pay for 
overtime hours worked would provide additional flexibility that 
would make it easier for all Americans to participate in the 
labor force. Currently, only products workers who work overtime 
hours are allowed to take comp time off instead of overtime 
pay. Under the Fair Labor Standards Act, private sector workers 
are not given this option.
    Let me give you an example of how this could work for a 
senior citizen. Say that a grandmother worked 50 hours rather 
than 40 hours 1 week and wanted to take some time off to see 
her grandchildren rather than receiving overtime pay. A choice 
of 1\1/2\ hours of comp time instead of 1\1/2\ hours of pay 
would allow her to do that. She might want to catch up on 
errands or catch up on sleep. This would also encourage other 
groups such as working mothers to enter the workforce. As a 
working mother with six children, I am fully aware that there 
are many important parts of a worker's life, including time 
with family. Extra time spent 1 week is manageable if there is 
an option to take more time off at another point.
    Global competitiveness is the second major challenge for 
the American economy. It is here to stay, and we need to face 
it head on rather than hiding from discussions of outsourcing. 
Yes, it is estimated that U.S. firms outsource about 300,000 
jobs a year, but foreign companies employ directly at least 6 
million workers in the United States, and indirectly provide 
another 6 million more jobs.
    Increased global competitiveness is just another reason for 
keeping our labor markets flexible and trying to extend that 
flexibility.
    Figure 4 shows an index of labor market flexibility 
measures for the G-7 countries, and it shows that the United 
States has the lowest amount of employer mandates governing the 
hiring and firing of workers. And this is associated with a 
vibrant labor market that benefits American workers.
    In Figure 5, we can see that not only are a higher 
proportion of Americans employed, but those Americans work 
longer hours every year than do their counterparts in other 
countries. In 2003, data show that Americans worked on average 
1,792 hours per year, far more than in Canada, the U.K., Italy, 
France, and Germany.
    One reason they do this is that lower tax rates permit them 
to keep more of what they earn. Figure 6 shows a comparison of 
labor costs paid in Social Security and income taxes for the G-
7 countries in 2004. An average American would pay 30 percent 
of his salary in taxes compared with 31 percent for a British 
worker, 32 for Canadian, 46 percent for the Italian, 47 percent 
for the Frenchman, and 51 percent for the German. Only the 
Japanese work is taxed less and, not surprisingly, worked more 
hours than his American counterpart.
    We saw that Americans have lower unemployment rates than do 
other countries, and in Figure 7 we can see that when they are 
unemployed, they find jobs faster. Only 12 percent of the 
unemployed in the United States are unemployed for more than a 
year, compared with 33 percent for Japan, 34 percent for 
France, 50 for Germany, and 58 percent for Italy. So in Italy, 
of everybody unemployed, 58 percent have been unemployed for 
more than a year.
    One impossible challenge, as you point out, Mr. Chairman, 
is figuring out what technology is going to be 10 years from 
now. As you said, we could not imagine what technology we have 
now. We do not know where our technology is going to lead us in 
2015 or 2025. But we do know that our employers are going to 
need to adapt to whatever comes along, and we need to give them 
the tools to do so. We also need to protect the intellectual 
property of our investors and our entrepreneurs and our 
inventors and not allow other countries to pirate our ideas. 
The United States leads the world in creativity, and we need to 
protect our intellectual property.
    In conclusion, just as we now have more flexible labor 
markets than our major competitors, we need to expand that 
flexibility as we move forward into the 21st century. We need 
to make our workforce more attractive by giving everyone the 
option of comp time instead of overtime. We need to lower taxes 
rather than raising them. We need to decrease mandates rather 
than increasing them.
    Thank you for giving me the opportunity to appear here 
today.
    The Chairman. Thank you very much.
    [The prepared statement of Ms. Furchtgott-Roth follows:]
              Prepared Statement of Diana Furchtgott-Roth
    Mr. Chairman, members of the committee, I am honored to testify 
before your committee today on the subject of the challenges of the 
21st century workforce.
    America's dynamic workforce has always faced changes. Americans 
once worked primarily in agriculture, then in manufacturing, and now in 
services. Transition from declining to growing industries has been 
relatively easily achieved because of the flexibility of the U.S. 
economy and U.S. labor markets. As a result, the United States has one 
of the lowest unemployment rates (see Figure 1) and one of the highest 
rates of job creation in the industrialized world. We are home to 
millions of entrepreneurs.


    As we move further into the 21st century, challenges will come from 
many fronts. Two specific issues are the aging of our workforce and 
increased global competitiveness, and these are the subject of my 
testimony today. These phenomena will be with us over the next few 
decades and we need to consider the best strategies for promoting the 
flexibility of our labor markets to deal with them. Today I will talk 
about some consequences of each of these changes.

America's Aging Workforce

    As the large ``Baby Boom'' generation of Americans ages, the 
demographic structure of the economy will shift and the proportion of 
Americans over age 55 will increase significantly. In addition to the 
aging of the ``Baby Boom'' generation, increases in longevity will 
raise the proportion of older Americans.
    Today the estimated U.S. population aged 55 or over is 67 million, 
equaling 20 percent of the total population. This group is expected to 
grow to 106 million by 2035, and comprise 28 percent of the population. 
Total population will increase from 296 million in 2005 to 378 million 
in 2035.
    Americans age 65 or older comprise nearly 37 million people, or 
11.0 percent of today's population. Over the next 30 years this group 
will grow fastest. Their numbers will more than double to 77 million by 
2035. During the same period, Americans in the prime working age group, 
25 to 54, will increase by only 14 million (11 percent).
    The consumption demand of an aging and increasing population will 
lead to tight labor markets unless we have high productivity growth, 
increased labor force participation, and additional immigration. In 
America's dynamic and flexible economy, we already see two of these 
forces--higher productivity growth and increased labor force 
participation of older Americans--already at work to help offset the 
demographic changes that are underway.

Labor Force Participation of Older Workers

    Fortunately for the United States, the labor force participation 
rate of older workers is increasing. We also see more older workers 
working full-time weekly schedules. Increased labor force participation 
of older workers is a positive sign that America's open and flexible 
labor markets are providing opportunities for older Americans who 
choose to remain economically active.
    A higher percentage of older Americans work than do senior citizens 
of many other industrialized countries. In Figure 2 we can see that 14 
percent of Americans 65 and older remain economically active, a figure 
in major industrialized countries only exceeded by Japan. In France, 
Italy, Germany, Canada and Australia the percentage ranges from 1 to 7 
percent.


    Improved health and greater longevity are changing traditional 
attitudes about retirement. Many Americans see continued work in their 
60s and 70s, either part-time or full-time, as a source of vitality as 
well as a source of income.
    In 2004, the last full year for which data are available, the U.S. 
labor force included on average 23 million workers age 55 or older. Of 
these, 18 million were age 55 to 64 and 5 million were age 65 or older. 
In 2004, the 23 million Americans age 55 or older in the labor force 
comprised 16 percent of the labor force. Thirty-six percent of 
Americans age 55 or older were in the labor force in 2004.
    From 1995 to 2004, the labor force participation rate for every 
group of older Americans increased. For the 55 to 64 age group the 
labor force participation rate increased from 57 percent to 62 percent. 
For the 65 to 74 age group, the labor force participation rate 
increased from 18 to 22 percent.
    The labor force participation rate of Americans age 55 or older, 
both men and women, has been rising since 1993. In 2004, the labor 
force participation rate for men age 55 or older was 43 percent. For 
women age 55 or older, the labor force participation rate in 2004 was 
30 percent.

Employment and Unemployment Experience of Older Americans

    Older workers consistently experience lower unemployment rates than 
do younger age groups. In 2004 the unemployment rate for Americans age 
55 or older was 3.7 percent, compared to the overall average 
unemployment rate of 5.5 percent. Older workers are more likely to be 
self-employed: 17 percent of workers age 65 or older were self-employed 
in 2004, compared to 11 percent of age 55 to 64 workers and 8 percent 
of age 45 to 54 workers.
    One noteworthy trend has been toward a higher proportion of older 
workers working full-time. This may be a result of the removal of the 
Social Security earnings test for workers age 65 or older in 2000. In 
2004, on average, 77 percent of workers age 55 or over worked full-
time. In 2004, 23 percent of workers ages 55 and above usually worked 
part-time weekly schedules (down from 28 percent in 1994). Figure 3 
shows that the labor force participation rate of older Americans has 
increased steadily over time, reaching a high of 37 percent in April 
2005.


Economic Conditions of Older Americans

    Some may say that older Americans have to work more because they 
are less well off. But data show the opposite: the economic condition 
of older Americans is above average and steadily improving.
    According to the 2000 Census, Americans age 65 or older were more 
likely than younger groups to own their own home (78 percent), to earn 
interest from financial assets (70.5 percent) or to own stocks (29 
percent). The median net worth of families headed by persons 65 to 74 
years old in 2001 was $176,000, up from $122,000 (real 2001 dollars) 
from 1992. For families headed by persons 75 or older, the median net 
worth was also higher in real terms--$151,000 in 2001 compared to 
$107,000 in 1992.
    In 2002, the proportion of Americans age 65 or older with incomes 
below the poverty level was smaller than the overall population 
proportion of persons below the poverty level--10 percent of the age 
65+ group compared to 12 percent of the overall population. In 1970, 25 
percent of Americans age 65 or older were below the poverty line, and, 
as recently as 1993, the proportion was 12 percent.

Increasing Flexibility for Americans in the U.S. Labor Market

    The flexibility of the U.S. labor market enables older workers to 
choose the pattern of labor force participation that fits their 
preferences and needs. The removal of Social Security earnings tests 
for workers age 65 or older ensures incentives to remain in the labor 
force if desired. Income tax reductions since 2001 have increased the 
incentive to remain economically active.
    However, flexibility and the range of choices need to be further 
increased, not just for older Americans but for everyone. Allowing all 
private sector American workers the choice of comp time or overtime pay 
for overtime hours worked would provide additional flexibility that 
would make it easier for Americans to participate in the labor force. 
Currently, only public sector workers who work overtime hours are 
allowed to take comp time off in lieu of overtime pay. Under the Fair 
Labor Standards Act, private sector workers are not given this option. 
With our aging workforce, we need to encourage as many people as 
possible to work if they choose to do so.
    Let me give you an example of how this could work for a senior 
citizen. Say that a grandmother has worked 50 hours rather than 40 
hours 1 week, and wants to take some time off to see her grandchildren 
rather than receiving overtime pay and working regular hours the next 
week. A choice of 1\1/2\ hours of comp time instead of 1\1/2\ hours pay 
would allow her to do that. She may wish to catch up on errands, or 
catch up on sleep. The option of comp time rather than overtime pay 
could tempt such a person into taking a job rather than staying home.
    A choice of comp time rather than overtime pay would also encourage 
other groups, such as working mothers, to enter the workforce. As a 
working mother with 6 children, I am fully aware that there are many 
important parts of a worker's life, including time with family. Extra 
time spent at work 1 week is manageable if there is an option to be 
able to take more time off at another point.
    In the same way, biweekly work programs would allow Americans to 
divide their work hours between 2 weeks rather than 1. With 80 hours of 
work in a 2-week period, excess hours in 1 week could be made up with 
decreases in the next. This is especially important for those with 
other commitments.
    What is important is that private sector hourly workers be given 
the same choice as those in the public sector. One reason that so many 
women choose to work in government is the flexibility of comp time.

Global Competitiveness

    Global competitiveness is a second major challenge for the American 
economy. New forms of communications and more efficient mobility make 
it easier to import goods from abroad and to export products to other 
countries. In March, our exports of $102.2 billion were at a record 
high and were 7.1 percent higher than a year earlier.
    We cannot shy away from increased global competitiveness. It is 
here to stay, and we need to face it head on rather than hiding from 
discussions of outsourcing. Yes, it is estimated that U.S. firms 
outsource about 300,000 jobs a year, but foreign companies employ 
directly at least 6 million workers in the United States, according to 
the Department of Commerce, and indirectly provide an equal number jobs 
for millions of others.
    Increased global competitiveness is yet another reason for keeping 
our labor markets flexible and trying to extend that flexibility. As 
President Clinton's former Chairman of the Council of Economic 
Advisers, Martin Neil Baily, has written in his 2004 book Transforming 
the European Economy, coauthored with Jacob Kierkegaard,

        ``The key to economic growth in high-income countries is 
        adaptability and flexibility. Only flexible economies are able 
        to adapt to internal shifts, global developments from beyond 
        their borders, and new technological advances, while generating 
        productivity growth and new jobs required to achieve true 
        social cohesion.'' (page 6)

    Figure 4 shows an index of labor market flexibility measures for 
the G-7 countries in 2003, the latest year available (data for 2004 
will be published this July). This shows that the United States has the 
lowest amount of employer mandates governing the hiring and firing of 
workers of the countries examined.


    This is associated with a vibrant labor market that benefits 
American workers. In the United States 62 percent of the working age 
population is employed, compared with 57 percent for Japan and 52 
percent for the four major European countries. Employment growth in the 
United States has been far higher than in Japan and Europe, as can be 
seen in Figure 5.


    Not only are a higher proportion of Americans employed, but these 
Americans work longer hours every year than do their counterparts in 
many other countries. In 2003, OECD data show that Americans worked on 
average 1,792 hours per year, compared with 1,718 hours in Canada, 
1,673 hours in the United Kingdom, 1,591 hours in Italy, 1,453 hours in 
France, and 1,446 hours per year in Germany. Of major industrialized 
countries, only workers in Japan work more hours per year than 
Americans.
    One reason Americans work more is that they have lower tax rates 
and so keep more of their earnings. Figure 6 shows a comparison of the 
percent of labor costs paid in social security and income taxes for the 
G-7 countries in 2004. These data are for a single person without 
children who earns the average production worker's wages. The American 
would pay 30 percent of his salary in taxes, compared with 31 percent 
for the British worker, 32 percent for the Canadian, 46 percent for the 
Italian, 47 percent for the Frenchman, and 51 percent for the German. 
Only the Japanese worker is taxed less, at 27 percent, and, not 
surprisingly, worked more hours than his American counterpart.


    We saw above that Americans have lower unemployment than do other 
major industrialized countries, and we can see in this figure that when 
they are unemployed they find jobs faster--they are unemployed for a 
shorter period of time. Figure 7 shows that only 12 percent of the 
unemployed are unemployed for a year or more, compared with 33 percent 
for Japan, 34 percent for France, 50 percent for Germany, and 58 
percent for Italy. The only major country that does better than the 
United States is Canada, with only 10 percent unemployed for more than 
a year.


    One impossible challenge of the 21st century is forecasting what 
technology is going to be 10 years from now. Ten years ago, in 1995, 
most Americans did not have cell phones, they did not have e-mail, and 
they could not even own blackberrys because they had not been marketed. 
With these new inventions productivity is rising substantially. We do 
not know where technology is going to lead us in 2015 or 2025. But we 
do know that our employers are going to need to adapt to whatever comes 
along, and we need to give them the tools to do so. We also need to 
protect the intellectual property of our inventors and entrepreneurs, 
and not allow other countries to pirate our ideas. The United States 
leads the world in creativity, and theft of intellectual property has 
been estimated to cost us hundreds of billions of dollars.
    In conclusion, just as we now have more flexible labor markets than 
our major competitors, we need to expand that flexibility as we move 
forward into the 21st century. We need to make the workforce more 
attractive by giving everyone the option of comp time instead of 
overtime. We need to lower taxes rather than raising them. We need to 
decrease mandates rather than increasing them.
    Thank you for giving me the opportunity to appear here today.

    The Chairman. Mr. Bernstein?
    Mr. Bernstein. I, too, thank the committee for the 
opportunity to testify today and applaud you for addressing the 
challenges facing our workforce both now and in the coming 
decades.
    Economists and policymakers have stressed the opportunities 
of the global economy and the dangers of pushing back against 
them. Like others in my field, I agree with these sentiments: 
when the global economy calls, you had better up the phone.
    Yet surely it is the case that globalization creates both 
winners and losers, both here and abroad, now and in the 
future. Many in our manufacturing workforce have watched their 
jobs and their factories leave for other countries, and now in 
an era where white-collar jobs can increasingly be offshored, 
even our most skilled workers face competition from workers 
with similar skill sets yet far lower wages.
    Millions go without health insurance, see their pensions 
erode, and watch their incomes stagnate while the benefits of 
economic growth flow freely to those at the top. We are just 
now coming out of the longest jobless recovery on record, and 
for many in the working class, wage growth continues to lag 
inflation, even while profits and productivity soar.
    This committee is well aware of these developments, and I 
take it as given that deriving a policy framework for 
addressing both the upsides and downsides of globalization is 
the main reason for today's hearing.
    About 80 percent of the jobs lost to trade over the last 
business cycle were held by those with noncollege educations. 
But half of those jobs paid in the top half of the wage scale. 
So as intuition would suggest, jobs lost to trade, particularly 
those in manufacturing, are good jobs for those without college 
educations. The loss--in some recent periods, the 
hemorrhaging--of manufacturing employment is one of the most 
frequently cited costs of our protracted trade deficit in 
manufactured goods. Most recently, the sharp decline in the 
price of accurately transmitting information to faraway places 
has created the potential to bring millions of skilled workers 
into competition with our white-collar workforce, and the 
implicit supply shock from bringing these workers online is 
likely to create the opportunity for global labor arbitrage, 
creating downward pressure on white-collar wages.
    Over a period where our economy has consistently expanded, 
become far more productive, and become far more globally 
integrated, the hourly wage of the median male, as shown in the 
figure up there--historically a building block for the living 
standards of middle-income families--was unchanged over 30 
years, between 1973 and 2004. It ended up at precisely the same 
level in real terms. At the same time, the 95th percentile wage 
ended the period up 30 percent over its 1973 level. To the 
extent that globalization was improving economic outcomes over 
this period, by this measure, its benefits eluded low- and 
middle-wage men.
    The figure in my written testimony plots the receipt of 
employer-provided health care and pension coverage for college 
graduates starting out in the workforce. I chose this group 
because, as newly minted college grads, they presumably suffer 
less from any skills deficits than those with a terminal high 
school degree. Yet these workers' skills have failed to 
insulate them from the loss of pension and health coverage. The 
challenges of globalization must also be viewed in the context 
of changes in our workforce, particularly regarding the 
pressures of balancing work and families. Today, two-thirds of 
mothers with children work in the paid labor force. In fact, 
given male stagnation of hourly wages, as shown in this slide, 
extra work by wives has been a critical factor in preventing 
the decline of the incomes of middle- and low-income married 
families with kids.
    Now, how can we best meet the challenges that I have set 
forth? Many who consider this question focus less on direct 
policies to insulate our workers from shouldering more of the 
risk inherent in expanded globalization and more on the 
prospective difficulties facing future employers finding enough 
skilled workers. In fact, the mantra of a skill shortage is so 
often repeated that it seems beyond question. Yet in an economy 
with scarce policy resources, it is essential to examine the 
evidence for and against the alleged coming skill shortage. I 
have done so in my written testimony and find the evidence to 
be weaker than you might expect. I will not take the time to go 
through the arguments in detail. I will say that the predicted 
occupational shifts that should be forthcoming over the next 
decade should raise the demand for workers with at least a 
college degree by 1 percentage point over 10 years. Given the 
expected increase in the supply of college graduates, we are 
likely to meet those projected skill demands. Of the 30 
occupations adding the most jobs over the next decade, only 
eight call for a college degree.
    It is also very hard to square these concerns regarding our 
present and future skills mismatch with the post-1995 
productivity acceleration, a trend that is highly inconsistent 
with the warnings of skill shortages years back. Those shaping 
workforce policies based on these types of predictions should 
know that the past is littered with inaccurate claims based on 
demographic projections because, contrary to the oft-made 
claim, demographics are not destiny. Too many other factors can 
and do intervene such that demographic change always explains a 
relatively small share of future outcomes.
    Back in the mid-1980s, researchers at the Hudson Institute 
warned that skill demands would mean higher unemployment for 
less skilled workers. Their base-case prediction by these 
forecasters for unemployment in 2000 was 7 percent. In fact, 
the unemployment rate was 4 percent in that year, and the 2000 
rate was driven down in large part by the tightest low-wage 
labor market in decades.
    Turning finally to policy recommendations, I am mindful 
that even the mildest forms of work protections are criticized 
by opponents as a destructive response to globalization to 
future workforce pressures. Under the guise of ``flexibility,'' 
it is argued that in an increasingly global economy we can no 
longer afford labor protections that date back to an era when 
our economy was far less globally integrated. This strategy 
threatens to take our workforce policy in exactly the wrong 
direction. We cannot both shift more risk onto our workforce in 
an era of increasing economic insecurity and inequality and 
expect them to embrace globalization. Neither, of course, can 
we build walls around our economy.
    Instead, we must think in terms of providing our workforce 
with both the tools and the protections they need to maximize 
the benefits of globalization. Some ideas consistent with that 
goal: expand trade adjustment assistance to workers in all 
sectors, covering all countries with whom we normally trade; 
protect and enhance workers' rights to organize, as articulated 
in the Employer Free Choice Act; take the responsibility for 
health insurance coverage out of the workplace and more toward 
a single-payer, universal approach to health care, based on 
expanding Medicare to the nonelderly; raise the minimum wage 
and modernize the unemployment insurance system; remove tax 
incentives for companies to shift jobs overseas; ensure 
universal access to pre-K so every 3- and 4-year-old in the 
Nation has a quality learning environment; ensure access to 
higher education for all who want to attend college by paying 
the costs of postsecondary education for every child in America 
who can qualify; help working parents balance work and family 
by implementing paid family and medical leave, paid vacation 
and sick days.
    These are the policies designed to ensure that one of our 
greatest resources--the American workforce--has both the skills 
and the security they need to meet the challenges they face 
moving forward into the 21st century.
    I thank you for the opportunity to testify today.
    [The prepared statement of Mr. Bernstein follows:]
                 Prepared Statement of Jared Bernstein
    I thank the committee for the opportunity to testify today, and 
applaud you for addressing the challenges facing our workforce both now 
and in the coming decades.
    My testimony will focus on these challenges through the lens of 
globalization. The term, according to the International Monetary Fund, 
refers to the increasing integration of economies around the world, 
particularly through trade and financial flows.\1\
---------------------------------------------------------------------------
    \1\ See http://www.imf.org/external/np/exr/ib/2000/041200.htm.
---------------------------------------------------------------------------
    There can be no doubt that our economy is far more globally 
integrated than ever before. Thirty years ago imports plus exports 
amounted to 10 percent of our gross domestic product. Now they amount 
to 25 percent of GDP. Like other large forces of change, globalization 
is an inevitably evolving part of our economic lives. Advances in 
technology, most recently the decline in the cost of transmitting 
information, have diminished barriers between nations and expanded the 
U.S. marketplace far beyond our borders.
    Economists and policymakers have stressed the opportunities 
embedded in these developments, and the danger of pushing back against 
them. Like others in my field, I agree with these sentiments: when the 
global economy calls, you'd better pick up the phone!
    The benefits of globalization include the growth-enhancing ability 
of countries to tap their comparative advantages, the expansion of our 
export markets, and the price savings associated with imports. 
Similarly, the expansion of financial and labor markets has the 
potential to create greater competition, more efficient markets, and 
lower prices.
    Yet, it is surely the case that globalization creates both winners 
and losers, both here and abroad. Many in our manufacturing workforce 
have watched their jobs and even their factories leave for other 
countries, and now, in an era where white-collar jobs can increasingly 
be offshored, even our most skilled workers face competition from 
workers with similar skill sets yet far lower wages.
    As we discuss these matters today, tens of millions of workers go 
without health insurance, see their pensions erode, and watch their 
incomes stagnate while the benefits of economic growth flow freely to 
those at the top. We are just now coming out of the longest jobless 
recovery on record, and for many in the working class, wage growth 
continues to lag inflation, even while profits and productivity soar.
    In such a climate, the view that forward-looking people must 
happily embrace whatever outcomes globalization yields is not 
productive. While the benefits of globalization are prodigious, many 
who have been hurt by trade competition feel devalued when elites 
stress solely those benefits and ignore the negative impact of these 
trends on working families. Moreover, if policymakers do not 
acknowledge and try to address these costs, we will increasingly 
encounter a public that views protectionism as the best way to insulate 
themselves from the downside of global competition.
    I believe this committee is well aware of this danger, and that 
deriving a policy framework that addresses both the upsides and 
downsides of globalization is a main reason for today's hearing. Toward 
that end, I begin by presenting a set of economic outcomes that have 
evolved over the past few decades, as our economy has become more 
global. I stress that correlation is not causation, and that increased 
exposure to global competition is but one of many factors responsible 
for these changes. Where possible, I try to quantify its role.
    Following that, I assess the policy responses offered to strengthen 
the competitiveness of our 21st century workforce. Two common lines of 
argument are skill enhancement and further deregulation of U.S. labor, 
product, and financial markets are the necessary components of a more 
competitive workforce. While improving access to educational 
opportunities is critical to improving living standards to many who 
currently lack such access, further deregulation--for example, reducing 
our labor standards--is likely to be counterproductive. Instead of 
making us more competitive, it will have the effect of shifting more 
economic risk onto our workforce, thereby amplifying the negative 
effects of globalization.
    My testimony ends with a set of policy ideas designed to enhance 
our competitiveness while helping to provide a greater safety net to 
those whose economic fortunes have been subjected to greater risk. The 
goal of this policy set to harness the benefits of globalization in 
order to address its costs. Washington Post columnist E.J. Dionne, put 
it well in a recent piece, when he noted that the challenge for policy 
makers in this area is ``. . . how to create enough security so that 
Americans can embrace a dynamic economy without fear. Paradoxically, 
throwing more risk onto individuals leads to risk-avoidance. Risk-
taking requires a certain amount of risk-sharing.'' \2\ These 
sentiments guide the policy ideas I offer below.
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    \2\ Washington Post, May 20, 2005.
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The Challenges Facing Today's Workforce

    In order to best plan for strengthening the workforce of the 
future, we need to understand the challenges facing today's workers. 
This section briefly touches on the most relevant examples.
    Employment Trends: As we show in State of Working America, 2004/05 
(Table 2.32--hereafter, referred to as SWA), over the last business 
cycle (1994-2000), 77 percent of the jobs lost to trade were held by 
those with non-college educations, but half of the jobs paid in the top 
half of the wage scale. Thus, as intuition would suggest, jobs lost to 
trade, particularly those in manufacturing, are good jobs for those 
without college educations. And a simple, but underappreciated fact is 
worth noting here: only a minority of our workforce, 30 percent, has a 
college degree or higher in 2004.
    The loss--in some recent periods, the hemorrhaging--of 
manufacturing employment is one of the most frequently cited costs of 
our protracted trade deficit in manufactured goods. Most recently, 
manufacturing employment peaked in March of 1998; since then, the 
sector has shed 3.3 million jobs, including an unprecedented period of 
43 consecutive months of job losses. Since that peak, manufacturing as 
a share of total employment has fallen from 14.1 percent of total 
employment to 10.7 percent. While this is a continuation of a very long 
trend--manufacturing has been shrinking as a share of total employment 
for decades--that trend accelerated over this period, as did our 
manufacturing trade deficit.
    More recently, the sharp decline in the price of accurately 
transmitting information to far-away places has created the potential 
to bring millions of skilled workers from abroad into competition with 
our white-collar workforce. The implicit supply shock from bringing 
these workers ``online'' is likely to create the opportunity for 
``global labor arbitrage,'' in the words of Morgan Stanley's chief 
economist Stephen Roach, creating downward pressure on white-collar 
wages.\3\
---------------------------------------------------------------------------
    \3\ See, for example, http://www.globalagendamagazine.com/2004/
stephenroach.asp.
---------------------------------------------------------------------------
    In the globalization debate, these issues have been discussed under 
the rubric of ``offshoring.'' At this point, there is little solid 
evidence of the offshoring's impact on jobs and wages, though anecdotes 
abound, particularly regarding the slow recovery in our IT sector. It 
is important to note that the lack of evidence at this point is due to 
the inability of our statistical system to capture this dynamic. Below, 
I suggest some ways in which we might do a better job of keeping track 
of how many jobs are ``offshored.''
    Most economists believe that even with increased offshoring, IT 
will again be a strong job-growth sector (hiring in IT has been 
depressed since 2001 due largely to the bursting of the tech bubble). 
In this regard, offshoring is likely to show up more in the 
compensation trends of our domestic workers in affected sectors than in 
their employment trends.
    Wage Trends: Figures 1A and 1B show real hourly wage trends for men 
and women at various wage percentiles. For men, note the long-term 
decline in the real value of middle- and low-wages, while the 95th 
percentile wage climbed fairly steadily.
    Relative to the role of globalization, two important points can be 
drawn from the trends in 3a. First, over a period where our economy 
consistently expanded, became far more productive, and became far more 
globally integrated, the hourly wage of the median male--historically a 
building block for the living standards of middle-income families--was 
unchanged over 30 years! In 2004 dollars, it started at $15.24 in 1973 
and ended up at $15.26 in 2004. At the same time, the 95th percentile 
ended the period over 30 percent above its 1973 level. To the extent 
that increased globalization was improving economic outcomes over this 
period, by this measure, its benefits eluded low- and middle-wage men.
    Recent work by my EPI colleague Larry Mishel has examined these 
male wage changes from the perspective of increased trade. A consensus 
figure from the inequality literature finds that trade explains about 
20 percent of the increase in wage inequality. Between 1979 and 2004, 
the male median wage fell 4 percent while the 95th percentile male wage 
was up by 32 percent. In today's dollars, this amounts to a growth in 
the hourly wage gap between these 2 percentiles of about $12. Taking 20 
percent of that gap and assuming full-year work translates into an 
income loss of $4,700, a significant loss for these workers and their 
families.\4\
---------------------------------------------------------------------------
    \4\ The hourly gap grew by $11.82. This figure times 
.20*2000=$4,728.
---------------------------------------------------------------------------
    Second, notice that for middle- and low-wage women, as well as for 
men throughout the pay scale, real wages climbed steeply from 1995-
2000, before flattening most recently. Prior to this period, most 
economic analysts argued that the limited skills of these workers were 
responsible for their weak wage outcomes. Yet skills had nothing to do 
with the wage acceleration of the latter 1990s; it was largely a 
demand-side phenomenon, as the unemployment rate headed for a 30-year 
low and the job market tightened up for the first time in decades.
    The period serves as a critical reminder that policymakers must not 
limit their analysis to the supply-side, as in skill-based solutions, 
but consider the host of other factors that influence the opportunities 
for work and the quality of jobs. Over this period, taxes became more 
progressive, yet contrary to supply-side lore, investment soared and 
productivity accelerated. The minimum wage was increased and the Earned 
Income Tax Credit, a generous wage subsidy to low-wage workers, was 
significantly expanded. The Federal Government balanced its budget for 
the first time in 30 years, and the signal of fiscal rectitude was 
reassuring to financial markets, helping to push down the long-term 
borrowing rate, further boosting investment and productivity (Blinder 
and Yellin, 2001). Again, I note that none of these policies targeted 
alleged skill deficits, yet together they had a demonstrably positive 
affect on our workforce, reconnecting, albeit for too few years, the 
fortunes of many in the working class to the overall growth in the 
economy.
    The momentum of the formerly full-employment job market kept real 
wages rising through mid-2003, but since then, the combination of 
slower nominal wage growth and faster inflation have led to declining 
real wages, particularly for less advantaged workers. For example, as 
shown in Figure 2, on a year-over-year basis, the hourly wages of blue-
collar manufacturing workers and non-managers in services have failed 
to beat inflation for 12 months running.
    Unlike wages, compensation growth has been beating inflation, but 
this is due to the rising costs faced by employers of providing 
healthcare and pension coverage. Even so, as shown in Mishel and 
Bernstein (2005), compensation significantly lags productivity, 
especially compared to prior periods.\5\ We show, for example, that in 
past recoveries, real compensation grew 72 percent as fast as 
productivity, suggesting the benefits of greater efficiency were more 
broadly shared with the workforce. This time around, compensation has 
been rising 37 percent as fast as productivity.
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    \5\ See: http://www.epinet.org/content.cfm/webfeatures	snapshots	
20050421.
---------------------------------------------------------------------------
    Of course, the gap between workers real wages and productivity is 
far greater. Data from the Employment Cost Index--a closely watched 
source of compensation and wage data for all civilian workers (and thus 
more comprehensive than the production worker series in Figure 2)--
reveals that while benefit costs have been driving compensation ahead 
of inflation, wages have grown far more slowly. In fact, the year-over-
year growth of the ECI wage and salary component has been 2.4 percent 
for the past three quarters, the lowest growth rates for this series 
since its inception in the early 1980s. Since 2001q1, real ECI wages 
have grown at an annual rate of 0.7 percent while productivity has 
expanded 4 percent per year, an historically unprecedented gap between 
paychecks and productivity.
    Where, then, if not into compensation, has the growth been going? 
It has largely flowed to profits, which have soared since the 
recession, creating a historically unique pattern. Over prior business 
cycles, profits (including interest income) have accounted for 23 
percent of the growth in corporate-sector income, on average, with 
total compensation accounting for the remaining 77 percent. In the 
current business cycle, the distribution is almost reversed: profits 
have claimed nearly 70 percent of total growth in the corporate sector, 
while increases in compensation (from increased employment and higher 
hourly compensation) have received just over 30 percent of total income 
growth.
    Employer-Provided Pension and Health Coverage: Figure 3 plots the 
receipt of employer-provided health care and pension coverage for 
college graduates starting out in the workforce. The group is chosen 
for the analysis because as newly-minted college grads in the 
workforce, they presumably suffer less from an alleged skills' deficit 
than those with terminal high-school degrees. Yet, these workers' 
skills have failed to insulate them from the loss of pension and health 
coverage, as the share with employer-provided health care has been 
drifting downward for decades, while the trend in pension coverage has 
been stagnant or falling with the exception of the latter 1990s. Most 
recently, a decline in pension coverage for young college graduates is 
evident at the end of the figure.
    To make matters worse, due to the shift from defined benefits (DB) 
to defined contributions (DC), pensions have become less secure for 
those who still have them. In the early 1980s, those who received 
pension coverage were about four times more likely to have a guaranteed 
pension benefit upon retirement than one subject to the outcome of the 
employee's investments and the employer's match. This ratio flipped in 
the mid-90s and DC pensions are now more prevalent than the DBs. The 
fact that these trends are befalling skilled workers suggests that 
policymakers need to think beyond skill-enhancement to re-secure health 
and pension coverage for these workers.
    Balancing Work and Family: The challenges of globalization must 
also be viewed in the context of changes in the composition of our 
workforce over time, particularly regarding the pressures of balancing 
work and family. As is widely recognized, the share of women in the job 
market has about doubled since we started tracking the statistics in 
the late 1940s, while that of men has consistently fallen. In 1950, 
women were 30 percent of the workforce, now they account for just under 
half. Today, about two-thirds of mothers with children work in the paid 
labor market; even among moms with kids under 6, a solid majority work, 
with employment rates just below 60 percent.
    In fact, given male wage stagnation (see Figure 1a), extra work by 
wives has been a critical factor in preventing the decline of incomes 
among middle- and low-income married families with children. As we show 
in SWA, low and moderate-income wives (in the first two income 
quintiles) increased their hours of work by between 60 and 70 percent 
between 1979 and 2000, while middle income wives increased their hours 
by about half. \6\ Higher income wives started from a significantly 
higher base and their hours grew less in percentage terms. They too, 
however, increased their hours by about one-third over the 1980s and 
1990s combined.
---------------------------------------------------------------------------
    \6\ See pages 100-106.
---------------------------------------------------------------------------
    Translating these large percentage increases into the equivalent of 
full-time work gives a sense of how much more time these working wives 
spent in the paid labor market. Moderate- and middle-income wives added 
over 3 months, while wives from low- and high-income families added 
over 2 months.
    In the absence of these added hours of wives' work, family incomes 
would have fallen for the bottom 40 percent of married couple families 
with children, and would have risen only 5 percent for middle-income 
families over the 2 decades from 1979-2000. Instead, thanks to wives' 
contributions, their incomes rose, by 8 percent for the bottom fifth, 
16 percent for the second fifth, and 24 percent for the middle fifth.
    These gains, of course, did not come without putting considerable 
stress on working families. From the perspective of workforce policy, 
the relevant question becomes: which policies can help families balance 
their need and desire to work and pursue careers, while giving them the 
time and resources they need to raise their families. I address these 
issues in the policy section below.
    Income inequality: As noted in the introduction, the economic 
dynamics associated with globalization creates winners and losers. One 
way this has played out in recent years is through increasing 
inequality, as workers in sectors and occupations more complementary 
with increased global integration have claimed far more of the 
economy's output than those in competing sectors. For example, managers 
in manufacturing may benefit through outsourcing work to cheaper 
overseas platforms while blue collar workers may be displaced.
    According to the most comprehensive income data, developed by the 
Congressional Budget Office, the after-tax, inflation-adjusted incomes 
of the bottom fifth of households grew 5 percent between 1979 and 2002. 
For households in the middle fifth, the average gain was 15 percent; 
for the top fifth, 48 percent, and for the top 1 percent, 111 percent 
(see Figure 4). Over this same period, our economy has become 
increasingly more productive, and while technological advances are the 
main factors cited for these gains, some economists credit trade as 
well, particularly for generating lower prices. In fact, productivity 
increased 53 percent, 1979-2002, but as these inequality statistics 
reveal, the benefits of this greater efficiency eluded most in the 
working and middle classes.
    This evolving gap is shown in Figure 5, which plots the 
relationship between productivity growth and the real income of the 
median family. From the late-1940s to the mid-1970s, the living 
standards of middle-income families increased in lock-step with 
productivity growth, as the benefits of the expanding economy were 
shared evenly by all who played a role in that expansion. Since then, 
the wedge of inequality has severed this relationship, despite the fact 
that middle-income families are working harder than ever before.\7\ As 
can be seen at the end of the figure, this problem has worsened in 
recent years. Between 2000 and 2003 (the most recently available income 
data), productivity expanded by 12 percent while median family income 
fell by 3 percent. In fact, the gap between the two series in 2003 is 
the largest on record, going back to 1947.
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    \7\ Between 1979 and 2000, the annual hours of work of middle-
income, married-couple families increase by over 500 hours, largely due 
to the contribution of working wives (Mishel et al., 2004).
---------------------------------------------------------------------------
    Recent Trends: Most recently, the formerly jobless recovery has 
left us with a labor market that remains slack, and while we've 
achieved some decent growth numbers in terms of GDP and especially 
productivity, the incomes of middle-income families fell each year 
between 2000 and 2003. As shown in SWA, Table 1.2, the post-2000 income 
losses are more than explained by the decline in annual hours worked, a 
function of the protracted labor market contraction. Poverty also rose 
over these years, and rose most for the least advantaged, like single-
moms who are more vulnerable now that our safety net seems better 
designed for booms, not busts.\8\
---------------------------------------------------------------------------
    \8\ See Greenberg and Bernstein, 2004.
---------------------------------------------------------------------------
    On the plus side, our economy is steadily creating jobs again, 
albeit at a rate which jobs lags past recoveries. Over the past 12 
months, for example, employment has been expanding, on net, at an 
average rate of 181,000 per month. In the last recovery, the monthly 
figure for the comparable point in the business cycle was 300,000. The 
current unemployment rate stands of 5.2 percent is low in historical 
terms, but that figure presents far too rosy a picture of the job 
market--it is biased downward by the fact that millions gave up the job 
search due to perceived lack of demand and are thus not counted among 
the unemployed. This bias is also evident in the extent of long-term 
unemployment, which currently looms as a much larger problem than we 
would expect, given an unemployment rate in the low fives.\9\ A better 
measure of current demand--employment rates--remain quite depressed, 
especially for African-Americans, males in particular.\10\
---------------------------------------------------------------------------
    \9\ See http://www.epi.org/content.cfm/webfeatures	snapshots	
20050518.
    \10\ See: http://www.epinet.org/content.cfm/webfeatures	snapshots	
20050406.
---------------------------------------------------------------------------
    These are some of the problems facing many in the current 
workforce. Surely, some of them are more closely linked to global 
competition than others. For example, the slump in manufacturing 
employment is closely linked to the expanding trade deficit, while the 
slow growth in IT employment has more to do with the bursting of the 
tech bubble. Declining real wages amidst strong profit growth may well 
relate to the global wage arbitrage noted above, but it is equally a 
function of the slack leftover from the jobless recovery.
    The larger point is that a policy framework for the 21st century 
workforce needs to grapple with these realities. The question for 
policymakers is then how, in an increasingly global economy, do we meet 
these challenges while enhancing our competitiveness? How can we 
harness the economic benefits of globalization in such a way as to 
pushback against greater inequality, ensuring that the living standards 
of working and middle-class families benefit from advances in trade and 
technology as much as those at the pinnacle of the income pyramid?

Demographics Are Destiny . . . Not!

    Interestingly, many who consider these questions focus less on 
direct policies to insulate our workers from shouldering more of the 
risk inherent in expanded globalization, and more on the prospective 
difficulties facing future employers (Hudson Institute, 1987 and 1997). 
Here, I briefly discuss two threads of their concerns: the future 
skills shortage, and the challenge of future demographic trends.
    The Skills of Our Current and Future Workforce are Important, But 
They're Not the Whole Story \11\
---------------------------------------------------------------------------
    \11\ Some of this text is adapted from Bernstein (2004).
---------------------------------------------------------------------------
    No serious analyst could question the value and importance of a 
skilled workforce. Years of economic research has established that an 
increasing supply of skilled workers is a critical input into 
production, leading to higher productivity growth and better living 
standards throughout the economy. Great innovations that have helped to 
establish our world-class economy are clearly linked to the quality of 
our workforce.
    Many critics of the American education system, however, argue that 
we already fail to produce enough skilled workers to meet employers' 
demands and that this shortfall will only worsen. And few who have 
examined this issue can doubt that access to quality education is 
blocked for many deserving, yet disadvantaged, Americans. In fact, the 
mantra of a skills-shortage is so often repeated it seems churlish to 
question it.
    Yet, in an economy with scarce policy resources, it is essential to 
examine the evidence for and against the alleged coming skills 
shortage. There's little question that the Federal Government will 
remain in the business of investing in workers skills, of course, but 
should these investments crowd out other, more direct ways of enhancing 
the security of our workforce? Here are a number of reasons to question 
the existence of a skills mismatch of a magnitude that would lead us to 
that conclusion:

     The most frequently cited evidence for a skills shortage 
over the past few decades is the increase in the college wage premium. 
But the rise in the college premium has been partly driven by shift in 
economic structures that have served to lower the wages of less 
educated workers, such as the loss of manufacturing jobs, fewer unions, 
lower minimum wages, and, excepting the latter 1990s, high average 
unemployment rates. When many of these factors pushing down low wages 
were reversed in the latter 1990s, the growth college wage premium 
decelerated.
     Contrary to the skills'-deficit argument, the real wages 
of college graduates have not been consistently bid up. Figure 6 shows 
that for about 10 years, from the latter 1980s through the mid-1990s, 
the real wages of young college graduates were flat. Their premium may 
have been rising over this period, but as just noted this was partly 
due to the structurally-induced decline in wages of less-educated 
workers. Presumably, a true skills shortage should lead to rising 
absolute wage levels, not simply relative wage gains. As in the wage 
percentile figures above (1B and 1B), this figure also reveals the 
boost these workers got from the full-employment labor market of the 
latter 1990s, and the reversal of that positive trend in recent years. 
Once again, the importance of demand as a wage determinant is evident, 
though this emphasis is generally absent from the supply-side skills 
discussion.
     Occupational employment shifts show steady, not 
accelerating growth of skill demands. It is critical to note that skill 
demands have always risen over time and will continue to do so. 
However, the ``skills mismatch'' claim argues that the rate of skill 
demands has increased. In Bernstein and Mishel (2001), we present an 
index of occupational skill demands and show that it has proceeded at a 
steady pace over the past 25 years.
     The quality of our labor supply has increased 
significantly, and will continue to do so. We have doubled the share of 
college educated workers, including those with advance degrees, from 
14.6 percent in 1973 to 29.5 percent in 2004. Conversely, we have cut 
the share of high-school dropouts from 28.5 percent in 1973 to 10.3 
percent in 2004.

    Still, it is possible to accept that while the case for skill 
shortages in our current economy is weak, given increased 
globalization, future skill demands will outpace the supply of skilled 
workers.
    Given the ongoing upwards shift in the share of the workforce that 
is college-educated, recent BLS projections of job growth by occupation 
do not paint a picture of difficult-to-meet skill demands. While most 
of the fastest growing occupations call for at least a college degree, 
these occupations are growing from a low base and are thus not 
contributing the most jobs to the future economy. Conversely, of the 30 
occupations adding the most jobs over the next decade, only eight call 
for a college degree.\12\ Summing over all the occupations, they are 
expected to add 12.6 million jobs over the next decade, yet only 28 
percent are expected to require at least a college degree. As we show 
in SWA, Table 2.48, these predicted occupational shifts should raise 
the demand for workers with at least a college degree by one percentage 
point over 10 years. Given the expected continued increase in the 
supply of college graduates, we are very likely to meet these projected 
skill demands.
---------------------------------------------------------------------------
    \12\ See http://www.bls.gov/emp/mlrtab4.pdf.
---------------------------------------------------------------------------
    A final point here is that it is very hard to square concerns 
regarding our present and future skills mismatch with the post-1995 
productivity acceleration--a trend unforeseen by any of the futurists 
who were warning of skill shortages years back. This is a particularly 
steep challenge for the skill-shortage adherents, since productivity 
growth, more so than test scores or educational attainment, is prima 
facie the best measure of the extent to which the skills of the 
workforce are promoting or hindering economic growth. Trend 
productivity growth accelerated by about 1 percent per year in the 
latter half of the 1990s--from 1.5 percent to 2.5 percent per year--and 
has since accelerated about another 1 percent (though many experts 
suspect that this added boost is less sustainable). Contrary to a 
skills deficit story, the acceleration of this most important economic 
indicator suggests that the skills of our workforce in tandem with 
capital investment and technological innovation appear to have given 
rise to a new golden era of accelerated productivity growth. 
Productivity experts expect this accelerated trend to continue into the 
future.\13\
---------------------------------------------------------------------------
    \13\ See Jorgensen et al., http://www.newyorkfed.org/research/
current	issues/ci10-13.pdf.
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What About an Older, Slower-Growth Labor Force?
    A related set of concerns reflects the fact that our workforce is 
increasingly older, and, as the baby boomers begin to age out of the 
system and are followed by smaller birth cohorts, will grow more slowly 
than in the past. Like the case for skills mismatch, there is a grain 
of truth here. In fact, one of the few things we can predict with a 
modicum of accuracy is the demographic composition of the future 
population (though that of the workforce is a tougher call), since we 
know the age and demographics of those alive today, and have some ideas 
about immigration (though, as shown below, this is an area that has 
proved hard to predict).
    However, those who intend to shape workforce policy based on these 
predictions should know that the past is littered with widely 
inaccurate claims based on demographic projections, because, contrary 
to the oft-made claim, demographics are not destiny. Too many other 
factors can and do intervene such that demographic change always 
explains a relatively small share of future outcomes.
    Take, for example, an unrelated prediction I raise here because it 
is quite instructive in this regard. Based on the age structure of 
groups in the population with higher than average propensities to 
commit crimes, criminologists in the 1980s warned that crime rates in 
the 1990s would accelerate. In fact, crime rates plummeted in the 
1990s, once again taking demographers by surprise.\14\
---------------------------------------------------------------------------
    \14\ A number of reasons have been offered for the divergence 
between the predicted and actual outcomes, including a surprisingly 
strong economy, heightened punitive measures, and, according to 
controversial work by Leavitt and Donahue, (2000), more abortions 
decades hence (see Bernstein and Houston, 2000, re the other factors).
---------------------------------------------------------------------------
    Closer to home, let us briefly look at some of the predictions made 
in the mid-1980s in the Hudson Institute's influential publication 
Workforce 2000. Warning that skill demands would mean higher 
unemployment for less-skilled workers, the base-case prediction by 
these forecasters for unemployment in 2000 was 7 percent. In fact, the 
unemployment rate that year was 4 percent (see Figure 7). Moreover, as 
shown in Bernstein and Baker, 2003, the rate was driven down largely by 
the tightest low-wage labor market in decades.
    This is not to fault the Hudson Institute's forecasters--no one 
else saw the unemployment rate headed for a 30-year low. The point is 
that by focusing on the static demographic, economic, and policy data 
they had at hand, they missed a set of developments that swamped these 
factors. These include the acceleration of immigration--they assumed 
that Hispanics would grow by 22 percent as a share of the labor force, 
1985-2000; the actual figure was 33 percent. They further assumed that 
Hispanic employment would fall from 6.4 percent of total employment to 
5 percent; instead, it rose to 11.5 percent. They (and everyone else) 
failed to foresee that faster productivity growth that allowed the 
Federal Reserve to let unemployment fall below the consensus rate for 
full employment; they could not account for policy changes like welfare 
reform and the expanded Earned Income Tax Credit that sharply raised 
the labor force participation rates of single mothers.
    Phenomena like these, and each period is replete with them, 
consistently foil demographic-based forecasts.
    Most recently, along with skill shortages, demographic forecasters 
have added the slower growth of the future labor force to their list of 
concerns.\15\ In large part, this concern stems from the economic 
identity noting that the rate of GDP growth equals the rate of 
productivity growth plus that of the labor force. Thus, if the labor 
force grows less quickly, it implies slower GDP growth, ceteris 
paribus.
---------------------------------------------------------------------------
    \15\ See, for example, http://www.aspeninstitute.org/
AspenInstitute/files/CCLIBRARYFILES/FILENAME/0000000225/DSGBrochure	
final.pdf.
---------------------------------------------------------------------------
    Yet what determines future living standards, on average, is GDP per 
capita (of course, the living standards of families at different income 
percentiles is very much a function of how average growth is 
distributed). If GDP and population both grow more slowly, the outcome 
for GDP per capita is an empirical question.
    An instructive short-run prediction comes again from the economic 
assumptions behind the BLS projections for growth over the next 10 
years. As shown in Figure 8, GDP is expected to grow more slowly in the 
forecast years, by 0.2 percent. Yet population growth will slow by 
slightly more than this, by 0.3 percent, from 1.2 percent per year to 
0.9 percent. The outcome is that GDP/capita will grow at the same rate 
over the two periods.
    This is but one short-term forecast and as such, may not change the 
minds of those convinced of a coming labor shortage in the more distant 
future. But here again, the point is that there are ``many moving 
parts'' to consider when deciding where to place scarce policy 
resources. The labor force may well grow more slowly in decades to 
come, but that will not necessarily lower GDP per capita. Faster 
productivity growth is already helping to offset the slower growth of 
the labor force. Finally, important shifts are underway regarding the 
age at which people leave the job market. Between 2000 and 2004, the 
only age cohort with an increasing rate of employment was those age 55 
and up. Their employment rates grew by 3.4 percentage points, while 
those of 16-24-year-olds fell by 5.8 points and those of 25-54-year-
olds fell by 2.5 points. Such changes can be unforeseen by 
demographically-driven forecasters.

Policy Recommendations: Not Walls, But Nets

    How can we best use the information presented thus far to frame the 
policy debate over how to amplify the benefits of globalization without 
ignoring the costs? The purpose of any policy set in this area is to 
strengthen the ability of our 21st century workforce to compete without 
forcing its participants to shoulder a disproportionate share of the 
risks embedded in a more dynamic, competitive global economy.
    Too often, even the mildest forms of worker protections are 
criticized by their opponents as a destructive response to 
globalization. These same opponents point to existing regulations like 
overtime rules, minimum wages, and various types of social insurance, 
already weakened by years of attack and neglect, as hurting our ability 
to compete.
    There is simply no evidence to support these claims. The history of 
such labor protections shows no correlation between them and any of the 
important macro-economic indicators of our competitiveness, including 
investment, productivity, or the growth of real national income. These 
protections are, however, more closely related to how both the fruits 
of that growth and the degree of economic risk are shared.
    Under the guise of ``flexibility,'' it is argued that in an 
increasingly global economy we can no longer afford labor protections 
that date back to an era when our economy was far less globally 
integrated. To help our workforce compete, the argument goes, we must 
dismantle policies wherein the government attempts to internalize some 
of the risk inherent in market outcomes, even while the degree of risk 
has been ratcheted up by globalization.
    This strategy threatens to take workforce policy in exactly the 
wrong direction. As the Dionne quote presented earlier stressed, we 
cannot both shift more risk onto our workforce in an era of increasing 
economic inequality and insecurity and expect them to embrace 
globalization. Neither, of course, can we build walls around our 
economy.
    Instead, we must think in terms of providing our workforce with 
both the skills and the security they need to maximize the benefits of 
globalization. To do so implies the creation of a broad safety net that 
ensures that the living standards of all working families grow with the 
overall economy. Our policy set should be designed to diminish the 
growing gap between productivity and the wages, incomes, and economic 
security of our workforce.
    Here are some ideas consonant with that goal:

     Expand Trade Adjustment Assistance to workers in all 
sectors and covering all countries with whom we normally trade;
     Protect and enhance workers' right to organize as 
articulated in the Employee Free Choice Act;
     Take the responsibility for health insurance coverage out 
of the workplace; establish an employer/labor commission with the 
assignment of recommending a single-payer, universal approach to 
healthcare, based on expanding Medicare to the non-elderly;
     Raise the minimum wage;
     Modernize the Unemployment Insurance system with the goal 
of increasing eligibility and coverage for those with shorter and more 
interrupted work histories;
     Get better information on the extent of offshoring;
     Remove tax incentives for companies to ship jobs overseas;
     Ensure universal access to pre-kindergarten so every 3- or 
4-year-old in the Nation has a quality learning environment and arrives 
at kindergarten prepared to learn;
     Ensure access to higher education for all who want to 
attend college by paying the costs of postsecondary education for every 
child in America who can qualify: require the student to pay back over 
time from increased wages;
     Provide scholarships to any low-income individual who 
studies science, math, engineering or technology, both for undergrad 
and postsecondary education;
     Help working parents balance work and family by 
implementing paid family and medical leave, paid vacation and sick 
days;

    The theme behind these ideas is that preparing for tomorrow's 
workforce calls for a balanced approach. Policies of this ilk 
acknowledge the importance of improving K-12 education and providing 
access to higher education. But they also take as a given that the set 
of challenges facing our workforce now and in the future cannot be met 
by a skills agenda alone. A large majority--70 percent of our current 
workforce--is not college educated, and these workers continue to make 
vital contributions. Yet, for many, living standards have fallen even 
while the economy expands.
    Balancing the needs of workers and employers means rejecting calls 
that invoke globalization as a rationale for greater risk shifting. 
Cutting social insurance benefits, shifting retirement savings into the 
stock market, pushing back on overtime protections and minimum wages, 
ignoring the glaringly obvious need to protect and expand our health 
care and pension systems--these harmful trends have all been 
rationalized under the guise of preparing our workforce to compete in 
the global economy.
    The reality is that such policies can only lead to greater economic 
insecurities while dispiriting and devaluing one of our national 
treasures: the American workforce. Instead, the future demands a 
progressive policy set that harnesses our great resources to propel our 
workforce forward with both the skills and the security they need.

Bibliography

Aspen Institute. 2003. Grow faster together. Or grow slowly apart. How 
Will America Work in the 21st Century? New York, NY: Frankfurt Balkind.

Bernstein, Jared and Dean Baker. 2003 The Benefit of Full Employment: 
When Markets Work for People. Washington, DC, Economic Policy 
Institute.

Bernstein, Jared. 2004. ``The Changing Nature of the Economy: The 
Critical Roles of Education and Innovation in Creating Jobs and 
Opportunity in a Knowledge Economy.'' Testimony, Committee on Education 
and the Workforce, U.S. House of Representatives.
http://www.epi.org/content.cfm/webfeatures	viewpoints	changing	economy	
testimony

Bernstein, Jared and Lawrence Mishel. 2001. ``Seven reasons for 
skepticism about the technology story of U.S. wage inequality.'' In 
Berg, Ivar and Kalleberg, Arne. I. eds. Sourcebook of Labor Markets: 
Evolving Structures and Processes. New York, New York: Kluwer Academic/ 
Plenum Publishers.

Bernstein, Jared and Ellen Houston. 2000. Crime and Work. Washington, 
D.C.: Economic Policy Institute.

Blinder, Alan and Janet Yellin. 2001. The Fabulous Decade: 
Macroeconomic Lessons from the1990s. New York, New York: The Century 
Foundation Press.

Donohue, John J. and Levitt, Steven D., ``The Impact of Legalized 
Abortion on Crime'' (2000). Quarterly Journal of Economics http://
ssrn.com/abstract=174508.

Johnston, William B. 1987. Work Force 2000. Indianapolis, Indiana: 
Hudson Institute.

Jorgenson, Dale W., Mun S. Ho, and Kevin J. Stiroh. 2004. ``Will the 
U.S. Productivity Resurgence Continue?'' Volume 10, Number 13--December 
2004. New York, NY: Federal Reserve Bank of New York.

Judy, Richard W. and Carol D'Amico. 1997. Work Force 2020. 
Indianapolis, Indiana: Hudson Institute.

Mishel, Lawrence, Jared Bernstein, and Sylvia Allegretto. 2005. The 
State of Working America, 2004/2005. Ithaca, New York: Cornell 
University Press.

U.S. Department of Labor, BLS. 2004. Monthly Labor Review, February 
2004. Washington, D.C.: Bureau of Labor Statistics.



















    The Chairman. I want to thank all of you for your 
information, not only that you just shared verbally, but that 
is in your full statements. It is a very comprehensive work 
that all of you did that will provide us with a lot of very 
valuable information. Of course, what we have asked you to do 
by being on the panel is to be futurists. We are asking you to 
see into the future and predict what is going to happen so that 
we can do laws that will prepare for those predictions, and of 
course, we are hoping that you are extremely accurate too. One 
thing I have learned being around here is it is much easier to 
predict about the past, but that is not the luxury that we 
have, and I do appreciate in your testimony the extra work that 
you went to to provide us with that information.
    I think the future is kind of scary, and every day the 
options get a little bit more limited. I am not sure that we 
have the excitement generated in the schools over the 
challenges and the opportunities that they face. It is real 
easy to think about the declining workforce and the scarcity 
that there will be of people that can do the jobs, and then the 
opportunity to say, ``Well, that is okay, they are bound to 
hire me because there will be so few of us.'' I hope that we 
can build the excitement out there so that they are learning 
how to learn so that they can do the kinds of jobs that we 
cannot even envision at this point.
    Any of you have any ideas on how we can generate that 
excitement among the kids? We keep talking about outsourcing 
jobs, but a lot of the jobs that get outsourced are not 
necessarily because of lower wages overseas, although that is a 
part of the problem, but a lot of them are because we do not 
have the people trained to do the jobs that are needed, and I 
think that is going to increase in the future. So how do we 
make them aware of the jobs that are going to be coming up and 
the skills that they will need to have, which means the kind of 
learning that they are going to have to be doing, learning how 
to learn. They will have to retrain. They will not be able to 
take a job like their parents or their grandparents had where 
they go to work for one employer, they work there 30 years and 
they retire. I am not even sure most of the young people are 
looking at that as a particular goal these days. They are 
looking at the excitement of the job. How are we going to 
increase the excitement for them to be willing to take on the 
futuristic type of things rather than the traditional, which 
will get outsourced? Any ideas?
    Ms. Erickson. I would offer a few comments. Our research 
certainly shows that what young people want today in a 
workplace is very different from what their parents were 
expecting, and as you said, Senator, the excitement is a huge 
factor. The ability to be flexible, the ability to work on a 
variety of different things. We found examples in our research 
of individuals who would not accept an employment arrangement, 
but insisted that the company structure it as a contract 
relationship because they want the psychological freedom to be 
able to move to different things and work on a project basis, 
and frankly, take time off when that is of greater interest to 
them.
    So we are wrestling with a workforce that is becoming 
increasingly interested in part-time, flexible, contract, 
project, different ways of structuring their relationship with 
their employer that are quite different from the kinds of 
relationships that we have seen in the past. I think as our 
companies are better able to offer that, it will surely get our 
young people more excited about the prospects that work offers 
for them.
    Ms. Furchtgott-Roth. Well, I would say that although I have 
shown these graphs showing how much better the United States is 
doing in many areas, primary, elementary and secondary school 
education is not one of them. University education is, but we 
are hearing from all different sources, we are hearing from 
employers that people with high school diplomas do not have 
enough math and reading and writing skills. We are looking at 
tests, comparative international tests. We see that our 
children score near the bottom in math and science.
    And the Hart-Rudman Commission, when it came out with its 
report in 2001, had two major warnings. The first, there was 
going to be a terrorist attack in the United States, which 
happened on September 11th. The second was that our children 
are not getting enough math and science education. That second 
recommendation has been completely--the second warning is being 
completely ignored.
    We need to do something to change the structure of 
education. We need to do something to have more competition in 
schools. We need to enable principals to have more authority 
and teachers to have more authority. We need to enable schools 
to fire teachers who are not doing a good job. We need to have 
more of the voucher systems that we see in Cleveland and 
Milwaukee and not condemn our poor children to low-quality 
schools in poor areas of town, but allow them to get out of it.
    Here I worked at the Department of Labor, just a stone's 
throw from many poor schools. If I had wanted to go on my lunch 
hour and teach a seminar in economics at one of these schools, 
I would not have been allowed to do it because I am not teacher 
certified. Here we are talking about getting older people back 
in the workforce. There are experts who graduate, who retire 
with Ph.D.'s at 55 or 60. They would like nothing more than to 
go teach a class. It would be good for them. It would be good 
for the children. They have incredible expertise in math, 
science, reading, writing. They are not allowed to do it. They 
do not have the teacher certificate.
    I mean these are things we need to change. We would have 
more competition. We need to raise the standards. We need to 
put more exciting teachers in. That way the children will be 
motivated to have high standards and to get better jobs.
    The Chairman. Thank you.
    Mr. Bernstein?
    Mr. Bernstein. I think my observation is that the 
excitement about participating in the economy of the future 
among our kids today depends largely on the class and the 
families that they grow up in, the kinds of options and 
opportunities they have in their youth. Often our school system 
gets blamed for the fact that too many children show up to 
school without the schools and the health care they need to be 
able to be active participants. That is why one of my policy 
recommendations was ensuring universal access to pre-K for 3- 
and 4-year-olds, so these kids arrive at kindergarten prepared 
to learn.
    Ensure access to higher education for those who want to 
attend college but do not have the means to do so. Provide 
scholarships to low-income individuals who study science, math, 
engineering and technology. All of these are ways to use our 
extensive resources to correct the inequities and inequalities 
that I think create the very dynamic that you described. I 
would not say that there is a widespread lack of excitement 
about the future. I would say that excitement is concentrated 
among those who have been placed in the economy in places of 
opportunity, in families that have higher incomes, in families 
who have benefited from the very concentrated growth of 
incoming wealth over the past couple of decades.
    I would disagree with many of the ideas that Diana just 
suggested simply because I am afraid that those kinds of 
flexibilities have not shown to be associated with better 
outcomes, but in fact have reinforced the types of inequalities 
that I think have created the very dynamic you describe.
    These problems of a lack of confidence, optimism about the 
future come, I would say, less from off-shoring and 
globalization and more from the economic conditions and the 
inequalities within which too many children are growing up 
today.
    The Chairman. A lot of thoughts there and a little bit of 
divergence, but maybe bring that back together a little bit 
though. I was with a friend of mine who was a lifelong 
schoolteacher and huge defender of the public schools and a 
member of the union, and he said to me--now, Wyoming is very 
rural. We do not have a lot of options on school. In fact it is 
all public school. I am in a town of about 26,000 people and it 
is 145 miles from the next town of equal or greater size. And 
he said to me, ``If somebody started a private school here, I 
think that about 80 percent of the kids would go to it.'' I 
said, ``Why?'' He said, ``So there would be some discipline and 
competition. We have gotten rid of competition to increase 
self-esteem, and what we have done is taken the kids who have 
the lowest self-esteem and relegated them to low self-esteem. 
They do not have that chance of competition to see that they 
could do a little bit better and grow a little bit there.''
    It was a shock to me. I would appreciate your reflections 
on that.
    Ms. Furchtgott-Roth. I think competition is absolutely 
vital. Imagine if we drove from here to New York and there was 
only one fast food chain, and it was McDonald's and everything 
else was banned? There would be no incentive for McDonald's to 
provide a good meal at any good price.
    The same with education. There is no choice for these poor 
children. The better off people can have the choice of the 
Sidwell Friends or St. Alban's. I do not know where you send 
your children, Jared, but I am sure it is not the local school 
down here on Capitol Hill. They have choices. The other people 
do not. Lower-income people do not have choices. They have to 
send the children to the one school that provides low-quality 
service even though we have been putting more and more money 
into education. We spend about the highest amount on education 
per capita of any industrialized country. We get some of the 
lowest results.
    What we need is more competition. We need more choices. It 
is elitist to say low-income people can not choose their 
schools. When there are vouchers offered, there is lines of 
people trying to get these vouchers to get their children out 
of the public school system, send them to some of the parochial 
Catholic schools that have better discipline or some of the 
other choices that there are that are better organized.
    That is what we need to have. It works in every other 
sector of our economy. Competition raises standards that would 
work in education.
    The Chairman. Mr. Bernstein?
    Mr. Bernstein. I would not disagree that a town like the 
one you described would possibly benefit from more competition. 
The problem that I see the way you framed it is that who would 
get to go to that private school? The problem again is not one 
of the overall quality of our K-12 education system. There are 
public schools that people in this room would be very happy to 
send their children to, but there are public schools, as you 
suggested, that we would not.
    So it is a matter of distribution, and once again, it is a 
matter of giving the public schools--which in my view has been 
one of the greatest--talk about great natural resources, our 
public education system has historically been one of the 
greatest resources we have created, and it has largely 
contributed to the very prodigious productivity that we are 
seeing today. The majority of our students that are in our 
workforce today came through the public school system and you 
can see the results in a workforce that is more productive than 
it has ever been.
    Once again, the problem is distribution, and if you 
splinter off the private schools and voucher systems--I worry 
about this under those conditions--what you are going to end up 
with is just yet another dimension of elitism and inequality 
built into the education system which has ideally in many years 
of our country been a great equalizer. So the goal needs not to 
be to peel resources away from the public system, but to 
increase its resources so that it can perform that role of 
being that great equalizer that it always has.
    The Chairman. Strangely enough, I am with you.
    [Laughter.]
    The point that he was making was the need for more 
discipline, that we have gotten a little lax on that. I know 
when I went to school that if I did something wrong and it was 
reported to my parents, there was no appeal, that I might be 
able to say something after I had my punishment but not before. 
My daughter is a teacher now and I know that occasionally she 
calls and lets a parent know that somebody did not turn in 
their homework or something like that, and she is always 
distressed that it becomes her fault.
    So we have had a little change there. So I think his 
comment was more to the discipline, and since he is a 
basketball coach, probably the competitiveness too and some 
wishes for some reversal there.
    We have been joined by Senator Kennedy. I would like to 
give him an opportunity to make a statement at this point and 
then we will pursue some more questions.

                  Opening Statement of Senator Kennedy

    Senator Kennedy. Thank you very much, Mr. Chairman, and I 
am very grateful to you for having this hearing.
    I want to thank our witnesses. We are, as the chairman 
knows, trying to be in three places, in the markup on that 
asbestos bill, and Senator Specter is after all of us in terms 
of making sure we are there to try and finish up that 
legislation. It is very complex and complicated. It has 
enormous implications.
    I think this in many respects is one of the most important 
hearings that we will have in this Congress because it is 
really a defining issue about where this country is going and 
how it is going to get there in terms of our future. I know the 
chairman is very much aware of this. I have listened to him 
speak on a number of different occasions.
    But the basis issue, it seems to me, is whether we are 
going to be consumed by globalization or whether we are going 
to be challenged by it. Whether we deal with it in terms of 
individuals and our country and if we are going to be the main 
competitor and lead the world in terms of world economy while 
also ensuring our own national security. You see these trend 
lines in India and China in terms of the graduates, numbers of 
engineers, and then you look at what is happening in the United 
States now and see we are down to about 50,000 and half of 
those are foreigners. A good percent of those are returning 
rather than remaining.
    And to look at where the research centers, not just the 
outsourcing of jobs, where these new research centers are 
going, into India and Bangalore and these other areas. And then 
look where they are going just in terms of weaponry. Without 
getting into classifications, most of these nations have stolen 
most of the weapons systems that we have at the present time. 
It is only a question of time before they are able to replicate 
and duplicate and build on them.
    So we must understand that we are in a real challenge at 
this time and take the steps that are going to be necessary 
here at home. I think I would be interested to the extent that 
our panelists can help us explain what we can expect and 
reasonably do to get other nations to try and live up to some 
international codes of conduct too. We are going to be faced 
with this issue with some of the prospective trade agreements 
that are going to be coming at us in the remainder of this 
Congress. And we have heard a lot of discussion. There is 
always a lot of talk when these matters come up before us. 
There have been some agreements that have actually been put in 
effect that have some positive results, but I would be 
interested in hearing from them what they might expect. Even if 
we do the things that we need to have done here--and I am not 
sure we are on the path to do all of those, but maybe our 
panelists could tell us what we ought to expect and what we 
ought to try and work on for these other countries, to make 
sure that no matter what we do in terms of investing in people 
and investing in research and development, that we are not just 
going to be sort of consumed by the rush to the bottom.
    Jared, do you want to take first crack?
    Mr. Bernstein. Sure.
    Senator Kennedy. I will put my whole statement, with your 
permission, in the record.
    The Chairman. Without objection.
    [The prepared statement of Senator Kennedy follows:]

                 Prepared Statement of Senator Kennedy

    The essence of the American dream is that if people work 
hard and play by the rules they can provide security for their 
families. But more and more Americans today are finding that 
their security is slipping away, and if we do not take steps to 
protect them it will continue to erode.
    Economic security is being increasingly undermined by 
globalization. It's becoming harder for children to expect to 
do as well as their parents. Costs are rising while wages and 
benefits are falling. Americans are working longer and harder 
without enjoying the fruits of their labor.
    The 2001 recession hit the Nation hard--millions of 
employees lost their jobs, and many of those jobs still haven't 
come back. The slow recovery was made worse by the pressures of 
globalization. More than ever before in our history, American 
workers are competing against workers around the world.
    Sadly, this competition has become a race to the bottom--
whoever is willing to work for the lowest wages gets the work.
    That's why more and more American jobs are going overseas. 
We've lost nearly 3 million manufacturing jobs since 2001. Most 
are good, middle-class jobs, with decent wages and benefits. 
And it's not just blue-collar jobs--millions of high-paying 
white-collar jobs are now at risk of being shipped overseas, 
especially computer jobs, and even many business and management 
jobs.
    This competition from abroad is also pushing down wages. 
Americans are working harder than ever, pushing productivity to 
record levels. But all that hard work is going into profits 
instead of employees' wages. Profits are up more than 70 
percent since the recovery began, while wages have fallen in 7 
of the last 12 months.
    The sad truth is that the globalization is threatening the 
middle-class. I remember when Americans who worked hard could 
support their families.
    But today, middle-class jobs are hard to find. 
Increasingly, our workforce is dividing into workers with high 
skills in the right fields, who can still find high-paying jobs 
with benefits, and the rest, who are left to compete for low-
paying work without benefits.
    Over the next decade, 7 of the 10 occupations that the 
Bureau of Labor Statistics predicts will add the most jobs are 
low-paying jobs, such as cashiers, food workers, retail 
salespersons, and janitors. At the same time, demand will 
increase for highly skilled workers in a few key fields, such 
as nursing and college teaching, that can't be shipped 
overseas, or in occupations that the global economy keeps in 
high demand, such as managers, accountants, and computer 
engineers.
    We must deal effectively with both sides of this division. 
We must invest in our economy to create more high paying jobs. 
We must strengthen labor protections, so that workers aren't 
harmed by globalization but share in the prosperity they 
create.
    At the same time, we must invest in higher education and 
job training to fill the high-paying jobs of the future and 
help ensure our future competitiveness in this global economy.
    Today, more women, people of color, and older Americans are 
in the workforce than ever before. Women now make up just under 
half of the labor force, which also means more parents are in 
the workplace. Today, in 70 percent of American families, all 
parents are working, either one single parent or both parents--
the exact opposite of 1960, when 70 percent of all families had 
at least one parent at home full-time. Workers today, and in 
the future, will need more flexibility, such as guaranteed paid 
sick days and expanded Family and Medical Leave in order to 
balance their work responsibilities more fairly with their 
families' basic needs.
    Minorities are also becoming a larger part of the 
workforce--in the last 20 years, the proportion of minorities 
in the workforce has grown by more than 45 percent. But 
minorities consistently have higher unemployment and receive 
lower pay than whites. In the global economy, our prosperity 
depends on making the best use of the talents of every American 
worker. When minorities don't have equal economic 
opportunities, our economy suffers.
    The workforce is also becoming older as the baby boom 
generation ages, and older workers are losing economic 
insecurity. Between soaring retiree health costs and 
increasingly threatened pensions, many employees can't afford 
to retire. Our retirement system itself has shifted to require 
workers to bear more and more risk. That makes it even more 
important to protect Social Security and preserve retiree 
health benefits and pensions.
    American workers face risk and insecurity in their daily 
lives and in their future. The global challenge is jeopardizing 
the very heart of the American Dream. But it doesn't have to be 
this way. Our economy can work for everyone if we make the 
right choices. We can create the same spirit of innovation, 
invention, and progress that brought us the automobile, the 
airplane, and the computer. Year after year, we brought the 
American dream closer for all our citizens, and we can't afford 
to let it slip away again.
    I look forward to the testimony of our witnesses on these 
all-important issues, and to working with our colleagues to 
ease this unfair burden.
    Mr. Bernstein. I think there are a number of things we can 
do. I appreciate the concerns that you raise. First of all, we 
need to, as I have stressed throughout, increase the access to 
higher education to many of our own citizens who are currently 
blocked, yet not by their skills. They could be fine and deep 
contributors to our economy if they had access to college 
educations. Too many minorities have the ability through the 
system to enter universities, but fail to complete them in many 
cases because of the income constraints they face. So the first 
thing we need to do is use resources to ensure access to higher 
education for anyone who wants to and can attend college by 
paying their costs for every qualifying child. We can require 
that student to pay back the loan over time from their 
increased wages.
    At the same time we need to, obviously, have serious and 
enforceable rules in our trade agreements that try to stave off 
any kind of a race to the bottom that you mentioned. When we 
expand in global trade the benefits are very significant, but 
we are often expanding into countries whose norms and cultures 
and wage structures and rules are very different from ours, and 
in many cases have the potential to undermine ours, and we can 
use rules embedded in our agreements to try to prevent that 
from happening.
    Finally, I think one has to face that a very basic answer 
to your question is that these trends, while they have great 
upside potential, also have great downside risks, and 
therefore, particularly if we want our workforce to embrace 
this challenge of globalization, we have to repair and increase 
the safety net such that it reaches all those who are 
potentially hurt by these trends.
    Just to give one example. Our trade adjustment assistance 
program right now applies only to manufacturing workers who are 
displaced with trade by certain countries. Expanding that to 
cover all workers in all sectors with every country with whom 
we have normal trade relations would be a first step. That is 
the type of safety net we have to build to provide workers with 
the security, use the benefits of globalization to provide 
workers with the security they need to participate and meet the 
challenge.
    Senator Kennedy. Basically if there are going to be winners 
and losers, what you are talking about is that we ought to at 
least even this out. The economy will expand and grow, but the 
people are going to pay for it, individuals, and rather than 
putting the whole burden on those individuals who are not 
really making the judgments themselves but are basically caught 
up in this, that they are not going to bear the full burden on 
it.
    Please?
    Ms. Furchtgott-Roth. It is really a vital and very, very 
important question that you have raised, because here in our 
discussions with China we are talking about textile and textile 
quotas, and we are really being harmed very little by those 
because in fact if we placed more restrictions on China we 
would probably get textiles from somewhere else. But we are 
losing hundreds of billions of dollars because of intellectual 
property theft, and they are breaking these laws left, right 
and center. They are doing nothing to enforce it, and we are 
doing nothing about it. I mean our DVDs are being pirated, even 
our furniture patents. People in North Carolina, they complain 
that the Chinese are copying those and selling those without 
giving them the rights that they are due. They are just copying 
our material, selling it, stealing it, and we are doing 
nothing. I mean we need to make them live up to the laws that 
they have signed, and we need to stand up for our companies. We 
need to get some of these, at least try to get these DVDs, 
pirated DVDs off the streets. Star Wars come on sale there, 
pirated on the streets before it opens in the theaters here.
    We need to make a real effort to do something about that 
because we are losing hundreds of billions of dollars a year. 
And our competitive advantage is in creativity and intellectual 
property. So that is a vital question. We need to do absolutely 
more about it.
    Senator Kennedy. Would you put currency fluctuations into 
that mix too, you know, particularly with regard to China or 
are we getting too far from the real problem on this?
    Ms. Furchtgott-Roth. Well, you see, China I think is 
hurting itself by pegging the yuan to the dollar and so 
eventually China is going to have to shift this policy to avoid 
just protests and high inflation in its own country. They are 
going to have to deal with the yuan, and they are going to deal 
with it. They do not have to deal with pirating our products, 
so they are not going to do that on their own, whereas they are 
going to adjust their currency on their own because it is 
unsustainable.
    Senator Kennedy. Tamara?
    Ms. Erickson. I was just going to add that from a business 
perspective certainly protection of intellectual property is 
one of the most critical issues. Think about it in terms of 
what we will have going forward over the next several decades. 
It will be, as Diana said, our intellectual abilities and our 
creativity, and so anything we can do to foster that and 
protect that is where I would certainly suggest that our focus 
be aimed. I just wanted to add to the conversation about 
education the importance of educating people and exposing them 
to the kinds of tools and technologies that will be available.
    This is probably not a practical idea, but think about a 
program that would give every young person a Blackberry and 
give them access to learning how to use e-mail and operate in a 
21st century world. So much of what people need to do is to 
understand how the world is going to operate, how decisions are 
going to be made. And while we certainly need math and science, 
we also need people just to have exposure to the world, and any 
way we can help our young people gain that I think will be very 
advantageous.
    Ms. Furchtgott-Roth. If I could add, USTR keeps track of 
the documents piracy and the piracy by other countries, but 
they do nothing. We do not do anything, they do not do 
anything.
    Senator Kennedy. May I continue to proceed?
    The Chairman. Yes.
    Senator Kennedy. Let me ask you a little bit, just looking 
at that chart over there on the 50th and 10th. I mean, as 
somebody who has been interested in the minimum wage over a 
long period of time, I think what we have seen is--I was just 
reading Fortune Magazine about a week ago, and in the back part 
of it they have the list of all the profits, the business top 
500 at 15 percent profits on this. We have enormous increase in 
productivity, incredible accumulation of capital in these major 
companies and corporations. That is mentioned, I believe, in 
your earlier testimony. If not, we have got the documentation 
about how people are working longer, if you take the number of 
hours as compared to where we are in the industrial countries, 
we are working longer, we are working harder. We have increased 
our productivity rather significantly over this period of time.
    I do not know how much more in terms of the productivity, 
got both members of the family working now which added to 
family both income and productivity. I do not know how much 
more we are going to be able to squeeze out of the American 
workers, when you have both the accumulation of capital and you 
are getting these very sizable profits, and we are looking at 
sort of globalization. How are we going to make sure that 
whatever burden we are going to be bearing in this whole kind 
of an expanse is going to be sort of evenly shared here in our 
economy?
    Mr. Bernstein. I think that is a key question, because as 
you suggest, the growth of the economy over the past few years 
has been very unevenly shared. We have actually posted some 
decent growth rates, and our productivity growth has been 
really quite spectacular. Yet, as I show in my testimony, year 
over year the wage of the blue collar worker in manufacturing 
or nonmanager in services has fallen consistently year over 
year for every month for the past 12 months. So here we have 
productivity growing, yet income is falling. Every year between 
2000 and 2003, the most recent data we have for the median 
family, productivity grew, and in 2002 and 2003 the economy 
expanded, yet median family income fell in real terms.
    As you suggest, over the period that you see wage decline--
and the slide up there is for men--family incomes were 
constrained by, of course, by that decline in real hourly wages 
for men, but that decline was counteracted in large part by so 
many more women going into the workforce working more hours per 
year. And that is what made the difference in terms of middle 
family incomes. That is how they got their incomes up, by 
working more to compensate for the decline in male wages. So 
one of the answers to your question is that we have to do 
everything we can to reconnect the growth in this economy to 
the living standards of middle income families and to the wages 
of those workers in, say, the bottom 80 percent, who are 
falling behind even as the economy expands.
    Now, how do we do that? You mentioned the minimum wage. 
Well, that is a great example of one way to lift wages at the 
very bottom of the wage scale, interestingly, and contrary to 
theoretical predictions, moderate increases in the minimum 
wage--and we have been doing that since the mid' 30s so we have 
lots of evidence--moderate increases in the minimum wage are 
not associated with employment losses. The last time Congress 
raised the minimum wage by legislation was 1996, so it has 
fallen considerably since then, probably over 20 percent in 
real terms.
    So revisiting that issue would be a great way to boost the 
bottom. It does not do that much for the middle. For the middle 
there are another set of policies that I argue would help 
connect the economy to middle income families living standards, 
and I elaborate on them in the testimony. In part they have to 
do with trying to reabsorb some of the risk that is inherent in 
a more global economy, strengthening pensions, strengthening 
health insurance, trying to lower unemployment, as well as, of 
course, providing workers with access to greater skills. I 
think that program would get part of the way there.
    Senator Kennedy. I understand now Britain is $9.50 an hour. 
They are going to $10 at the end of this year, and they have 
1,200,000 children out of poverty with this. They have the 
second best economy in Europe, outside of Ireland. They are the 
number one. And they have virtually seen a decline in their 
unemployed, and it has had a very significant--I listen to 
Gordon Brown, who is the Chancellor of the Exchequer and 
probably the most successful Secretary of Treasury or Office of 
Management and Budget all combined into one, the most 
successful both economist. And he talks about the same point on 
certainly the low-income wages, and hopefully we will have a 
chance to do something about it.
    Thank you, Mr. Chairman.
    The Chairman. Thank you. I appreciate your being here, and 
your full statement will be in the record and the questions you 
have asked.
    I am going to have some more questions for Mr. Bernstein on 
the chart that he has there, but I have to look up a couple of 
things before I can even phrase those. It just seems to me like 
if that is by wage percentile I am surprised that the 50th 
percentile varies from the 50th percentile.
    Mr. Bernstein. I am not sure I understand the question. The 
50th percentile varies from the 50th percentile?
    The Chairman. Yes.
    Mr. Bernstein. Oh. Why is it not always just 50 all the way 
across? Yes.
    The Chairman. If it is the 50th percentile, why is it not 
the 50th percentile?
    Mr. Bernstein. Oh, okay.
    The Chairman. And you are taking a very limited sample 
there and building fluctuation in, which has to stay that way 
by definition.
    Mr. Bernstein. No. This is a very typical approach in 
economics. See, if it were 1 year, yes, I would agree with you. 
Yes, in 1995 the 50th percentile is the 50th percentile, it 
does not change. But every year the median workers earns a 
different level of pay. The median worker is simply the worker 
right in the middle of the pay scale. That worker can earn $10 
1 year, $11 the next year, and so that is what is driving the 
trend that you see here. We could have used average wages, it 
would have been the same story. The median is the 50th 
percentile in every year, but that level changes year to year.
    The Chairman. Since everyone here is a statistician we 
followed that precisely.
    [Laughter.]
    I will ask some more questions, but on detailed ones----
    Senator Kennedy. You have to understand that our chairman 
is an accountant, the only one. So if you catch these, we 
always pay special attention because he always has some 
insights into these figures, and we learn that every day under 
our chairman. Thank you.
    [Laughter.]
    The Chairman. To get back to some of the more definite 
questions here, Ms. Furchtgott-Roth, in your testimony, you 
indicated that changing the Fair Labor Standards Act to allow 
for compensatory time and flex-time would serve as an incentive 
for increased labor participation by a number of nontraditional 
employees. Are there other laws or regulations or policies that 
we have, that if modified, would attract more individuals into 
the workforce?
    Ms. Furchtgott-Roth. Absolutely. First of all, there is a 
large empirical literature that shows that lowering taxes 
attracts more secondary workers into the labor market because 
they get to keep more of what they earn, and in the charts that 
are in my testimony that I presented earlier, showing that 
countries with lower tax rates have higher--more people work, 
people work longer hours, that is borne out.
    Second, current regulations make it very difficult for 
people to hire, small businesses to hire because of the 
paperwork. My husband owns his own small business. He has owned 
it for about 3 years. He tried to hire someone a couple of 
years ago, just an administrative assistant to help him. He got 
so much material from the IRS that he gave up. He decided he 
was going to do this on contract or do it himself. It is just 
impossible for small firms, very difficult for entrepreneurs to 
hire people and deal with all this paperwork, and that could be 
radically simplified.
    Third, if health insurance was more easily accessible, if 
the association health plans were able to be expanded, if 
people could buy health insurance across States, that would 
make it a lot easier for small businesses to hire people also 
because a lot of people, given that we have the system where 
health insurance is connected with employment and we are 
probably not going to be able to get rid of that very soon, it 
is linked. Association health plans where associations could 
offer large groups to small businesses, group rates to small 
businesses, that would be another thing that would be very 
helpful in increasing hiring. So I would say those three 
things.
    The Chairman. Thank you.
    Ms. Erickson, did you have some comments on that? I 
appreciated your comment about how the workforce of the future 
might be relying on cyclical workers, where they are on 3 
months, off 3 months.
    Ms. Erickson. That is what our research finds, yes. People 
would prefer that as a way of working. We are finding all kinds 
of interesting arrangements coming forth, people who are 
working only for health care coverage for no wage, people who 
are working in a cyclical fashion, 3 months on, 3 months off, 
as well as more traditional kinds of job sharing and so forth. 
So that flexibility coming in and the health care options, one 
of the things I mentioned in my testimony is that health care 
remains the single unifying core value that we find when we 
survey the workforce. That is the one thing everybody is 
concerned about.
    Beyond that, preferences vary all over the map. Some people 
want more risk in their arrangement, some people want less, 
more security, etc. And so other than health care, our research 
would indicate that the more flexibility we can provide for 
people to shape their own arrangements, the better it will be 
to attract nontraditional people into the workforce.
    The Chairman. Mr. Bernstein, in your comments you made 
reference to needing a single payer insurance system. Can you 
expand on that a little bit?
    Mr. Bernstein. I was nodding my head when Ms. Erickson 
noted the concerns over health care. We talk a great deal about 
these concerns regarding workers who are--there is something 
like 45 million uninsured in our country. We have about half 
the workforce who does not even have a health care plan or is 
not participating in one. My view is that if we wanted to in 
one bold stroke tremendously improve the quality of employment 
in this country and significantly reduce the economic 
insecurity that I tried to stress was one of the downsides of a 
more globalized economy, not taking anything away from the 
extensive benefits, but that shifting of insecurity and risk 
onto the workforce when you have a more globalized marketplace 
could be significantly reduced with a health insurance system 
that in my view was--that was taken out of the workplace.
    The costs and the inefficiencies to employers of having to 
provide health care to their workers are starting to be 
increasingly and glaringly evident and obvious. I think it is 
really dampening the ability of our businesses to compete.
    If you look at some of the other industrialized countries 
that we compete with, they tend to have single payer health 
care systems, and these systems mean that they are spending in 
some cases about half as much of their economy on health care 
with outcomes on average about the same.
    That does not mean that everybody is going to get better 
health care under this system. There are those who I think 
under a single payer system, particularly those at the very top 
of the health care distribution who would end up with care that 
was more closer to the average. But I believe that for many 
people, and not the least the tens of millions of uninsured, 
moving toward a single payer system based on expanding 
Medicare, which has a great record with low administrative 
costs and solid outcomes, we could achieve those goals that I 
have laid out.
    The Chairman. Thank you.
    To follow up on the question I started with, Ms. 
Furchtgott-Roth, there are currently laws, policies and 
regulations that have unintended consequences of discouraging 
labor force participation rates for people 55 and over and for 
women workers. Are there some of those and what would they be?
    Ms. Furchtgott-Roth. I would say that there are three 
things, as I mentioned, the paperwork, the health insurance, 
which I agree with Mr. Bernstein needs to be separated from the 
workplace, but I would suggest separating it by having 
competition in the supply of doctors rather than having a 
universal health care system because the European countries 
that have these single payer systems, you have problems with 
waiting lines, rationing, lack of medical equipment. And so 
even though it is universal, it is not that good, and you see a 
lot of them coming to the United States for health care. Also 
you see people from Canada, which has a single payer system, 
coming to the United States for health care.
    Teacher certification is another thing that prevents older 
Americans and women from teaching and entering the workforce. 
Even though we need more teachers, experts without teaching 
certificates are not allowed to teach, and this would be a job 
that secondary workers would enjoy doing. It would fulfill a 
need in our community.
    The Chairman. Thank you.
    Now, we talked about adjusting to the change in 
demographics and the changing workforce by all of us, the 
employees, the employers, the policymakers need to make 
corresponding adjustments in our thinking about work and the 
workplace. What are some of the adjustments that need to be 
made? What are some things that we ought to be looking at? Ms. 
Erickson?
    Ms. Erickson. I will start on that. First of all, we need 
to recognize that there is really a new life stage that will be 
available in the U.S. labor pool. If you think about it, by the 
time most of us trickled out the door, our parents were 
probably old. They probably felt old. They were probably ready 
to have a much easier life. By the time our children leave 
home, hopefully, we are not going to feel old, we are not going 
to be old. We are going to have 20 or 30 more years of healthy 
active life to contribute. It will be in many ways the first 
time in human history that we have had an adult nonchildrearing 
stage of life.
    Think about what we can do with that. I mean it is an 
unprecedented opportunity. Everybody who has had the empty nest 
syndrome hit I think knows kind of the burst of energy that 
that can provide in terms of creativity and jumping back into 
new things. We are going to have a whole generational cohort 
that will have that sense of energy.
    So part of it is for employers to think outside the box and 
forget some of the stereotypes that we have been wedded to, 
that people need to retire at 60, that is crazy. They are going 
to have 20 more years where they can contribute very, very 
productively to business. We need to stop thinking about 
traditional employment relationships where you are the 
employee, and we need to think about more flexibility and more 
contract and more ability for people to come and go in terms of 
different arrangements they would like to have. That kind of 
flexibility and customization is really at the core.
    What I would say in sum is we need to get employers to stop 
thinking about equality in the sense of treating everyone the 
same, and think about fairness in terms of treating people 
flexibly but fairly.
    Ms. Furchtgott-Roth. Right, yes. Yes, I would say that we 
do not know what is going to come up in 2015, 2025, 2035. We 
need to make sure that the workforce is as flexible as possible 
in order to deal with these things so employers can hire one 
person who wants to telecommute, or another person who wants to 
be contracted out, or another person who wants to work 80 hours 
a week, and just make it possible for people to balance their 
total schedules, adjust their time, have comp time instead of 
overtime pay, or give them as much flexibility as possible 
because every individual needs his or her own tailored package, 
and we want to make it as easy as possible for that to happen.
    Mr. Bernstein. Well, I would like to take a slightly 
different view in the following sense. I think someone 
listening to much of our discussion would think that one of the 
goals of our group is to ensure that more people are working 
more hours as they get older.
    I hope that I am doing what I am doing until I am in my 
70s, 80s, whatever. I enjoy it. It is not physically taxing, 
and I hope I continue to have the opportunity to contribute in 
this way. But there are those, I think we could all agree, who 
ought to be able to retire in their mid 60s if they want to.
    When I look at the employment rates, as other panelists 
have mentioned, of the group 55 plus and note that that is the 
only group whose employment rates have been rising over the 
past 4 years, and they have been rising steeply, I wonder just 
how much of that is voluntary people wanting to work more and 
how much of it is what I think we hear anecdotally is because 
they are concerned about their pensions, they are concerned 
about their health care.
    Therefore, I would argue that one of the things we need to 
do to provide for the workforce of the 21st century is ensure a 
much stabler and more secure pension and health care system for 
the elderly. I would say especially pensions because I think 
Medicare provides a good health care safety net for them, but 
to make sure that the pension system that we have in place--and 
I am thinking largely of Social Security--remains as strong a 
safety net as it has been, so that when people voluntarily want 
to get out of the workforce--if they want to stay in they ought 
to be able to and we ought to enhance their ability to do so, 
but for those who want to or need to get out at traditional 
retirement ages, I think they ought to be able to.
    The Chairman. Thank you. All very insightful comments, that 
brings to mind though the statement--I am sure this was meant 
to be humorous--and the statement went something like this: 
``Don't retire. Did you ever notice that most of the people who 
die are retired?''
    [Laughter.]
    Of course, I think that was written by the same person that 
did the book about do not go to a hospital because most people 
who die, die in a hospital.
    [Laughter.]
    Thank you.
    As you are probably aware, we are in the process of 
reauthorizing the Workforce Investment Act and will consider 
other legislation that is aimed at providing lifelong education 
and training opportunities for current and future workers. 
Because of the way the workforce is changing, we know that 
school is never out and learning cannot ever be over. Even in 
the same job people have to learn the new techniques that come 
along. Can you comment on the importance of training and skills 
acquisition to our future workforce needs, especially for the 
older and the nontraditional workers? Go ahead.
    Mr. Bernstein. I will start. Since you mentioned the 
Workforce Investment Act, let me say something specifically 
about that. I have noted and documented in an article for the 
American Prospect, with co-author Steve Savner, that some of 
the activities under that bill discovered a great combination 
that I will bet you all of the panelists here would agree with, 
that when local employers work with local training initiatives 
to identify future areas of skill demands and of future job 
openings, you have a much more successful training program than 
when you simply take people in and give them a set of skills 
that you think maybe they will need.
    So I think what we ought to be contemplating in this type 
of policy is a closely-knitted relationship between those who 
provide workforce training and employers on the ground, again, 
with a local focus on future pockets of demand in particular 
communities. That way you link workers up with jobs. Just 
providing them with skills without jobs, they will be all 
dressed up with nowhere to go. Providing them with the skills 
they need for forthcoming jobs seems to me to be a great way to 
go.
    The Chairman. Ms. Furchtgott-Roth?
    Ms. Furchtgott-Roth. The Department of Labor already has 
One Stop Centers that bring together people who are looking for 
jobs and employers and training centers. These centers are 
really very important in training dislocated workers for new 
jobs. Training is really vital for the future, as we have seen. 
The returns to a college education are going up considerably. 
We need to make sure that our children are prepared for 
college, encouraged to go.
    We need to make greater use of the community colleges and 
give people more flexibility over what training they can get. 
The idea of the personal reemployment accounts, where they 
would be able to pick where they would go rather than staying 
at the Federal Government training center. The Department of 
Labor spends $10 billion on training, that is billion rather 
than million, and other domestic agencies spend another 5 
billion. Many of these programs are wasteful and duplicative, 
such as we have WIA--WIA is Workforce Investment Act, WIA 
Adult, WIA Dislocated Worker, WIA Youth, and the Wagner-Peyser 
Employment Service systems.
    So you go into one of these One Stop Centers, you can go to 
WIA on one side, Wagner-Peyser on the other. They do provide 
exactly the same thing. Last year only 200,000 people were 
trained at a spending level of 10 billion. That is $50,000 per 
person, so this is just not an efficient way of doing this. It 
is really important that you are looking at reauthorizing this 
Workforce Investment Act and making changes, to consolidate 
some of these programs into one program, the WIA Plus 
Consolidated Grant Program, that will give each State a grant 
to provide training services, because we in Washington cannot 
say what each individual State needs. If we could take some of 
this money, give it to the States, let the State decide what 
kind of training is best for their particular mix of unemployed 
workers and new workers, then we would be a lot further along.
    The Chairman. Ms. Erickson, did you have any observations 
on the Workforce Investment Act?
    Ms. Erickson. Well, again, just to reinforce that the 
continuing education is certainly highly important. There 
almost are multiple dimensions that we need to think about it 
in. Some of our key professions are coming up against very 
critical shortages, and granted, that is a small percent when 
you look at it in the overall total, but for example, the 
average age of a petroleum engineer in the United States today 
is 53, and most oil companies still have early retirement 
programs that allow those individuals to retire at 55. So we 
are about 18 months from having a significant proportion of our 
petroleum engineering capability in the United States retire.
    The oil companies are preparing for that by looking for oil 
petroleum engineering capability in Indonesia and places 
offshore. That is a tragedy, and that comes about because we 
have not had the educational system that has brought enough 
people in the United States up through that particular highly 
specialized, small discipline.
    So as we look at education we need to look I think at some 
of those leading edge capabilities which just by keeping them 
here keep our research facilities here, keep that intellectual 
capital development component of our economy vital, as well as 
the more broad-based training that we have been talking about 
so far.
    The Chairman. Thank you.
    Senator Isakson?
    Senator Isakson. Thank you, Mr. Chairman. I deeply 
apologize for being late, so I probably should not even ask a 
question. So what I might do is just say amen to what Ms. 
Erickson just said.
    I just left a hearing on the nuclear energy issue, and two 
panels, and the problem you talked about in terms of petroleum 
engineering is precisely the problem we have in nuclear energy. 
We have a workforce capital shortage of immense proportions. 
Having once chaired a State board of education, and looked at 
what all the problems and difficulties we were having, one 
thing I concluded was aside from all the things we needed to do 
in the educational institution to improve what we were doing, 
we needed in this country to start glorifying the right things, 
not sometimes the entertaining things. And by that I mean the 
professions and the jobs of the 21st century, and doing a good 
enough job of getting that attention to children early enough 
in their early years or their adolescent years so that they 
would know these careers even existed.
    I think--and this is a comment, obviously, not a question--
but, Mr. Chairman, for what it is worth, I think one of the 
things that we do not think about enough is providing the 
perceptions for our kids to be exposed to of what opportunities 
are really out there, and some of them do not ever get them 
because they grow up in a home where those perceptions are not 
there because it is a second or third generation of high school 
education or less and their environment or their economic 
status does not expose them to that. Obviously, it does not get 
exposed on TV or the media.
    One of the things we have got to do is start selling the 
opportunities that America offers. Second, on your point about 
the exporting is exactly correct. I mean these companies are 
going offshore and they are going out to find these people 
because that is where the technical people are.
    One last thing and this is also a comment, but I can get 
three things off my chest at once and it will be really good.
    [Laughter.]
    There are a lot of people that have great concerns about 
free trade and great concerns about the lower-wage countries 
and some of the jobs that have gone over there. And I would 
like some reaction from you all to this. I cannot help but 
think that the best thing for America in the 21st century would 
be these developing nations to start having the same pressures 
we have already had and addressed. If every country had a 
minimum wage, if every country had an OSHA, if every country 
had the amount of workforce protections that we have had, the 
base cost of them producing their product would rise and we 
would once again compete not as much on price but on quality, 
where I think we in this country would excel.
    As an observation, I think one of the things open and free 
trade has the potential to do for us is to expand the horizons 
of those developing nations so that they begin to have the 
natural pressures we went through as a country in the first 
part of the 20th century that brought about the remarkable 
changes that we have had.
    That is all I have to say, and that really was not a 
question, but any observations you all want to make are fine.
    Ms. Erickson. I think the one observation perhaps we all 
would offer--we spoke about it a bit before you arrived--is 
just to add intellectual property protection to your list as 
one that is really critically important as well.
    Senator Isakson. Agreed.
    Ms. Furchtgott-Roth. And it is not just petroleum engineers 
that are getting to be in their 50s. The whole of the skilled 
trades, we have carpenters, we have----
    Senator Isakson. Nurses.
    Ms. Furchtgott-Roth. Yes, exactly, that whole group of 
trades, it is becoming less fashionable to go into those 
trades, and so the people there in their late 40s, 50s, people 
who repair air conditioners, people who fix heaters, that whole 
group of people and that kind of--we need to show people that 
this is a good area to go into, these are very high-paying 
jobs, relatively high-paying jobs, and these are good careers 
for apprenticeships and people who would want to do something 
like that.
    Mr. Bernstein. I appreciate your comments, Senator, and I 
would like to make three points. One is that I think you were 
talking in kind of a longer-term view, but I think it is 
important to raise that in the current economy there is 
actually a cyclical component to some of the problems you have 
mentioned. For example, the unemployment rates among computer 
programmers went from very low 1 and 2 percent rates, which is 
purely frictional--that means if you were a computer programmer 
in the mid 1990s you either had a job or were looking for a 
good one--to well below the average to well above the average, 
5, 6, 7 percent in San Jose after the bubble burst. Those rates 
have yet to come down, so we actually still have an excess 
supply of these very workers that we were talking about being 
in short supply. But that is very cyclical. Over the longer 
term hopefully those workers will become reabsorbed.
    But getting to your second point, it is more challenging to 
reabsorb them if we are competing with workforces with a 
similar skill set in other countries where their wages are one-
tenth of ours, and certainly, one of the motivations for going 
and using those workers either through offshoring or through 
H1-B or whatever, is because of their lower price.
    In that regard I wholly endorse and think it is critically 
important your platform for trying to raise the level of the 
playing field a bit, and I think that is and ought to continue 
to be an integral part of our trade agreements. Whether those 
components of our trade agreements are enforceable or not and 
how we enforce seems to me a great area of inquiry.
    Senator Isakson. You cannot force them, but I do think as 
those countries begin to realize some economic prosperity, 
relatively speaking, from actually being traders with America, 
the natural human tendency, as their plight in life improves is 
to seek the types of things we have in the United States of 
America today. I mean most of the stuff that we have in 
workforce protection evolved by worker pressures as the workers 
became more plentiful and as they became more economic--that is 
a natural phenomenon that will take place. We cannot make it 
happen through trade agreements because we cannot impose 
domestic law on a foreign government, but it is something that 
I believe the pressure in time will help us.
    I agree with your comment on the cyclical nature. I will 
say this, having done a lot of seminars with computer based 
people who were out of work, which was a large component in my 
area where I live, metropolitan Atlanta area, one of the 
reasons we are working so hard on the Workforce Investment Act 
is getting some of these people and professions that went from 
a specialty to a commodity, who there might not just be those 
jobs any more, to get them to retrain rather than to continue 
to try and find what does not exist any more. I think to a 
certain extent that is what happened in technology, which is 
why the Workforce Investment Act is very important.
    I know I have used my time now, Mr. Chairman. Thank you.
    The Chairman. Appreciate your comments. That brings to my 
mind that my wife and I went into the shoe business at about 
the time Italians started making shoes, and at that time 
companies in the United States were importing these really 
cheap shoes. Inexpensive, I should say. No, they were cheap.
    [Laughter.]
    Everybody had to have them because they were so low-priced. 
Then Italians discovered what was happening in the shoe market, 
and as you know, today Italian shoes are the most expensive 
shoes. I still will not go with the best constructed, but they 
are the most expensive, and part of that is what has happened 
within the industry and with the wages.
    And what Ms. Erickson said, that figure that I saw that is 
very distressing to me, deals with electrical engineers. A year 
ago in the United States evidently we graduated 59 electrical 
engineers who were born in the United States. We graduated a 
lot more than that but they were not born in the United States. 
So we are importing a lot of people to learn these skills, and 
then some of them stay on to use those skills in the United 
States. Some of them take back to other countries to put them 
in a better competitive economic position. It is kind of a 
worrying trend when we have less people going into those things 
that need science and math. So we have to reverse that.
    I wanted to ask one more question. Ms. Furchtgott-Roth, 
your testimony--and I appreciate the charts that you have, they 
are very helpful--but you made some comparisons particularly 
with the European workforce. Can you share with us some, 
capsulize some of the lessons that you think we can draw from 
comparing those European workforce data with our own, and 
perhaps even focus a little bit on nontraditional workers there 
as opposed to here?
    Ms. Furchtgott-Roth. Yes. Well, Europeans have a higher 
rate of unemployment, shorter hours of work, stagnant job 
creation and stagnant productivity in GDP. Senator Kennedy did 
mention his conversation with Gordon Brown, the Chancellor, 
where he had talked about the growth in jobs in Britain. It is 
true jobs in Britain have grown, but they are all public sector 
jobs. They have not created any private jobs over the past 2 or 
3 years.
    Martin Bailey, Chairman of President Clinton's Council of 
Economic Advisors, has studied this issue carefully. A few 
months ago he published a book entitled ``Transforming the 
European Economy.'' It is a very thoughtful book, and I have it 
right here. In contrast to people who say the solution for the 
United States is to increase taxes, to reduce inequality, raise 
the minimum wage and have more mandated benefits, he says the 
following: He says the current system in major European 
countries is fatal for employment. Wage rates for low-skilled 
workers are inflexible. Payroll taxes are very high and inflate 
company employment costs along with other employer mandates. 
Benefit levels paid to the unemployed and to many others on a 
variety of social welfare programs are kept high relative to 
after-tax wages and are paid for prolonged periods. This system 
discourages employers from hiring and workers from taking jobs.
    And he goes through several recommendations for Europe, 
basically to make it more flexible, to reduce some of these 
mandates, to time limit some of the unemployment insurance 
benefits, basically to make Europe more like us in order to 
make it get the same levels of GDP growth, productivity growth, 
job creation that we have. So I highly recommend it, published 
in September by Martin Neil Bailey, former Chairman of 
President Clinton's Council of Economic Advisors, called 
``Transforming the European Economy.''
    The Chairman. Thank you.
    Would anyone else wish to--Ms. Erickson?
    Ms. Erickson. One comment I would like to add to that, I 
spoke about engagement, people's feeling of passion and 
excitement about their work. All the studies indicate that 
engagement levels, while very low in the United States, are 
even lower in Europe, that people's sense of passion for their 
work is very low in European countries. You can speculate why 
that is true. We believe from our work that it is for many of 
the reasons that were just said, the work is inflexible. The 
structures are rigid. The variety is not there, and people are 
turned off. And so a lot of the productivity challenge we have, 
I would even go so far as to say a lot of the education 
challenge we have is around getting people excited about work. 
Kids will get excited about learning if they feel like their 
parents are excited about the work they are doing. If we have 
parents who are turned off by work, what child is going to feel 
excited about preparing for the future of a work future that 
they are living in a home with an example of somebody who is 
dreading going out to that 9 to 5 job every day.
    So in many ways, creating more excitement, creating more 
engagement with the work we do is to me the most relevant goal 
that we need to think through as we shape a variety of 
different approaches.
    The Chairman. Mr. Bernstein?
    Mr. Bernstein. I think when you lump Europe all into one 
group and talk about this kind of Euro-sclerosis that Diana was 
referencing, I think you miss nuances that are very important. 
There are countries within Europe that have had very impressive 
job growth even with the set of protections that Diana was 
arguing against. Ireland is one case where they have had a 
tremendous IT boom. The Netherlands has also expanded 
employment and output. And by the way, in each one of these 
countries, their rates of productivity growth are analogous to 
ours, and in some of them, their levels of productivity are now 
comparable to ours. And that is one of the reasons why the 
OECD, the Organization for Economic Cooperation and 
Development, that looks at all these economies, has been very 
hard pressed to link the kinds of policies that protect workers 
in the workplace to the disappointing economic outcomes that we 
have heard about. There are lots of reasons why countries do 
not perform well, and it actually turns out that these social 
protections do not show up as one of them.
    Importantly, at the same time, we focused only on the cost 
of these social protections. The benefits are quite deep. Child 
poverty in Scandinavia, in Germany, in France, are half of 
child poverty here. Not the market outcomes. Market outcomes, 
child poverty is about the same, but when they fiscally 
redistribute, their child poverty rates are about half of ours. 
They actually have more income mobility than we do, not less. 
So these are dynamic economies, and I think to ignore that is 
to I think reduce the argument to a level that is not 
particularly useful.
    The Chairman. Did you have any further comments?
    Senator Isakson. I was going to say, having just heard both 
sides of the argument with regard to that--I am a Swede and was 
in Sweden a couple years ago, which is one of those countries I 
imagine you were referring to in your last comment. There is a 
level at which workforce guarantees and regulation is healthy, 
and there is a level where it is suppressive and oppressive and 
demotivational, and that is where we have to be very careful as 
a country to never move to--and I can say this because I am a 
Swede--I think they got to that point. That is one of the 
problems that they have been dealing with.
    So we have to be very careful. You want to have a safe 
workplace and you want to have a quality workplace and you want 
to have workforce protections, but you can mandate on business 
so much and you can carry it to a point to where its embedded 
cost is counterproductive, which is why we have congresses and 
why we have experts and why we talk about these things. But 
there is a balance. You can way too far on the regulatory end.
    The Chairman. Thank you very much.
    I want to thank the witnesses for their testimony and the 
questions that they have answered. The record will stay open 
for 10 days. You can expand on any of the comments that you 
have made or observations that you have on anything that has 
been said here today. We also may be submitting some additional 
questions to you, ones that are very specific to your 
testimony, we usually reserve for outside of the hearing itself 
that allows us to make more detailed comparisons. So we will 
get into some more specifics on some of the countries that were 
mentioned and other things to, and we will be open to any other 
ideas you have for how we can get the workforce ready for 
tomorrow's challenges and opportunities. Thank you very much.
    The hearing is adjourned.
    [Additional material follows:]

                          ADDITIONAL MATERIAL

                 Prepared Statement of Senator Isakson

    Recently, economist Robert J. Samuelson wrote that, ``Our 
aging society is the central problem. Everything else is just a 
footnote.'' He was talking about the implications of an 
increasingly older American workforce on Social Security, but 
he could have been talking about the resultant lack of workers 
as well.
    As the baby boomers approach retirement, our economy faces 
a serious workforce shortage. Within the next 15 years, it is 
estimated that 80 percent of the native-born workforce will be 
over 50 years of age.
    However, beyond the graying of America, our biggest 
challenge lies in the changing skills our workers will need to 
compete in an ever more globalized economy.
    We must embrace, not shy away from, this global 
interconnectivity. This interconnectivity provides a myriad of 
both challenges and opportunities. Our Nation's comparative 
advantage will no longer be simply confined to our natural 
resources or our manufacturing capability, instead it will lie 
with our Nation's people and their ability to invent, innovate, 
market, and create.
    To that end, our next generation of workers needs us to 
provide them with flexible, top-notch 21st century training 
with tools to compete.
    The fact that this next generation of workers will need 
skills that differ with those needed by the current generation 
is not new. Economic change is a fact, not an inconvenient new 
problem. Certainly, the agrarian workers of the 19th century 
would be lost in the factories in which their sons and 
daughters made their livings.
    What may be new is the acceleration, the pace of change. 
This rapid pace of change results in a situation where workers 
cannot assume the job for which they train at age 20 will still 
remain when they turn 50.
    Recently, one of America's most important businesses 
leaders, Bill Gates, told the National Governors' Association 
that American high schools cannot teach our kids what they need 
to know today.
    Today's interconnected world makes it possible for people 
around the globe to compete and collaborate with American 
workers. In this light, Bill Gates' message is clear: the 
status of American education is inadequate to equip the next 
generation of workers to compete against those abroad who will 
have had higher quality educational opportunities available to 
them. I look forward to working with my colleagues to address 
this and other pressing educational challenges.
    [Whereupon, at 11:38 a.m., the committee was adjourned.]