November 2002, Vol. 125, No.11
Précis
Workforce development and economic opportunity
Dispersion of commercial Internet use
Why are there tuition assistance plans?
U.S. most competitive country
Workforce development and economic opportunity
Federal Reserve vice chairman Roger Ferguson, speaking at the Commercial Club of Cincinnati, identified workforce development as one, along with home ownership, of the two most important forces driving community development and local economic opportunities. He notes, "…communities with strong businesses and a well-educated labor force are more likely to be healthy, viable places to work."
The increasing role played by education, Ferguson points out, has paralleled the shift of the economy away from manufacturing and into services. A concomitant increase in technological innovation has made life-long learning and training ever more necessary. He uses BLS projections to show that a disproportionate share of new jobs will require college degrees or other postsecondary school qualifications and that workers who take the initiative to improve their credentials will most likely find their incomes increased. The community in turn will benefit, as an educated work force attracts economic development. A key strategy for local areas is to maintain a strong educational infrastructure and to collaborate with employers and institutions such as community colleges to provide skilled workers and responsive educational programs.
Dispersion of commercial Internet use
Basic access to the Internet is now part of the basic investment needed to do business, according to a NBER working paper by Chris Forman, Avi Goldfarb, and Shane Greenstein. Using data from a commercial market analysis shop, they found that the average rate of adoption of at least the minimum capacity to use e-mail, browse, and passively share documents is a bit over 88 percent of establishments with 100 or more employees. Such participation approaches saturation in most industries. The NAICS sectors with the highest rates of participation were information, utilities, and professional, scientific, and technical services. The only sectors with Internet participation rates below 90 percent were retail trade, agriculture, forestry, fishing and hunting, and educational services.
Enhanced use of the Internet—for enterprise resource planning, customer service, education, publication, purchasing, or technical support was also widespread among industries, but at much lower rates than simple participation. The lead sectors for enhanced Internet use (rates in excess of 25 percent) were management of companies and enterprises and the information sector. The overall adoption rate for enhanced Internet applications was about 12-½ percent.
Among metropolitan areas, participation varied by size and by the pre-existing spatial distribution of industries. Large metropolitan areas (population greater than 1 million) had the highest participation and enhancement rates and small areas (population less than 250,000) had the lowest. The large metropolitan areas with the greatest degree of Internet participation were San Francisco, Denver, and Cleveland.
Why are there tuition assistance plans?
Employer-sponsored tuition assistance programs are a major source of funding for post-secondary education. Peter Capelli has found evidence that about one in five university graduate students are receiving some form of tuition help from their employers. Perhaps a quarter of adult students, the ones most likely to be employed, are getting tuition assistance of some sort. As the larger pool of undergraduate students is broken down by department, as many as one-third of business or engineering students receive financial assistance from their employers. The question is why do employers do it?
As an easily transferable set of general skills, the academic credits accumulated by these employees could be hired away by other employers or the employer providing the tuition assistance might have to bid up the wages of their employees as well as bearing the costs of the program. But Capelli’s research finds that the great majority of employers do help pay for post-secondary education. (One source he didn’t use, but could have, was the BLS Employee Benefit Survey which found that two-thirds of medium and large employers had job-related education assistance programs in 1997.)
Capelli’s explanation of the phenomenon is two-fold. First, tuition assistance programs provide a method of self-selection of the most productive workers. The better, brighter, more motivated and self-disciplined candidates would be more likely to select the firm with the tuition benefit, all other things equal. This means the employers gets a more productive worker, presumably more productive enough to cover the cost of the program. Second, workers will stay with the firm in order to make full use of the program, thus permitting the employer to earn that additional margin over a longer period.
According to the Global Competitiveness Report 2002–2003, the latest in a series of annual rankings by the Swiss-based World Economic Forum, the United States was the most competitive economy. The number one ranking was based heavily on America’s performance in the technology area: research and development, business-academic collaboration, venture capital, receptivity to innovation, and so on. The United States also scored well on macroeconomic environment. In contrast, international business leaders gave the United States relatively low marks on its public institution, but not so low as to take the Nation out of the top spot in the competitiveness table.
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