Greenspan Calls for Better-Educated Workforce

By Nell Henderson

Federal Reserve Chairman Alan Greenspan said yesterday that U.S. workers must be better educated so they can find jobs in an economy that is increasingly creating conceptual goods rather than tangible products.

Providing "rigorous education and ongoing training to all members of our society" is critical for the economy overall and for individuals buffeted by its changing nature, the Fed chairman said in a speech to the Greater Omaha Chamber of Commerce 2004 Annual Meeting.

Better education, particularly in elementary, middle and high schools, would go a long way toward boosting the wages of lower-skilled workers and diminishing the income inequality that has become more pronounced over the last two decades, he said. Greenspan used the occasion to elaborate on similar remarks he made last week on Capitol Hill in response to lawmakers' questions about recent job losses, including those attributed to trade and the movement of U.S. production overseas.

Greenspan said U.S. workers would benefit more over the long run from enhanced education and job skills than from protectionist measures that restrain trade.

"The single central action necessary to ameliorate these imbalances and their accompanying consequences for income inequality is to boost the skills, and thus earning potential, of those workers lower on the skill ladder," Greenspan said, according to a text of the speech provided in Washington.

Although the Fed chairman has no formal role in crafting education or labor policy, Greenspan has been questioned on the subject recently because of continued anxiety, in a presidential election year, over the country's weak job market. Although the last recession ended in November 2001, the economy has lost 2.2 million jobs in three years. And although the economy has grown rapidly in recent months, causing layoffs to abate, it has not caused businesses to hire as many new workers as expected, Greenspan noted.

While other policymakers praised Greenspan's analysis, they noted that he did not prescribe how to improve education, how to pay for improvements or what role government should play in helping the unemployed -- all hot topics this campaign season.

"I agree we should improve secondary and post-secondary education, but that's hardly a total response," said Rep. Barney Frank (D-Mass.), who had questioned Greenspan on employment issues last week.

"It's inconsistent for Greenspan to talk about" increasing educational opportunities while also calling for shrinking the federal budget deficit primarily, if not wholly, through spending cuts rather than tax cuts, Frank said. "These are public sector responsibilities."

Robert B. Reich, who was secretary of labor during the Clinton administration, said in an interview that Greenspan is "absolutely right" in seeing education as the key to improving job prospects, incomes and living standards over time. But, Reich said, rising tuition costs have made college less accessible to many families, many states are cutting spending on public education and there is insufficient public funding for education in early childhood.

"Education is an investment in our future productivity," Reich said. "Perhaps Mr. Greenspan needs to go to the next step in discussing where will the money come from."

But Rep. Doug Ose (R-Calif.), who also questioned Greenspan on Capitol Hill, said the Fed chairman helps lawmakers by highlighting issues -- such as education and the budget deficit -- not by recommending specific policy solutions. Greenspan was effectively saying, "come on, get together and get this done because it's critical to our long-term prospects," Ose said.

Greenspan said U.S. workers face a "never-ending necessity to learn new skills" because of the changing nature of the economy, particularly the "ever-growing conceptualization of economic output."

Because of this, he said, the incomes of highly skilled workers rose faster than average in the past 20 years. The wages of less-educated, lower-skilled workers stagnated.

Greenspan again predicted that job growth "will begin to increase more quickly before long" as the economic recovery continues, but he also repeatedly expressed concern for jobless individuals caught in the transition.

"We have reason to be confident that new jobs will displace old ones as they always have, but America's job turnover process is never without pain for those caught in the job-losing portion," he said.