Business forum: Educational foundations key to growth

  • Article by: DURWIN A. LONG
  • Updated: December 14, 2008 - 11:21 PM

The government's best investment may be in you.

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The country must stimulate greater investment in the education of working adults to strengthen the economic security of future generations. Above, Northrop Auditorium at the University of Minnesota.

Photo: Jerry Holt, Star Tribune

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As the U.S. economy has continued to deteriorate, talk in Washington has been building for passage of another economic stimulus package -- dubbed Stimulus 2.

Designed to jump-start the economy with a massive investment in public infrastructure President-elect Barack Obama and others estimate that the program would create 2.5 million jobs. Building roads, bridges and energy-related projects may be essential investments in the country's physical infrastructure. But there is a comparable need to invest in the human capital that will be required to invent and commercialize the countless new technologies equally essential to economic growth.

In a time of national economic crisis, policymakers have the perfect opportunity to invest not just in bricks and mortar but also in the educational foundations that will sustain the nation's economic, cultural and military preeminence. As President John Kennedy said, "Leadership and learning are indispensable to each other." History provides ample evidence that investments in education, made at times of national peril, pay large and long-lasting dividends.

The Morrill Land Grant Act of 1862, signed by President Abraham Lincoln in the midst of the Civil War, created a generation of entrepreneurs and managers who led the Industrial Revolution at the turn of the 20th century. Similarly, the World War II-era GI Bill put a college education within reach of millions of men and women who, in turn, created two decades of unprecedented prosperity in the 1950s and 1960s.

Indeed, for more than a century, rising household income was correlated with rising education levels. From the end of the Civil War through 1960, the average American's level of education rose from eight years in 1890 to nearly 14 years by 1960. Equally important, during the same period, the average American's educational attainment far surpassed that of workers in other industrialized nations.

Regressing since the '70s

But by the 1970s, U.S. educational attainment rates stagnated and college graduation rates, an important indicator of economic competitiveness in a knowledge-based global economy, began to decline relative to other industrialized countries. Data collected by the Organization for Economic Cooperation and Development indicate that, as of 2006, the United States ranked only 12th among developed countries in the percentage of 25- to 34-year-olds who had college degrees, lagging such countries as Russia, South Korea and Ireland.

Not surprisingly, household incomes that rose during the nation's century of increasing educational attainment began to decline. Census Bureau data indicate that inflation-adjusted median household income peaked nationally between 1999 and 2001, and declined by 2.1 percent through 2006. In Minnesota, the income peak came later -- between 2000 and 2003 -- but the decline has been far steeper -- down 6.8 percent by 2006.

A pair of opportunities

Today's economic crisis makes the expansion of college access for high-school graduates more important than ever, and it provides policymakers with two independent, but related, opportunities to stimulate investment in the human capital of adults currently in the workforce. Both opportunities involve increasing working adults' access to higher education, an important policy goal, as labor experts predict that almost half of all job growth expected over the next decade will require some post-secondary education. While obtaining a traditional college degree is neither feasible nor necessary for all of the 54 million non-degreed working Americans, working adults can benefit greatly from increased access to short-term, non-degree training and education programs.

To achieve this goal, Congress and the president can act quickly to increase the Lifetime Learning Tax Credit for individual taxpayers. Since 2002, individual taxpayers have been able to earn a maximum credit of $2,000 on the first $10,000 of educational expenses for themselves or family members enrolled in a career-related college- or university-sponsored educational program. To stimulate adult workers' increased investment in their own future earning capacity, the Lifetime Learning Credit should be modified so that taxpayers earn one dollar of tax relief for every dollar spent on education obtained through qualified institutions, up to a capped limit and subject to an income ceiling.

Simultaneously, the federal government should reduce the tax burden incurred by individuals who receive tuition reimbursement from their employers. Under current federal law, employer-paid education expenses greater than $5,250 per year is subject to federal income tax at each individual employee's top marginal rate. Increasing this threshold will encourage more adults to seek out more educational opportunities.

Both of these policy changes can be implemented relatively quickly -- in time to respond to the current crisis if included in Stimulus 2. Just as important, they can yield long-lasting returns, akin to investments in public infrastructure.

Americans should demand that policymakers enact nothing less than a 21st-century equivalent of the Land Grant Act and the G.I. Bill to stimulate greater investment in the education of working adults. It is precisely these investments that will strengthen the economic security of future generations.

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  • Durwin A. Long

  • Durwin A. Long is assistant dean, executive and professional development, at the University of St. Thomas' Opus College of Business.

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