If We Can Solve This Riddle…

There was a vocational tech center at the Texas high school I attended for one year. It was a square building located across the street from the main campus, and everyone knew exactly what it was.

This building was the destination for the dumb kids, or at least the ones who were not putting in the effort to get into college. It was also the way station for kids who were flunking out, but not yet 16 so they had to remain in school.

Obviously, this was the place to avoid at all costs, because the goal of high school was to make sure we all went to college. Or at least that was how I it seemed when I was there.

Looking back, it now seems upside down.

College was my destination, as it was for millions of others. But it’s not on everyone’s radar. In fact, college is not the destination for the majority of Americans.

In the U.S., we churnrn out about 35% college graduates from each group of 18-year olds. We have about 80% graduating from high school (another 5% get GEDs) and less than half of these earnrn college degrees.


The numbers have bumped up slightly in the last few years, but we’re not anywhere close to 50% of young people graduating from college.

That raises the question: “What are we doing with the majority of our student population?”

We have closed, or dumbed down, vocational tech offerings in high school and yet roughly 65% of our kids don’t get college degrees. Clearly, we have a gaping hole in our educational process.

And Corporate America has begun to complain loudly about this.

The idea of technical training for high school and even college students is not new. The claim that there won’t be enough skilled workers to carry the U.S. through the next fifty years is also an old refrain. What has changed recently is the U.S.’s position in manufacturing. We could, just maybe, find ourselves in the enviable position of ‘low-cost producer’ in the years to come.

With many candidates applying for each position available, American companies have been able to keep a lid on compensation over the last five years, while retooling their businesses to be more efficient. Meanwhile, countries like China saw their compensation rising.

At the same time, U.S. energy producers have brought vast amounts of domestic natural gas reserves online, so that our local cost of natural gas is exceptionally low. Because natural gas is used to generate electricity and run large industrial plants, American companies are enjoying a competitive advantage in energy when compared to companies in Europe and Japan.

These two factors are the main drivers of what many believe to be a coming resurgence in American manufacturing. In addition to “re-shoring,” where a company that had sent production overseas brings it back to the U.S., there is also “on-shoring,” where a foreign company sets up shop in the U.S. to produce goods.

Both of these trends are gathering speed.

But the one caveat that seems to keep coming up is the long-term availability of skilled workers.

A report from Boston Consulting Group (BCG) notes that today there are probably less than 100,000 job openings for which there aren’t the right skilled people available. This is not seen as a constraint on American business at present. However, the group estimates that the gap between jobs available and skilled-labor available could grow to 875,000 workers by 2020, particularly if the U.S. experiences growth in manufacturing. This yawning gap will be caused by retiring workers and a lack of training programs to develop replacement workers.

Germany, the juggernrnaut of manufacturing, starts tracking children for college, vocations or academia around age 10. Their training programs are rigorous and require apprenticeships. The result is an exceptionally qualified workforce skilled in precision manufacturing of all types.

At this point it seems unlikely that Americans would be willing to have their children “pegged” as college material, or not, at such a young age. I can’t say that I’d have done that with my own kids.

However, there is a change that we can make… one that seems to be taking hold no matter what: A newfound respect for vocation.

As we look around at so many college grads working in low-end service jobs, while those who can weld or machine parts get high-income offers, technical training is getting more attention.

The question is this: “Can we institutionalize the training?”

There are some efforts to do just that, including a $20 million grant from the Obama Administration announced last fall. The funds will go to 10 programs selected through the Advanced Manufacturing Jobs and Innovation Accelerator Challenge. These programs are expected to train over 1,000 workers.

While this is great, it’s woefully inadequate given the size of the population that could benefit from it. We need more.

Recognizing the resurgence in manufacturing and addressing the lack of skilled workers can put the U.S. on a great footing for growth in the years to come. High quality, well-paying jobs are the foundation of consumer spending and consumer borrowing, which are the building blocks of our standard of living and economic success.

If we can solve the riddle of training, then we can move our economy out of the doldrums that much faster.



Ahead of the Curve with Adam O’Dell

In the Driver’s Seat

Indiana-based engine maker Cummins Inc. (NYSE: CMI) is in the driver’s seat of the American manufacturing renaissance.

Rodney Johnson

Rodney’s investment focus tends to be geared towards trends that have great disruptive potential but are only beginning to catch on to main-stream adapters. Trends that are likely to experience tipping points in the next 5 years. His work with Harry Dent – studying how people spend their money as they go through predictable stages of life and how that spending drives our economy – helps he and his subscribers to invest successfully in any market.