EconSouth (Third Quarter 2001)
Worker Skills Must Expand to Meet Long-Term Demands
hile recent tragic events have increased the sense of uncertainty about the short-term prospects for the U.S. economy, an important factor that will help determine the economy’s long-term health and productivity is the labor quality of the country’s workforce.
Becoming more productive
What brought about this increase in productivity? While there have been numerous contributors, I believe that much of the increase can be attributed to two factors: capital deepening and innovation from business investment.
Capital deepening occurs when businesses invest in additional equipment to help them produce more — for instance, when a bread maker buys more ovens to bake more bread. Innovation, on the other hand, happens when businesses find newer, more efficient ways to do their work — like when that same baker develops a revolutionary yeast that makes bread rise faster.
During 2001, growth in business investment has slowed significantly, and this development will likely lower productivity growth, at least in the short term. While business investment in new technology and equipment should ultimately pick up, I believe that another ingredient will be essential for sustainable, long-term productivity gains. That ingredient is human capital — good quality in addition to sufficient quantity.
Human capital is essential
Over the last decade, as firms invested more in new technologies, the demand for people with the skills necessary to produce and use these technologies also grew. But a chronic and acute shortage of skilled high-tech workers in the United States probably kept many firms from reaching their full potential. I heard that story over and over in the Southeast during the latter part of the 1990s.
To sustain many of the productivity gains of recent years, I believe that our society will have to provide a better-educated, more skilled workforce to help set the pace. But a skilled workforce doesn’t just happen, as the article on workforce development in this issue of EconSouth indicates.
Investing in the future
But these investments are clearly worth making to help ensure that our nation has the skill sets required to help the economy remain highly productive. I believe it would be negligent not to recognize this issue’s importance to the economy as well as to our society as a whole.
By Jack Guynn, president and chief executive officer of the