Business Talks Big, Does Little for School

Hype and Hoopla about Concern for Schools

By Robert B. Reich

George Bush’s new plan for reforming American education places much responsibility — and hope — on the private sector. His secretary of education, Lamar Alexander, explained at the plan’s unveiling (recently) that the administration was counting on $150 million in corporate donations, plus voluntary corporate efforts to help the nation’s schools.

Thus, once again, the administration is relying on “points of light” in the national firmament as a substitute for hard cash and public action.

But is corporate America really all that concerned about the state of education?

Yes, American business talks a good game. It seems like every conference I attend on the subject of American competitiveness begins or ends with a speech by a prominent chief executive of a major American corporation about business’s stake in improving the quality of the American work force.

The corporate public relations chiefs who write these things must compare notes, because the speeches are virtually identical: At the start, stern warnings about foreign competitors who are gaining ground. Then a testimonial about the importance of the American work force to future competitiveness.

Then an expression of concern that too many young Americans lack basic skills and knowledge. Then a ringing assertion that American business must take the lead in ensuring workers get the education and training they need.

The speech ends with an inspiring list of examples of American corporations (including, not incidentally, the speaker’s own) that are doing just this—awarding cash grants to outstanding teachers in their communities, funding educators who reduce dropout rates, endowing programs to train science and math teachers, and installing computers and other technologies in the public schools.

On top of all this, the CEO notes that American firms are spending some $30 billion a year improving the skills of their employees.

I’m reasonably sure that the CEOs who deliver these speeches are sincere. Some are actively committed to the task. And all the hyperbole and hoopla surrounding corporate-school partnerships and workforce training notwithstanding, many of these programs are undoubtedly accomplishing some worthy objectives. For example, the RJR Nabisco Foundation has just awarded $9.7 million to support innovations in the public schools.

Misleading Claim

But the suggestion that the private sector is taking — or will take — substantial responsibility for investing in America’s work force is seriously misleading.

Consider corporate training. Of the $30 billion that corporations spend annually to train employees, only a tiny fraction goes to those at the bottom rungs. No more than 8% of U.S. firms provide remedial classes in reading, writing, or mathematics.

Most of the training budget is spent on high-level managers. Employees with college degrees are 50% more likely to receive corporate training than are non-graduates; executives with postgraduate degrees, twice as likely to get training as those with college degrees.

Moreover, most firms include in their training expenditures the cost of retreats, conferences and symposiums for their executives. This may be a convenient accounting device for tax purposes, but having been a member of the “faculty” at many such gatherings I can attest that more training occurs on fairways and tennis courts than inside conference halls.

What about corporate America’s highly touted generosity to education? Notwithstanding all the hoopla about “partnerships” between corporations and schools, the rate of corporate giving to American education declined markedly in the 1980s, even as the economy boomed. In the 1970s and through the start of the 1980s, corporate giving to education jumped an average of 15% a year. But in 1990, corporate giving was only 5% more than in 1989; and in 1989, only 3% more than 1988.

Most of this money never finds its way to public primary and secondary schools anyway. Of the $2.6 billion that corporations contributed to education in 1989, only $156 million went to support public grade schools. The rest went to private schools or to colleges and universities — in many instances, to the alma maters of senior executives. These are worthy institutions, surely, but few of tomorrow’s workers will get their educations in them.

Corporate Take Backs

Ironically, instead of supporting the public schools, U.S. corporations are busily siphoning off state and local tax dollars that might otherwise prop them up. Corporations do this by demanding tax breaks and subsidies as a condition for remaining in or coming to the area.

The strategy is typified by the Hyster Corporation, a manufacturer of forklift trucks, which in the early 1980s notified public officials in the eight cities where Hyster had factories (five in the United States, three abroad) that some would be closed. Hyster invited officials to bid to keep local jobs. By the time the bidding had closed, U.S. cities and states had surrendered a total of $18 million to preserve around 2,000 Hyster jobs.

These days, no self-respecting chief financial officer of a large American firm expects to pay the same rate of property taxes, in proportion to the assessed value of its offices and factories, as paid by local residents. It’s easy to get a far better deal simply by suggesting to municipal or state officials that without tax incentives or abatements the firm will leave town.

General Motors, which has frequently congratulated itself on its generosity to public school, has been among the most relentless pursuers of local tax abatements, with the result that GM takes away from public schools far more than it contributes. GM’s successful effort to cut by over $1 million its annual taxes in Tarrytown, N.Y., forced the town to lay off dozens of teachers and administrators, eliminate new library books and school supplies, and postpone routine school repairs.

GM also led a property tax revolt in Michigan, resulting in a wave of property tax appeals by corporations across that state. And as a condition for locating its new Saturn factory in Tennessee, it got the local government to waive all property taxes until 1995.

It should come as no surprise that, as a result of all this bidding, corporations now pay a far smaller proportion of local taxes than they once did. In fact, the corporate share of local property tax revenues has dropped precipitously, from 45% in 1957 to around 16% last year. Individual taxpayers have to fill the gap.

The inescapable conclusion is that American business isn’t really worried about the future of the American work force.

Foreign Workers

Why? One reason is that U.S. corporations are finding the workers they need outside the country, often at a fraction of the price. Multinational American firms are nothing new, of course. What’s new is that a growing percentage of their employees are foreign, and they export much of what they make back to the United States.

Advances in communications and transportation have made it perfectly reasonable to go to the most remote parts of the planet in search of cheap, literate, and reliable workers.

Foreign production is no longer limited to simple manufacturing assembly jobs. Much of the foreign work force is now sufficiently skilled that it can be entrusted with state-of-the-art machinery.

Texas Instruments maintains a software development facility in Bangalore, India, for example, where 50 Indian programmers are linked by satellite with its Dallas headquarters. Ford has placed its most modern engine manufacturing facility in northern Mexico.

Even routine services are now farmed out around the world. Most of the employees of Saztec International, a $20 million a year data processing firm headquartered in Kansas, live and work in the Philippines.

Compared with the average Philippine income of $1,700 per year, data entry operators working for Saztec earn the princely sum of $2,650 annually.

When it comes to skilled work that must be done on site in the United States, U.S. firms are also looking abroad for workers. Faced with a shortage of skilled nurses in the 1980s, American hospitals began recruiting nurses from Ireland and the Philippines on temporary work visas. In 1989, Congress decided that the nursing shortage was sufficiently serious that these temporary nurses — more than 10,000 of them — should be granted American citizenship.

A recent amendment to the immigration laws, strongly supported by American business, creates a new category of skilled immigrant, to whom an extra visa will be issued each year.

Immigration poses no direct threat to the wages of U.S. workers. Studies show that even in labor markets where immigrants concentrate, the average wages of American-born workers are only slightly lower than they would be otherwise. And surely Americans gain from the presence of additional skilled people eager and determined to build better lives for themselves in this nation.

But to the extent that an influx of skilled immigrants reduces pressure on U.S. firms to train Americans in such skills, it undermines the wages these Americans would have had, had they received the training.

So don’t be fooled by all the rhetoric surrounding corporations and the public schools. As corporate America finds ever more of its skilled workers overseas, it has become less — not more — concerned about whether it has a skilled work force at home.

That means several thousand fewer points of light for George Bush to count on.

Robert B. Reich is a professor at the Kennedy School of Government at Harvard University. The above is reprinted from the Washington Post