Atlantic Century Report warns of Competitiveness Decline

Yesterday, CNN's outstanding Sunday news magazine, GPS with Fareed Zakariah, referenced a new report on global competitiveness, the Atlantic Century Report. There are many such reports, and so you have to take each such report in context, considering whether the report has any bias and drilling down to determine its methodology. Above all, one must be ultra cautious in sezing on a study or report that seems to vindicate views that you always hold.

This new report sounds an alarm regarding a possible decline in United States competitiveness, especially in the areas of technology, innovation, and the role of advanced science and engineering degrees in maintaining our competitive edge. The port points out that some recent reports have argued that our competitive edge remains strong. But, the authors argue, that there are disturbing signs that in recent years, other nations are catching up with us. The report uses a scoring system to report competitiveness (see at the bottom of this post);

In the last few years a number of studies have assessed countries’ global competitiveness. Many of these have found that the United States is the world leader in international competitiveness. Such rankings have led many observers to claim that calls for concern or questions about the U.S. competitiveness position are unwarranted. For example, the World Economic Forum’s report, The Global Competitiveness Report 2008-20097, ranked the United States first in global competitiveness two years in a row.
Innovation and productivity are supported by a highly educated workforce, so higher education attainment has become an important component of economic success, particularly in higher wage nations that can compete less effectively in lower skilled, routinized work.......

For example, the United States leads Europe in terms of higher education attainment, with EU-15 (the broadened definition of the European Union) levels 77 percent of U.S. levels and EU-10 levels just 57 percent. But the report argues that in the last decade, the trends are in the opposite direction:

When it comes to trends, however, the picture is quite different. The United States ranks last, with almost no increase since 1999. In contrast the share of 25- to 34-year-olds in the EU-15 with a tertiary degree increased by 25 percent, in part because of very strong growth in nations like Ireland and the United Kingdom. In addition, some EU-10 nations increased even faster, including Poland (117 percent).

The report continues:

"Europe and the United States vs. the Rest of the World: Despite the fact that the United States led for many years in higher education attainment, it no longer does. In fact, Russia leads with an over 40 percent higher rate, while Canada, Japan, and South Korea lead the United States by over 30 percent. And all four have attainment rates over 70 percent higher than EU-15 rates. Most developing nations have much lower rates, with rates in Brazil and India below 30 percent of U.S. rates. Europe vs. the United States: Europe lags behind the United States in the number of researchers, with the U.S. researcher intensity over 55 percent higher than the EU-15 and twice as high as the EU-10. The strong science and technology base of the United States economy established after World War II and reenergized with strong IT and biotechnology leadership more recently means that the United States is among the world leaders."

When it comes to trends, most other nations are making faster progress than the United States. Perhaps not surprisingly given its concerted push to be a more technologically-based economy China grew the fastest, with its share of researchers more than doubling. But other lagging nations also experienced rapid growth, with Mexico almost doubling (98 percent); Brazil up two-thirds, and India up 50 percent. A few nations such as South Korea and Singapore that had relatively high levels of researchers in 1999 made rapid progress, increasing by approximately 70 percent. Finally, Japan and Canada both outpaced the EU-15 and the United States.

Here in Minnesota, one manifestation of the competitiveness crisis is the fact that Minnesota's labor force growth is shrinking radically at the same time that the number of older Americans is increasing. From 1970 to 1980, Minnesota's labor force grew by about 450,000 according to the State Demographer and State Economist. (Click on link for slide show with charts). In the following three decades, net labor force growth was between 325,000 and 400,000. But now comes crunch time. But the State demographer and economist estimate that net labor force growth will fall to about 150,000 in the decade 2010-2020, and to about 100,000 in the following decade. During the same period, the population and percentage of the population over age 65 will grow significantly.

From 2006-2011, for example, the number of Minnesota workers turning 62 will jump from about 38,000 to 60,000. The number of people who will be doing productive labor will be falling over the next several decades as compared to the number of senior citizens. (This growth in the elderly is offset somewhat by the lower number of children). But still, the rising number of elderly will be a significant challenge will have more people to support than prior generations. To make this work, it is absolutely critical then that we invest in education that allows you, and your children to be productive.

In a prior post, I argued that our failure to maintain a strong education infrastructure endagers our competitiveness as a nation.

One manifestation of the crisis in education may be illustrated by thinking back to what has happened to the cost of going to college. Back in 1957, tuition at the University of Minnesota for the whole year, 1957, was $111. By the time I graduated from high school in 1963, tuition for the full year had rise to $255. If you take that inflation adjusted $255 into today's dollars, the tuition would be only $1744. It's actually over $10,000. The cost of attending Minnesota's major public university, which was founded to provide a quality college education to average citizens, has grown by over 5 times, in terms of constant dollars. We are making it vastly more difficult for this generation of young people to attend college than for my generation. How did this happen.

By the time that I graduated from college, one year tuition was $294. When I enrolled in Georgetown Law school, tuition at U of M had risen to about $504. The tuition at my private university law school was about $2600. I could work my way through law school on summer jobs. Minnesota's spending per capita on higher education peaked in that year, 1972 and has been falling ever since. Minnesota's ranking among states in state funding for higher education dropped from 12th in FY 2001 to 35th in FY 2006, as a share of personal income. And although Minnesota is below-average in state funding for higher education, it is above average in the cost of attending public institutions.

The current full year tuition for undergrad at the University of Minnesota $10,320, Law School. It costs $21,000 to attend the law school for a year, and at my alma mater, Georgetown Law it now costs $39,000 per year. According to MNSCU statistics, the state appropriation per MNSCU sudent, adjusted for inflation, has decreased since 1999 while tuition has increased 57%

What was the University of Minnesota like when tuition was only $255 per year. In those years, Dr. Lilihei's team there completed the first open heart surgery using hypothermia. Their efforts led to cross circulation techniques, then to a heart-lung machine and ultimately to techniques that now make open heart surgery almost mundane. Lilihei's expertise led him to train more than 150 cardiac surgeons from 40 nations, including Christiaan Barnard (a fellow University of Minnesota Ph.D. recipient in the 1950s who went on to perform the world's first heart transplant in South Africa). At the University of Minnesota Lillihei and his coworkers also developed the first electronic pacemaker. At the University, when tuition was under $255, the school of medicine did the first pancreas transplant; pioneerered the development of the mechanical heart valves; conducted the first implementation of artificial blood; and implemented the first clinical use of cortisone, the great anti-inflammatory. Without these advances, our medical technology industry, which employed 20,400 workers in 2000, would not exist without the people and the basic research coming out of the university. In fact, from 1990 to 2000 the number of medical technology employees grew 67 percent in Minnesota, while increasing only 17 percent nationally.

During this time, the university spawned and supported growth of other areas of technology. That era witnessed the growth of Control Data, the establishment in the Twin Cities of Cray Supercomputers. U of M grads populated the laboratories of Minnesota Mining and Manufacturing .

Over the last two decades, and especially during the last 8 years, there has been a fundamental change in our ability to sustain the vital educational infrastructure that made Minnesota a center of growth in technology and in the next decades, unless this is reversed, we will pay a heavy price.