What the CEO of Caterpillar Can Teach Us About Our Educational System

OK, wrap your head around this one. There are 600,000 unfilled jobs in the U.S. manufacturing sector, because employers are unable to find qualified applicants.

Furthermore, the Organization for Economic Cooperation and Development issued a report indicating that more than half of American companies are having trouble finding enough skilled workers. Given our unacceptably high unemployment rate, how can this be?

At a forum about Jobs, Education and the Economy, Doug Oberhelman, CEO of Caterpillar (CAT), revealed that his firm has recently been interviewing 1,000’s of people for shop floor jobs that require “basic skills, nothing fancy.”  He was “appalled” to learn that the hiring managers at CAT rejected 60% of the applicants, because they “can’t read, they have no math skills, and they fail the drug test.”

The irony in these numbers is that the U.S. annually spends $650 billion dollars on public education, more than any other country in the world. However, Oberhelman points out that—based on his recent hiring experiences—we are throwing over $300 billion out the door.  Not only is the aggregate level of spending on education high, but the amount we spend has increased dramatically and consistently. The Cato Institute reports a “25 percent increase in K-12 per-pupil expenditures, in constant dollars, between 1995 and 2005.”

These facts suggest that putting more resources into our education system will not solve the problem. Many countries—South Korea, Finland, Canada, Netherlands, to name a few—are achieving better results using fewer resources. Rather, we must radically reform our existing institutions, so that our schools produce an educated workforce, one that is capable of performing 21st century jobs.

Inaction is not an option. We are competing against China, a country that values education. And they want our jobs! Although they don’t spend much money on it, they are starting to leverage the benefits of having produced an educated workforce. CAT makes a 20-ton, hydraulic excavator system in a dozen places throughout the world, including a facility in Victoria, Texas. CAT’s CEO indicated that the number one plant in terms of “quality, safety of employees, and almost every metric is in China.”

In conclusion, there is still somewhat of a party atmosphere in the U.S.: the economy appears to be on the mend, employers are hiring workers, and the housing sector seems to be lifting us up. But if we do not fundamentally restructure our educational system, Oberhelman suggests that the party will be over for the next generation.

In subsequent posts, I will describe some specific reforms that need to be made.

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