The Literacy Gap

By Christine Gorman

Anyone who has hired new employees or tried to retrain veteran ones is painfully aware of the problem. As much as a quarter of the American labor force -- anywhere from 20 million to 27 million adults -- lacks the basic reading, writing and math skills necessary to perform in today's increasingly complex job market. One out of every 4 teenagers drops out of high school, and of those who graduate, 1 out of every 4 has the equivalent of an eighth-grade education. How will they write, or even read, complicated production memos for robotized assembly lines? How will they be able to fill backlogged service orders? Already the skills deficit has cost businesses and taxpayers $20 billion in lost wages, profits and productivity. For the first time in American history, employers face a proficiency gap in the work force so great that it threatens the well-being of hundreds of U.S. companies.

More and more American corporations have responded to the literacy crisis by adding school bells to their time clocks. In the past decade, the price tag for remedial employee training in the three Rs has reached $300 million a year. More than half of FORTUNE 500 companies have become educators of last resort. As a result, employees are cracking the books as never before, even during work hours.

At an annual cost of $750,000, Aetna Life and Casualty teaches 500 employees basic reading, writing and arithmetic in its gleaming eight-story Institute for Corporate Education in Hartford. Since 1982 the General Motors Truck and Bus Group plant in Flint Township, Mich., has offered its 3,000 workers high school classes and one-on-one tutoring in a cluster of rooms overlooking the shop floor. The center has granted 14 high school diplomas so far.

Taking up where school systems leave off, companies have traveled two different paths in the quest for improved literacy. Smaller firms have tended to rely on local educational resources, such as community colleges and volunteer tutors, to set up programs that will help their workers bridge the skills gap. Getting employees to stick with classes can be difficult, however, since the sessions are frequently held away from the workplace after hours. Larger companies, which command the resources to hold classes in-house, have sweetened the deal by offering workers time off during the workday to attend. Success in both cases depends on how strongly individual companies support their programs -- and how effectively they defuse workers' fears about getting fired for owning up to subpar literacy.

The problem is not just large numbers of people who are insufficiently educated. Never before have the majority of American jobs placed so many demands on employees. To compete effectively, the average American worker today must employ skills at a ninth-to-twelfth-grade level, in contrast to the typical fourth-grade standard during World War II. "It's not that people are becoming less literate," points out Irwin Kirsch, a senior research psychologist working for the Educational Testing Service in Princeton, N.J. "It's that we keep raising the standards."

In the past, an expanding labor pool allowed business to satisfy its growing demands for skilled workers by skimming off the top. But since the baby boom ended in the mid-1960s, the number of 16-to-24-year-olds in the work force has dropped from 22.4 million in 1979 to 20.2 million last year. Most of the growth will be among minorities -- the very groups that have been served least well by public school systems. Over the next decade, blacks, Hispanics and Asians, who may speak English poorly, will make up more than half of all entry-level employees.

U.S. automakers are leading the search for skilled, literate workers. GM devotes more than 15% of the $170 million it spends yearly on job training to remedial education. In an attempt to match the quality of many foreign manufacturers, Detroit's Big Three carmakers joined the United Auto Workers in 1982 to create a comprehensive education and training program. At Ford Motor Co. alone, more than 8,500 of 106,000 blue-collar workers have since enrolled in basic-skills classes at the company's 50 learning centers in plants nationwide. Says Ford chairman Donald E. Petersen: "The prosperity of our business will depend on our ability to operate more and more like a learning enterprise."

The point is not lost on the rank and file. Jane Conrad, 45, a $14-an-hour GM press operator, missed out on a supervisor's job because she had not finished high school. So the mother of six enrolled in GM's Flint Township Learning Lab this year. Subjects included a thorough review of fractions, reading comprehension and English literature. Conrad, who received a high school diploma this past summer, is concerned about the increasing demands of automation at the plant. Says she: "If you don't have the basic training, some of it can be hard to keep up with."

Some unions have been in the education business for decades. In New York City, locals of the American Federation of State, County and Municipal Employees started teaching basic skills to their members in the late 1960s, when a group of nurses' aides without high school degrees asked for help. Today approximately 15% of its 20,000 member-students enroll in fundamental literacy and math courses each year. "The problem was always there," says Katherine Schrier, director of the union's Education Trust Fund. "Business is just now waking up to it."

The shock has been particularly strong in the service industries. At American Express, which expects to fill 75,000 entry-level positions in the next five years, profits depend on good customer relations. Says Amex President Lou Gerstner, whose company spends $10 million annually to teach its new workers basic English and social skills: "I lie awake at night wondering where I'm going to find well-qualified employees for the future." Even the art of cooking requires more of workers than ever before. Last year Domino's Pizza of Ann Arbor, Mich., discovered that its fledgling bakers had trouble understanding its dough-making manuals. Now it spends $50,000 on a reading program, heavily seasoned with lessons on cuisine chemistry.

Since 3 out of every 5 new jobs in the economy are created by companies with fewer than 500 employees, small businesses suffer as severely as their corporate brethren. Bill Gregory, who owns Gregory Forest Products Sawmill in Glendale, Ore. (pop. 870), did not know he had a problem on his hands until one of his 400 employees noticed that a forklift operator took forever to count loads of lumber. A bit of digging disclosed that about 10% of the mill's workers needed help developing proficiency in math and English. So, at a cost of $15,000, Gregory asked the nearby Umpqua Community College to provide , instruction. Says he: "We're spending millions of dollars to modernize the mill. It just didn't make sense to pay for that without providing training for basic skills as well."

Reading, writing and arithmetic, however, are just the beginning. Today's jobs also require greater judgment on the part of workers. Clerks at Hartford's Travelers insurance company no longer just type endless claim forms and pass them along for approval by someone else. Instead they are expected to settle a growing number of minor claims on the spot with a few deft punches of the computer keyboard. Now, says Bob Fenn, director of training at Travelers: "Entry-level clerks have to be capable of using information and making decisions."

On-the-job education has allowed some companies to tap the current wave of immigration -- the largest since World War I -- for skilled workers. Blue- collar employees at the Orange County, Calif., division of Unisys, for example, speak everything from Korean to Japanese to Spanish. Their productivity improved significantly, Unisys managers say, when the company began offering ten-week courses in reading, writing and speaking English. Classes, which number 15 students at most, meet in the company cafeteria, whose wraparound picture windows look out on the Santa Ana Mountains. "Before I took the class I couldn't stand up and talk in our Thursday staff meetings," says Elvia Adame, 31, who came to Southern California from Mexico City eight years ago. "Now I participate in all the meetings."

Of course, better-skilled workers do not guarantee profits. Economic policy, trade agreements, technology, labor costs all play a role. But progress still depends on people who can communicate effectively, calculate accurately and act conclusively. "You can make the exchange rate anything you want," says American Express's Gerstner. "If you don't have the human capital to equal or exceed your competitors, you will fall behind." The report cards are out, and businesses are going to great lengths to make the grade.

With reporting by Mike Cannell/New York and D. Blake Hallanan/San Francisco