US Industrial Outlook

Education and training services

Education and training services – Industry Overview

Achamma Chandersekaran

Public and private expenditures for education and corporate training accounted for nearly 8 percent of the gross domestic product (GDP) in current dollars in 1993, second in size only to health and medical services. Education and training expenditures are expected to increase at a rate of approximately 6 percent in 1994, or slightly faster than the growth rate of GDP in current dollars. The education and training industry is labor intensive, employing an estimated 10 million workers in the private and public sectors.

Before reading this chapter, please see “Getting the Most Out of Outlook ’94” on page 1. It will answer questions you may have concerning data collection procedures, forecasting methodology, sources, and references, and the Standard Industrial Classification (SIC) system. The SIC code for education is 82. For other related topics, see chapters 26 (Computer Equipment), 27 (Computer Software) and discussions of technology in various chapters.

Approximately 27,700 of the 110,000 schools in the United States are nonprofit, private, institutions including religiously-affiliated schools and tax-exempt independent schools. Another 7,000 private academic schools and 4,000 private vocational schools pay income taxes. The non-public educational sector, including elementary and secondary schools and institutions of higher learning, represented 18 percent of spending on educational services in 1993, although the Federal Government contributed a significant portion of spending for private educational services.

Corporate spending for training amounted to approximately $1 of every $15 of educational and training expenditures in 1993 despite slowing largely due to corporate restructuring. Estimates of the cost of private sector training vary widely, reflecting differences in the methodology used to obtain cost estimates and the difficulty of collecting cost data. Based on the persistence of high unemployment and restructuring within large corporations which are the primary job-training providers, expenditures for formal training in 1993 were estimated to have increased 3 percent to approximately $34 billion. Corporate spending for formal training in 1994 is expected to increase about 6 percent to approximately $36 billion. While there is no generally accepted method for calculating business-sector spending for informal training, it is generally considered to be significantly higher than the amount spent for formal training. Informal training involves showing new workers production and office procedures and teaching the use of equipment and tools, or new techniques for using tools.

Educational services considered in this chapter include those provided by public and private institutions that operate elementary and secondary schools, two- and four-year colleges, professional schools and universities. Training services represent expenditures by U.S. employers to provide formal instruction to teach modem techniques in manufacturing and services, and to retrain workers who lose their jobs due to automation and restructuring.

In recent years, technological innovation has fostered considerable change in manufacturing processes relating to production quality and cost. The internationalization of production and markets has also intensified competition, resulting in significant automation and an increase in the use of computer-related technology. Technological growth has also raised the level of training required for the existing workforce and new entrants. One-fourth to nearly half of manufacturing industries including fabricated metals, industrial machinery, electronic equipment and instruments and transportation equipment manufacturing now use computer-aided design and computer-aided engineering in their overall operations. A slightly smaller percentage of these industries use computer-controlled technology actually on the factory floor. More than 30 percent of high school graduates and 60 percent of college graduates use computers in their jobs. The workplace changes have presented a challenge for secondary school teachers because only an estimated 25 percent are computer literate, according to Market Data Retrieval, a private research firm.

Workers once considered to have sufficient skills for lifetime employment find they must learn new skills and processes to sustain their employment in an increasingly technological work environment. The influx of immigrants, who made up 22 percent of the labor force growth between 1980 and 1987, has also added to the need for on-the-job training.

The growing importance of computer-aided design, computer integrated manufacturing, total quality management, and just-in-time production requires a skilled workforce. Based on such information as the educational background of the unemployed, and labor-market projections, the U.S. Office of Technology Assessment has concluded that a large segment of the U.S. labor force is inadequately prepared for employment in high technology manufacturing. The U.S. Department of Education estimated that 90 million adults are functionally illiterate.

Educators and businesses have started cooperative ventures to address needs in education and skill development. Educators are also increasing remedial help and training for students and workers with insufficient knowledge and skills. Businesses have begun providing equipment to schools and colleges and bringing teachers to their plants and factories to gain firsthand knowledge of the level of technical sophistication modern workers must have.

Educators recognize the need for better focus on fundamentals, such as reading comprehension, communication, and math skills. To provide additional skills, school systems in many states have introduced computer science, giving high school students hands-on experience in programming fairly complex problems. The average public school had one computer for every 92 students when the first data were collected in 1983, according to Market Data Retrieval. By 1990, there was one computer for every 21 students. In private elementary and secondary schools for the same period, the ratio of students to computers changed from approximately 56 students per computer in 1983 to 20 students in 1990.

Besides workfloor skills in manufacturing processes, employers and post-secondary institutions have found that a significant number of high school graduates need remedial work in grammar, mathematics, and basic problem-solving skills, before they are ready to take a job or college courses. Of approximately 13 million college students in 1989, more than 2 million were enrolled in remedial courses in reading, writing, or math.


The number of foreign students entering U.S. post-secondary institutions increased steadily throughout the 1980’s and continued into the 1990’s. Foreign student enrollment in U.S. institutions of higher learning increased 43 percent from 1980 to 1991 compared to an 19 percent increase in overall enrollment. The United States has a balance of payments surplus in educational services (Table).

Table 1: U.S. International Transactions in

Education and Training

(in millions of dollars)

Foreign payments US Payments

Year to the United States to foreign countries

1986 3,495 433

1988 4,142 539

1989 4,575 586

1990 5,127 658

1991 5,752 737

1992 6,522 821

SOURCE: U.S. Department of Commerce, Bureau of Economic


Despite the attractiveness of U.S. higher education to foreign students, the competitiveness of U.S. workers has declined compared with workers in some European and Pacific Rim countries because of weaker support for training and vocational education (Box).

These countries have used better-trained workers to shorten the production cycle and make incremental improvements in existing products, which has given these countries a competitive edge against the United States. Examples of these changes include automobile antilockbrakes, which were invented by the United States’ Chrysler Corp. and produced by Germany’s Mercedes-Benz; VCR technology, which was developed by RCA in Princeton, NJ, and produced in Japan; and digital audio tape and high-definition television, which was researched initially in the United States and first produced in Japan.

To shorten the competitive cycle and to make incremental improvements in existing products, the U.S. work force must have a broader and deeper understanding of the whole process involved in manufacturing a product, rather than the part for which each person is responsible. Because technology changes constantly, U.S. workers must have continuous training to remain globally competitive.

Congress has created the Competitiveness Policy Council to explore productivity and competitiveness issues that involve education and training. President Clinton has made education a national priority and has proposed educational reform legislation called “Goals 2000: Educate America Act”. It is designed to outline a long-term objective for the improvement of U.S. education and training.

Outlook for 1994

Education and training expenditures are expected to increase approximately 6 percent to $529 billion in 1994. Public school and college spending is expected to increase about 6 percent, or slightly more than current GDP. Growth in private elementary and secondary expenditures is expected to slow for the second consecutive year. Expenditures for private higher education are expected to grow at about the same rate as public higher education. Growth in corporate spending for training in 1994 is expected to rebound from its 1993 slump to rates of the early 1990’s.

The steady increase in foreign students coming to the United States is expected to continue in 1994, resulting in a moderate increase in the balance of payments surplus in educational services.

Long-Term Prospects

U.S. multinational corporations are expected to increase the training they provide outside die United States as they increase their investment in joint ventures abroad. Meanwhile, universities and colleges are reaching out to foreign markets to enhance transfer of technology and training. These activities will result in increased exports of education and training beyond 1994. Expenditures for public and private higher education are expected to continue to grow at about the rate of current GDP, but elementary expenditures are expected to use significantly because of a sharp increase in enrollment between 1994 and 1998.


Additional References

Manufacturing Technology, 1988, Current Industrial Reports, U.S. Department of Commerce, Bureau of the Census, Washington, DC 20233. Telephone: (301) 763-4100. Financial Statistics of Institutions of higher Learning, Digest of Education Statistics, Military Cutbacks and the Expanding Role of Education, and “College Level Remedial Education in the Fall of 1989,” FRSS-38, U.S. Department of Education, National Center for Education Statistics, 555 New Jersey Ave., NW, Washington, DC 20208. (202) 219-1651. “American Education: Making it Work,” A Report to the President, April 1988, U.S. Government Printing Office, Washington, DC 20402. (202) 783-3238. “Competing in an International Economy,” Worker Training, Ofrice of Technology Assessment, Washington, DC 20402. Telephone: (202) 224-8996. “A Nation At Risk: The Imperative for Educational Reform,” 1983, National Commission on Excellence in Education, U.S. Government Printing Office, Washington, DC 20402. Telephone: (202) 783-3238. “Building High-Performance Workplaces,” and “Building a Standards-Based School System,” Competitiveness Policy Council, 11 Dupont Circle, NW, Suite 650, Washington, DC 20036. Telephone: (202) 387-9017. The Learning Enterprise, Carnevale, Anthony P., and Gainer, Leila, American Society for Training and Development, 1640 King St., Alexandria, VA 22313. Telephone: (703) 683-8100. Putting People First, Cinton, Bill, and Gore, Al, 1992, Random House, Inc., New York, NY “A Nation At Risk – Still,” Across the Board, March 1993, 845 Third Ave., New York, NY 10022. Telephone: (212) 759-0900. FOCUS, National Center for Manufacturing Sciences, July 1993, 3025 Boardwalk, Ann Arbor, MI 48108. Telephone: (313) 995-0300. “Job Training: Costs, Returns, and Wage Profiles,” National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138. Telephone: (617) 868-3900. “Political Factors in Public School Decline,” The American Enterprise, Vol. 4, No. 4. 1550 17th St., NW, Washington, DC 20036. Telephone: (202) 862-5800. “Education: The Search for Excellence,” International Economic Insights, January-February 1993, 11 Dupont Circle, NW, Suite 620, Washington, DC 20036. Telephone: (202) 328-9000. “Does Business Have Any Business in Education?” March-April, 1991, “Motorola U: When Training Becomes an Education,” July-August 1990, Harvard Business Review, Operations Department, Harvard Business School, Boston, MA 02163. Telephone: (617) 495-6192.

COPYRIGHT 1994 U.S. Department of Commerce

COPYRIGHT 2004 Gale Group