CHRISTINE CHMURA
TIMES-DISPATCH COLUMNIST
Published: May 10, 2010

Can lifting workers' skills make a difference in economic growth? The short answer is, yes.

An increase in the productivity of workers leads to more output (faster economic growth), which translates into higher living standards.

Using the results of a 2008 Bureau of Labor Statistics occupational analysis, we found that 30 percent of American workers have below-average qualifications. At that time, 150 million people were working in the nation. Among these, 45 million had below-average qualifications.

What if the nation could invest in improving worker skills at a time when the economy needs a sustainable boost?

What if President Barack Obama viewed heightening the skills of the work force as a means to spawn economic growth?

What if the nation could lift the skills of 10 percent of the below-average workers to average?

Our analysis suggests this investment would result in a:

• $46.7 billion increase in total wages;
• $14.7 billion increase in retail spending;
• $15.8 billion increase in federal taxes;
• 0.75 percent boost in productivity; and
• 1.12 percent decrease in the deficit at its current level that would have been a 9.8 percent drop based on the size of the deficit in fiscal 2007.

We also ran less optimistic scenarios, such as an upgrade in skills of 2 percent or 5 percent of workers with below-average qualifications.

The bottom line is that lifting skills can propel economic growth because it leads to more productive workers and faster growth for the overall economy.

Underemployment is a different issue in our economy that results in the underutilization of a worker's skills.

People are underemployed when they work in occupations that are below their level of training. College graduates, for example, who work as retail clerks or restaurant servers are underemployed.

We analyzed additional data and found pockets of highly skilled workers around the nation. Not surprisingly, attractive areas showed the greatest percentage of underemployed highly skilled workers.

Boulder, Colo.; San Francisco; and Washington were among the 10 metropolitan areas in the country with the most underemployment of highly skilled workers.

On the other hand, metro areas with less attractive characteristics, such as relatively high unemployment rates, had a shortage of highly skilled workers. (Go to http://www.chmuraecon.com and click on the map to get a ranking of all metro areas.)

For regions, this revelation may point to needed paradigm shifts in economic-development tactics.

Regional underemployment means there is a mismatch between supply and demand of workers by skill levels.

Regions with an oversupply of highly skilled workers can increase the wealth of their region by attracting firms that need highly skilled workers. The underemployed who obtain the new jobs will benefit from higher wages.

Regions with an undersupply of highly skilled workers need to elevate the skills of their work forces to become more efficient and effective, or these regions might lose the firms that need highly skilled workers.

These regions can benefit from boosting the skills of their workers to be more productive, thus increasing the profitability of firms and the disposable income of workers.

Whether lifting the skills of workers who have below-average qualifications or attracting firms to match a region's knowledge base, the result is the same: increased productivity, higher wages and, ultimately, faster economic growth.

These trends are needed to reduce the ballooning national deficit. But that deficit might put downward pressure on productivity, and that will be the topic of my next column.

This article was originally published in the Richmond Times-Dispatch.