Preventing a crippling lack of high-skill workers is relatively simple. Across advanced economies, there could be 18 million too few college graduates in 2020, but only 1.5 million of this gap would occur in the United States. China, Europe, and Japan all will face far larger gaps, because of aging and low birth rates; China could have 23 million fewer college graduates than it would need.
The United States is not so well-positioned when it comes to addressing the employment problems of less-educated workers. One way to do so would be to move people out of the low- and middle-skill categories (high school graduates and workers with some college or associate's degrees) into the high-skill group. But even after raising the college graduation rate enough to avoid the projected 2020 gap, there would still be more than 100 million Americans with associate's degrees or less, whose basic education may not give them skills that employers are likely to demand.
Not every American can go to college, but everyone should be able to acquire skills that make them employable. Germany does this through a high school vocational training system that is tightly integrated with industry. Students split time between classroom and work and graduate with the right skills and a job. These programs can be adapted for the United States. In fact, Germany's Siemens is working with a community college in Charlotte, N.C., to train workers in its turbine factory there. Delta Airlines and Snap-on Tools have partnered with community colleges to create curricula for reservations agents and auto mechanics who need to know how to use high-tech diagnostic and repair tools.
One of the biggest challenges will be finding jobs for mid-career workers whose skills may no longer be in demand or have eroded due to long-term unemployment. Again, Germany provides a possible model. Germany's unemployment system was redesigned in the 1990s to stress training and job placement, rather than simply providing benefits. Germany also encourages employers to hire the long-term unemployed by paying up to half of their wages for up to two years.
Displaced American workers can also benefit from credentialing. Workers who have accumulated skills on the job, but who lack formal training or education, have trouble "signaling" their value in the labor market. Through a voluntary credentialing system, workers can be certified in specific jobs -- for example, managing accounts receivable -- so they can transfer their skills to a new employer.
To reach full employment, we must also tackle the demand side of the equation. The first step is to make sure that businesses have every opportunity to create jobs when they see a chance to grow. The United States remains relatively business-friendly, but many processes, such as getting permits for new plants, are overly complex and time-consuming, involving multiple agencies and layers of government. Multinationals want to be here -- we still have the largest consumer market in the world. We can make it far easier for them to expand here, including by creating one-stop processes for getting approvals and permits.