Echo

Retraining workers won't work

Monday, October 4, 2010

Update: one of our readers caught a mistake in the chart. I indexed the data to December 2008, or one year after the recession actually started in December 2007. The statistics that changed are formatted in bold, and the chart in the article has been updated. The analysis doesn't change at all, but the number of jobs lost during the recession is higher than those indicated in the original article.

From the NY Times, White House Plans Job Training Partnership (bold by me):

As part of efforts to address record-high levels of long-term unemployment, President Obama plans to announce a new national public-private partnership on Monday to help retrain workers for jobs that are in demand.

The national program is a response to frustrations from both workers and employers who complain that public retraining programs frequently do not provide students with employable skills. This new initiative is intended to help better align community college curriculums with the demands of local companies.

“The goal is to encourage community colleges and other training providers to work in close partnership with employers, to design a curriculum where they want to hire the people coming out of these programs right away,” said Austan Goolsbee, chairman of the President’s Council of Economic Advisers.
The White House has coined this program Skills for America's Future. The complication is, that lack of skills is not the problem for the 66% of the labor force aged 25 years and over without a bachelor's degree. The problem is the lack of jobs.


The chart illustrates the dynamics of employment by level of education through August 2010, as measured by the Bureau of Labor Statistics. Note that the data are indexed to the onset of the recession, December 2007, where 100 implies that employment is now at its pre-recession level.

The only category to recover employment in full is that requiring a Bachelor's degree or higher. Furthermore, no material change in employment for BA's (or higher) has occurred since about a year ago, as indexed employment hovers around 100. No new jobs.

The levels of employment for those workers with the lowest levels of educational attainment, 1. and 2., are 10.2% and 6.6% below pre-recession levels, respectively. That is over 3.5 million jobs.

The White House program is targeted at community college students, or education category 3., some college or associate degree in the chart above. Employment for workers with a community college degree sits over 3.2% below pre-recession levels, or 1.1 million jobs. Retraining workers will not raise the employment level further.

The government needs to "add jobs", not "retrain workers", and stimulate domestic aggregate demand.

Rebecca Wilder

15 comments:

rjs October 4, 2010 at 6:35 AM  

i certainly agree with your premise, rebecca, as ive seen hundreds around here go to "welding school" and come out just as unemployable as they were when they went in...but what you left out was your solution...how do you propose the government "stimulate domestic aggregate demand."?

Rebecca October 4, 2010 at 7:54 AM  

Hi rjs,

By adding jobs directly. They don't need to be technical jobs, just jobs, which would stimulate aggregate demand through income generation. Or a payroll tax cut would allow households to save more and front-load the deleveraging cycle, and possibly increase consumption growth (although my personal recommendation would be on the former option). Or the government could do it the "spending" way by work projects for private (not unlike those contracts generated by the ARRA).

Robert Shiller has an interesting article in the NY Times about Prof. Bewley's resarch on workforce morale for those who retain their jobs - it's low, which then restrains aggregate demand further.

Rebecca

Rebecca October 4, 2010 at 7:55 AM  

<span>Hi rjs,  
 
By adding jobs directly. They don't need to be technical jobs, just jobs, which would stimulate aggregate demand through income generation. Or a payroll tax cut would allow households to save more and front-load the deleveraging cycle, and possibly increase consumption growth (although my personal recommendation would be on the former option). Or the government could do it the "spending" way by work projects for private firms (not unlike those <span>contracts generated by the ARRA</span>).  
 
Robert Shiller has an <span>interesting article in the NY Times</span> about Prof. Bewley's resarch on workforce morale for those who retain their jobs - it's low, which then restrains aggregate demand further.  
 
Rebecca</span>

Anonymous October 4, 2010 at 9:21 AM  

Adding jobs will be difficult given that so many of the lost ones are in the construction and manufacturing sectors. Those are the jobs that are filled by your targeted groups and will be very slow to come back. Another factor will be age of those who lost jobs. Its difficult to get back in the workforce when you are over 40 (yes, 40!!)  aj

Ralph Musgrave October 4, 2010 at 2:59 PM  

Rebecca’s claim that the basic problem facing employers is lack of demand is supported by this small business survey.

http://www.nfib.com/Portals/0/PDF/sbet/sbet201009.pdf

According to page 18, “poor sales” are much the most important problem with “quality of labour” being a complete non-problem.

Ralph Musgrave October 5, 2010 at 6:12 AM  

Here are two more surveys which show that as far as employers are concerned, lack of skilled workers is a non-problem compared to other factors.

http://www.blumshapiro.com/pub/articles/BlumShapiroCBIASurvey.pdf

http://www.pwc.com/us/en/industrial-manufacturing/barometer-manufacturing

beezer October 5, 2010 at 8:30 AM  

Amen, miss.

As I look back at this recession it appears that leadership forgot how to get much accomplished, or even identify what needed correcting.  We lost jobs, so jobs must be created.  The private market destroyed 8 million jobs and is unlikely to replace many of them soon, much less produce new jobs.

I think Milton Friedman is the unwitting cause of this blindness.  Somewhere along the line his economics got warped in the political arena.  It mutated into a philosophy that asking the government to improve economic prospects is a total waste of time and money. 

Go figure.  Even a New York taxicab driver knows better.  So here we sit, pretty much twiddling our fingers trying to swap spit with monetary tools that obviously have little to no real effect on creating jobs.

JWL October 5, 2010 at 11:18 AM  

Just a note, the recession didn't start in December 2008, it started in December 2007. Obviously the story doesn't change, but just wanted to chime in with the official dates.

Rebecca October 5, 2010 at 1:48 PM  

You are the first person to catch that! It was literally 5am - no excuse, but big difference. In fact, the story is likely much worse in terms of the level of jobs!

RMS50 October 6, 2010 at 1:04 PM  

I fall into the catagory of some college w/no degree, and in construction for 25 years as a Project Manager, and no work on the horizon.  The stimulus money operation was a joke as the only people it put to work were large companies that could afford million dollar bonds to do govt sponsored work, housing authorities, etc.  I apply for alot of positions that I am easily qualified for but lose out to college grads who have no experience and then the job position is open again after 4 mos and the company goes thru the same motions.  Re education would help, retraining....for what?

paulthiel1 October 6, 2010 at 2:04 PM  

The government cannot "Add Jobs."  All they can do is encourage a favorable climate for small businesses to develop and grow.  Government, however, sure can destroy jobs.

Let's say I run a company and need some workers to do data entry.

First, I must assemble a diverse collection of resumes and interview across the spectrum to avoid even the appearance of discrimination.  Next, I cannot ask any questions about the applicant's personal background.  If I call their past employers, all they can tell me is whether or not they are eligible for rehire (or the former employer can get sued).

Once I hire them, they need to fill out an I9 and W4.  These need to be kept on hand for years in case of a government audit.  Now, I must pay them.  In addition to the employee's wages, I must also pay Social Security, Medicare, FUTA, SUTA, Workers Comp, and now (thanks President Obama) I will be responsible for their health insurance.  I also need to collect their taxes are remit them quarterly to the IRS.  Fortunately, I live in a state without income tax or I'd also have to remit to the state and possibly the city.  God help me if there is a union involved.

Whew, now that's over we can get to work.  Hopefully, all is well, but if it is not, I have to watch how I terminate the employee lest I open myself up to a wrongful termination lawsuit.

Or I can hire someone outside the US (www.elance.com) and cut them a check once a month.

Let's forget about the lower pay rate they make.  Which scenario allows me to concentrate more on my customers and growing my business?

Despite the best intentions, we have done this to ourselves and have nobody else to blame.

Anonymous October 7, 2010 at 9:33 AM  

This is SOOOO true! I've been in that position - paperwork does not begin to describe what you go through. And, it doesn't matter whether or not it is for-profit or nonprofit, the rules are the same for all. One has to think long and hard to add a worker - this was true before the latest fiasco and moreso now.  aj

Anonymous October 19, 2010 at 5:21 AM  

Community colleges are good for increasing America's human capital. The problem is that President Obama is presenting it as a short-term fix, when really it's a long-term growth issue.

People with associate's degrees do generally have lower unemployment than simple high school graduates, due likely to their greater human capital. Furthermore, many community college students go on to receive bachelor's degrees. Also, in the information technology sector community colleges are often used by college graduates to increase and modernize their skills.

Anonymous October 19, 2010 at 5:21 AM  

Community colleges are good for increasing America's human capital. The problem is that President Obama is presenting it as a short-term fix, when really it's a long-term growth issue.

People with associate's degrees do generally have lower unemployment than simple high school graduates, due likely to their greater human capital. Furthermore, many community college students go on to receive bachelor's degrees. Also, in the information technology sector community colleges are often used by college graduates to increase and modernize their skills.

Anonymous October 19, 2010 at 5:21 AM  

Community colleges are good for increasing America's human capital. The problem is that President Obama is presenting it as a short-term fix, when really it's a long-term growth issue.

People with associate's degrees do generally have lower unemployment than simple high school graduates, due likely to their greater human capital. Furthermore, many community college students go on to receive bachelor's degrees. Also, in the information technology sector community colleges are often used by college graduates to increase and modernize their skills.

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