In today's edition of
The New York Times, there is an
article that highlights the grim reality that training unemployed workers has only a small impact. It reveals:
Hundreds of thousands of Americans have enrolled in federally financed training programs in recent years, only to remain out of work. That has intensified skepticism about training as a cure for unemployment.
Even before the recession created the bleakest job market in more than a quarter-century, job training was already producing disappointing results. A study conducted for the Labor Department tracking the experience of 160,000 laid-off workers in 12 states from mid-2003 to mid-2005 — a time of economic expansion — found that those who went through training wound up earning little more than those who did not, even three and four years later. “Over all, it appears possible that ultimate gains from participation are small or nonexistent,” the study concluded.
This lack of effectiveness becomes an even more urgent issue when one considers that there is a significant structural component to today's elevated unemployment problem. At the same time, aside from the reality that there are presently about 5 unemployed persons for every job opening, the U.S. employment services market is fragmented. Although sectors designed for administrative workers, senior managers, and persons with specialized skills are reasonably effective, those sectors do not capture the majority of unemployed persons.
Those deficiencies raise a fundamental question: How can policymakers address structural unemployment. There are no magic bullets to quickly address structural unemployment, which is fundamentally a mismatch between prospective employees' skills and the demands required in available job openings. Cutting payroll taxes would not eliminate that mismatch. Training, likely because it is not very specialized or intensive, does not either.
One solution that would offer better prospects for erasing the skills mismatch--and those prospects are borne out in unemployment rate differentials, whereby the unemployment rate for those with a Bachelor's Degree or above is less than 5%--would be a fresh college degree, but the costs of such an approach (providing funding for unemployed workers to cover such costs) would be prohibitive. What this leaves is perhaps a new training approach modeled after Executive Education programs (e.g., an Executive MBA) that would be an intensive one-year program coupled with rigorous career services support that would connect program "graduates" with firms. A well-designed and focuses program could potentially address the skills mismatch. Such a move should be tested on a pilot project basis to determine its effectiveness.
Even if it proves effective, it would not rapidly reduce the unemployment rate. Until the economy is in the midst of a sustained recovery and aggregate demand is stable or growing, job creation will remain far from robust. However, if the pilot project proved effective, it could be expanded. If so, there would be a training approach that actually would provide a mechanism for addressing the structural component of unemployment. Over time, such an approach would allow far more job applicants to participate in the employment market than would otherwise be possible e.g., if they were locked out due to a fundamental skills mismatch. For now, given the large structural component to the unemployment rate and absence of effective solutions, it would make sense to experiment with the above-described idea, as well as others, to try to develop a policy and program mix that could better address structural unemployment.
Finally, the federal government should resist
gimmicks designed to discourage youth from pursuing a college education. The current inadequacies of training offer a hint that such gimmicks would only leave youth underprepared and uncompetitive for the economy. In the longer-run, it would lead to a lower standard of living for those young people.