Would Increased Job Training Lower Unemployment?

Would increased job training lower unemployment?

Those who watched Pres. Obama's State of the Union address may recall how the president said that he wanted "to cut through the maze of confusing training programs, so that from now on, people...have one program, one website, and one place to go for all the information and help they need." Obama continued, "It's time to turn our unemployment system into a reemployment system that puts people to work."

NPR's Ari Shapiro reported Thursday on how opposing candidates from both sides of the political aisle favor retraining American workers in order to spur job growth. Shapiro: "There are not many things that President Obama, Newt Gingrich and Mitt Romney agree on, but when it comes to job training there is common ground." In light of Pres. Obama's State of the Union address and various solutions offered by Republican candidates, both Republicans and Democrats appear to be weighing the possibility of linking unemployment compensation to job training.

Shapiro noted that Obama, Gingrich, and Romney "disagree on the details" regarding re-training workers. That being the case, "they agree that worker re-education, in some form, is a useful solution to the country's unemployment problem." On the topic of job retraining programs, economist Gary Burtless commented that even "[if] we had a perfect training system and a perfect retraining system, we might be able to drop the unemployment rate currently by 2/10 or 3/10 of a percentage point." Thus, such programs may do little to lower the US unemployment rate in the short-run. Shapiro concluded that "even if people of both parties can come together behind these proposals, a few tenths of a percentage point will not fix the job market."

In any current political debate, the topics of the job market and unemployment are certain to make an appearance. That being the case, evolving technology and cultural attitudes are playing a significant role in this labor market predicament. During the State of the Union address, Obama commented, "Long before the recession, jobs and manufacturing began leaving our shores. Technology made businesses more efficient, but also made some jobs obsolete." Conservative commentators have been quick to criticize the president in blaming problems in the labor market on things like ATMs and computerized airport kiosks, but does Obama have a point with these ideas?

Even Austrian School free-market economist Henry Hazlitt noted that while the idea that "machines cause unemployment" is an economic fallacy, "we should still keep at least one eye" on the individual who loses his or her job because of technological advancement. Hazlitt wrote that "we cannot and must not forget" the individual who gets thrown out of his or her job owing to technology. Hazlitt noted that such "personal tragedies...are incident to nearly all industrial and economic progress", but in the long-run machines "bring an increase in production and an increase in the standard of living."

Though Hazlitt's insights have value, the problem is that with American companies moving jobs overseas for cheap labor and rapidly developing technology wiping out jobs (not to mention generational issues with baby boomers postponing retirement and clogging up the job pipeline), the US labor market is reaching a point where if things are not corrected in the short-run via government intervention, there's not going to be a long-run. If the US labor market works against younger generations with less social mobility and less jobs available, then some may perceive the situation as calling into question the sustainability and equity of the free-market model in the US. As the Federal Reserve's economic projections reflect the belief that economic growth "over the coming quarters" will be modest with the unemployment rate declining only gradually, the situation portends hard times for American consumers in the years to come. On Friday, the Wall Street Journal reported that the Fed's William Dudley said that economic recovery will remain sluggish and that the unemployment rate is "likely to remain unacceptably high for the near term." With the specters of political gridlock and societal unrest in response to declining labor and economic conditions, such sentiments are ominous. Might there be an "American Spring" on the horizon?

Business Insider's Joe Weisenthal on Friday discussed how according to a just-released report from the Bureau of Economic Analysis, the real GDP increased only 1.7 percent in 2011 "compared with an increase of 3.0 percent in 2010". Weisenthal: "That's the final, pathetic growth number for 2011." Taking this statistic in light of price changes and with modest growth in the future, there is little hope for substantial decline in unemployment. In light of Okun's law (if GDP grows near three percent per year, then the unemployment rate will remain unchanged; the jobless rate will decline by half of what the growth rate exceeds three percent), it appears that unemployment will remain relatively high going into the November elections.

And even then, perhaps merely having a job is not everything. Marketplace's Stacey Vanek Smith recently discussed problems with jobs in the retail sector. With fewer hours, low benefits, and low wages, retail workers face a dire situation going forward; declining aggregate demand for retail goods in the wake of $4 per gallon gas could further complicate matters. Whereas service sector work can be quite alienating and dehumanizing as it is (financially struggling customers are probably not as cordial as financially secure customers), declining economic conditions do not help. Marketplace's John Dimsdale recently noted how some part-time workers depend on food stamps to survive. Dimsdale: "Nearly a third of food stamp recipients have jobs, but don't earn enough to feed themselves."

On this same topic, John Merline from Investor's Business Daily discussed Friday how "one big debate in the upcoming election will be whether President Obama is pushing the country toward a European-style welfare culture." With Gingrich's comment that Pres. Obama is "the best food-stamp president in American history", more than 46 million Americans will get food stamps this year; "[t]hat's 45% higher than when Obama took office, and twice as high as the average for the previous 40 years."

Taking the above into account, it appears that job retraining programs undertaken by the federal government will not be enough to lower the jobless rate in the immediate future. Problems with higher education and high student loan debt only add further dimensions to the dilemma. These issues seem to reflect cultural and social problems with respect to getting citizens back to work while stimulating economic growth. Even if the government chooses to invest in job training, there is no guarantee that participating citizens will thereafter be able to secure quality, meaningful employment. In this light, the unemployment dilemma in the US is systemic. Far from being related to one individual sector or one individual aspect of the marketplace, the unemployment dilemma appears to reflect inherent problems in the labor market. American society seems to be approaching an existential crisis in terms of labor and subsistence: How should one's labor and the products of one's labor be related to living wages? If the wealthy are sitting on mountains of cash and can take advantage of tax loopholes to avoid paying taxes, if given a substantive opportunity within the boundaries of the law, should the government step in effectively seize the assets of the wealthy in order to make sure that ordinary citizens can eat?

This issue calls to mind a line from economist Nouriel Roubini's book "Crisis Economics": "Crisis is endemic to capitalism." In this way, if the government and American society at large really do want to bring unemployment down, further systemic analysis and reevaluations of cultural norms may be necessary. Job training may sound like a silver bullet to reduce unemployment, but cultural and systemic problems remain. Obviously, in an economy where individuals are unable to provide for themselves even while holding a job, there are going to be disruptions to societal functionality. In a culture and society where monetary profits are valued higher than human potential and wealth is concentrated in the hands of the few, it is reasonably foreseeable that economic instability and societal unrest will grow. At the end of the day, even if the government undertakes a vigorous job retraining program, the populace may have to deal with high unemployment in the years to come. How the populace chooses to deal with that high unemployment on cultural and social levels remains yet to be seen.