Obama’s Euro-style un­em­ploy­ment

The Washington Times Weekly - - Editorials -

It’s no se­cret that Pres­i­dent Obama wants Amer­ica to look more like Europe. He de­sires ex­panded pow­ers for la­bor unions, higher gas prices for com­muters and a di­min­ished role on the world stage. So far, he’s been ef­fec­tive in fos­ter­ing the con­di­tions for Euro­pean-style un­em­ploy­ment on these shores.

The U.S. un­em­ploy­ment rate con­tin­ues to rise even as an in­creas­ing num­ber of jobs go un­filled, largely in man­u­fac­tur­ing and skilled trades. Mr. Obama’s June 13 re­sponse to job­less news was to sug­gest yet an­other new gov­ern­ment pro­gram: a pub­lic-pri­vate part­ner­ship for the re­train­ing of work­ers. He said this as if the gov­ern­ment hadn’t tried the same, tired idea hun­dreds of times with­out suc­cess. A Jan­uary re­port by the Gov­ern­ment Accountability Of­fice counted nine fed­eral agen­cies that al­ready ad­min­is­ter 47 over­lap­ping em­ploy­ment train­ing pro­grams at a cost of $18 bil­lion.

Adding one more to the list isn’t go­ing to pro­vide a quick fix to a prob­lem years in the mak­ing.

The cur­rent un­em­ploy­ment rate is 9.1 per­cent, well above the 5 per­cent level that has gen­er­ally been con­sid­ered to be full em­ploy­ment since World War II. Dur­ing a typ­i­cal re­ces­sion, when there is high un­em­ploy­ment, there are also few job open­ings.

A study by the Fed­eral Re­serve Bank of San Fran­cisco sug­gests the sit­u­a­tion has changed. Since April 2010, the num­ber of job open­ings was much higher than ex­pected, given the un­em­ploy­ment rate.

The Fed study con­cluded that the “ ‘nor­mal’ un­em­ploy­ment rate may have risen as much as 1.7 per­cent­age points to about 6.7 per­cent.” At that level, the United States is look­ing more like a Euro­pean Union nation.

Mis­matches of skills, long-term un­em­ploy­ment and ex­ten­sion of un­em­ploy­ment ben­e­fits are the driv­ers for the new higher struc­tural un­em­ploy­ment level. The last is the eas­i­est pit­fall to avoid. In Europe, the gen­er­ous wel­fare state has cre­ated a per­ma­nent un­der­class, and we are fol­low­ing that path by ex­tend­ing un­em­ploy­ment ben­e­fits over and over again. Ex­tend­ing ben­e­fits might seem kind now, but it’s not in any­one’s best in­ter­ests.

Long-term un­em­ploy­ment im­poses a fi­nan­cial strain on the per­son who is unem­ployed. The longer he is with­out a job, the harder it is for him to find work as his skills de­te­ri­o­rate. Busi­nesses will be­gin hir­ing only when the reg­u­la­tory en­vi­ron­ment be­comes more sta­ble. That means no more tem­po­rary stim­u­lus pack­ages, no more tax hol­i­days, no more short-term so­lu­tions to long-term prob­lems.

The most in­tractable prob­lem is the mis­match of skills. For far too long, the value of vo­ca­tional train­ing and the skilled trades has been ig­nored.

High schools have fo­cused on send­ing grad­u­ates to col­lege and have rarely, if ever, con­sid­ered whether this is the best op­tion for all.

Barely half of stu­dents en­rolled in four-year col­leges grad­u­ate in six years. The rest sim­ply ac­cu­mu­late nondis­charge­able debt, with­out even a de­gree to show for the ef­fort.

Re­sources de­voted to vo­ca­tional train­ing at the high-school level have dwin­dled, even though only about one out of four jobs ex­pected to grow most rapidly in the next decade will re­quire a bach­e­lor’s de­gree, ac­cord­ing to the Bu­reau of La­bor Sta­tis­tics. The re­sult is a vi­cious cy­cle where high-school grad­u­ates emerge with fewer op­tions, go off to col­lege, may or may not grad­u­ate, but prob­a­bly ac­cu­mu­late debt and then try to find a job that may or may not need a col­lege de­gree.

If we don’t rec­tify the sit­u­a­tion at the in­sti­tu­tional level, we will end up with higher “nor­mal” or struc­tural un­em­ploy­ment in the long term. Pro-growth eco­nomic poli­cies must re­place the wel­fare-state men­tal­ity and al­low the mar­ket­place to do what it does best: cre­ate op­por­tu­ni­ties.

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