A modest pre-Labor Day jobs proposal

For the past sev­eral weeks, polit­i­cal pun­dits have said the next pres­i­den­tial elec­tion will pivot around three issues: jobs, jobs and jobs. Recently, as the Repub­li­can Iowa straw poll was unfold­ing, Pres­i­dent Obama under­took a three-state bus tour to tout an upcom­ing jobs pro­posal to be unfurled after Labor Day. Many won­der why, with so many peo­ple unem­ployed, the Obama admin­is­tra­tion would choose to sit on any seri­ous pro­posal to end such suf­fer­ing. But per­haps that’s part of the magic of polit­i­cal life that we unthink­ing lit­tle drones fail to comprehend.

In an effort to plug the gap between now and Labor Day, I would like to present my own mod­est lit­tle pro­posal for help­ing — in a small but real­is­tic way — a cer­tain group of unem­ployed, and at the same time improve the com­pet­i­tive­ness of Amer­i­can businesses.

In endeav­or­ing to real­is­ti­cally help the unem­ployed through gov­ern­ment pol­icy actions, it is every bit as impor­tant to rec­og­nize what the fed­eral gov­ern­ment can­not do as what it can do. What it can­not do, despite spend­ing huge sums of present and future tax­payer monies, is elim­i­nate cycli­cal unem­ploy­ment through an $830 bil­lion fis­cal stim­u­lus. Accord­ing to this Key­ne­sian gam­bit, for each dol­lar borrowed/spent the econ­omy will see a “mul­ti­plier effect” that so increases aggre­gate demand that a mul­ti­tude of new jobs will be cre­ated. Sup­pos­edly, as the stim­u­lus was orig­i­nally jus­ti­fied by the Obama admin­is­tra­tion, the unem­ploy­ment rate would remain below 8 per­cent and mil­lions of jobs (in many instances, “green jobs”) would result.

Sadly, the mul­ti­plier effect remains a the­o­ret­i­cal nicety with lit­tle link to real­ity. And as gov­ern­ment funds dry up, the tem­po­rary jobs that are cre­ated wither on the debt-nourished vine, as with the recent announce­ment that jobs would be lost as gov­ern­ment weath­er­iza­tion funds end.

So, exactly what might the gov­ern­ment have some influ­ence over as it relates to unem­ployed Amer­i­cans? It involves some­thing called “struc­tural” unem­ploy­ment, which is typ­i­cally described as a mis­match between the jobs skills of those who are unem­ployed and the exper­tise needed for unfilled jobs that are cur­rently avail­able. Typ­i­cally, to elim­i­nate struc­tural unem­ploy­ment, our nation’s edu­ca­tional sys­tem and train­ing facil­i­ties — and their stu­dents — must adapt in terms of the skills and/or degree-granting pro­grams offered. If the gov­ern­ment has any role in this sit­u­a­tion, it often takes the form of grants and sub­si­dized loans to stu­dents so as to even­tu­ally meet chang­ing labor needs.

This is not, how­ever, the facet of struc­tural unem­ploy­ment that my sug­ges­tion con­sid­ers. Another struc­tural issue that some­times arises (though rarely to the degree seen in recent years) is a geo­graph­i­cal divide between those with the skills needed to fill jobs and the phys­i­cal loca­tions where posi­tions are avail­able. In short, jobs are avail­able, skilled peo­ple are avail­able to fill them, but some­thing keeps employ­ers and poten­tial employ­ees sep­a­rated. And what is that “some­thing?” Hous­ing! Specif­i­cally, an avail­able worker’s job mobil­ity is impaired by an under­wa­ter mort­gage, where the per­son owes more on the house than what it can fetch in the mar­ket­place, leav­ing the worker and busi­ness per­ma­nently divided from one another.

So, how can this type of unem­ploy­ment be rec­ti­fied by the fed­eral gov­ern­ment? By treat­ing such indi­vid­u­als in fash­ion sim­i­lar to that of a few years ago when the feds bailed out the finan­cial sec­tor (and oth­ers, includ­ing autos) via TARP, the Trou­bled Asset Relief Pro­gram. Of course, this assumes politi­cians believe peo­ple are as wor­thy of help as finan­cial institutions.

In this case, the qual­i­fied — but immo­bile — indi­vid­ual would sell his/her house and the gov­ern­ment would pro­vide a loan to the indi­vid­ual for the remain­der of the under­wa­ter mort­gage. Then, over a period of 15 to 30 years — as with a reg­u­lar, fixed rate mort­gage — the gov­ern­ment would be repaid.

In the process, the per­son would regain the flex­i­bil­ity needed to move and fill an avail­able posi­tion (which should be a require­ment of this pro­gram), the busi­ness would obtain a skilled employee, and labor mar­kets would begin to heal.

So, how many peo­ple might be helped by such a pro­gram? It should num­ber at least in the tens of thou­sands, and poten­tially pen­e­trate the hun­dreds of thou­sands, given the num­ber of busi­nesses cur­rently lament­ing the lack of skilled work­ers needed to fill avail­able positions.

The source of funds for such a pro­gram? How about can­celling some of those not-so-shovel-ready projects which cre­ate jobs that last about as long as the funds bor­rowed by government?

Dr. James New­ton serves as chief eco­nomic advi­sor to Com­merce National Bank and is an aux­il­iary fac­ulty mem­ber in eco­nom­ics and sta­tis­tics at Ohio State University-Marion. Dr. Newton’s views do not nec­es­sar­ily reflect those of Com­merce National Bank or OSU-Marion.

Posted by Jim Newton on Aug 25 2011. You can follow any responses to this entry through the RSS Feed. Comments can be made below.