June 25, 2013
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.