A case for public direct employment

Kijong Kim | July 21, 2010

A recent New York Times article highlighted the inadequacy of job training programs in the face of massive unemployment. The programs do not reflect the demand for highly skilled workers, such as those who can handle high-tech equipment and service jet engines. Even highly regarded programs have less than a 60 percent job placement rate. It is hard to predict the economy’s next great job-producing sectors and develop programs that train for them.

We’ve reached the point, moreover, where the experience that come with age has become a roadblock to successful job hunting, and almost 39 percent of the long-term unemployed are men in their mid-40s or older. Unemployment checks barely covers their living expenses. Sometimes families break up or people move in with their elderly parents. It’s a sad story.

When passive labor policies are not working and the end of recession seems too far away, it’s time to consider more active steps, including public employment programs. Once upon a time in America, the Civilian Conservation Corps reached out to jobless young people. Perhaps we need another large-scale jobs program, only this time for older workers. Just as the Fed is our lender of last resort, government could take on the role of employer of last resort. It’s paying the jobless anyway, in the form of unemployment insurance (about to be extended again). Why not just go ahead and give jobs along with jobless benefits?

Are you worried that such a plan will intolerably increase the public debt? A study by Carmen M. Reinhart, a co-author with Kenneth Rogoff of This Time is Different: Eight Centuries of Financial Follies, says of the Great Depression: “Countries that were more consistent in keeping spending high tended to recover more quickly.” (Free but older version of the paper is here). Perhaps there is a lesson for us in this.

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