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 Monday response to jobless news was to suggest yet another new government program: a public-private partnership for 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.