These aren't the workers you're looking for

By M.S.

YESTERDAY the House passed an extension to long-term unemployment benefits through November 30th. According to congressman Sandy Levin (via Annie Lowrey), by the time the Senate can take up the bill on July 12th, some 2.5m Americans will have lost their benefits since the beginning of June. If the bill passes the Senate, they will have their benefits retroactively extended. With average benefits amounting to $300 per week, that's about $750m per week in additional spending on unemployed people the Senate will have to vote for. But the reason Congress hasn't already passed an unemployment extension is that the previous bill also included funding for new government jobs programmes, which Republicans say they will not vote for.

Meanwhile, the New York Times's Motoko Rich reports today, factories that are looking to hire more workers as the nation's manufacturing economy recovers are finding that the kinds of workers they're looking for aren't out there.

During the recession, domestic manufacturers appear to have accelerated the long-term move toward greater automation, laying off more of their lowest-skilled workers and replacing them with cheaper labor abroad. Now they are looking to hire people who can operate sophisticated computerized machinery, follow complex blueprints and demonstrate higher math proficiency than was previously required of the typical assembly line worker. Makers of innovative products like advanced medical devices and wind turbines are among those growing quickly and looking to hire, and they too need higher skills....

Here in this suburb of Cleveland, supervisors at Ben Venue Laboratories, a contract drug maker for pharmaceutical companies, have reviewed 3,600 job applications this year and found only 47 people to hire at $13 to $15 an hour, or about $31,000 a year... All candidates at Ben Venue must pass a basic skills test showing they can read and understand math at a ninth-grade level. A significant portion of recent applicants failed, and the company has been disappointed by the quality of graduates from local training programs. It is now struggling to fill 100 positions.

This would suggest that retraining workers for new jobs might produce substantial returns. But government job-training programmes have at best a mixed record of success in America. The system has improved since the 1998 Workforce Investment Act (WIA) consolidated a barrage of different programmes into one-stop centres administered by the states. A 2008 evaluation found that adult trainees in WIA programmes improved their earnings on average by several hundred dollars per quarter, which greatly exceeded the cost of the programmes. But for reasons not sufficiently understood, dislocated workers entering the programmes did much less well, and actually had lower earnings for the first several quarters than those who didn't receive retraining. (Of course, this might be substantially different in the current climate; whatever jobs those non-retrained workers were landing in 2007 may not exist anymore.) Moreover, part of the problem with attempting to recruit highly-skilled workers in Cleveland these days may be the reduced mobility of America's workforce due to the ongoing slump in housing prices.

Still, it's striking that Congress may be grudgingly willing to spend on extending unemployment benefits, but not on doing anything geared towards addressing the structural reasons why Americans are unemployed. Ben Venue's inability to find 100 qualified workers, and more broadly the extreme disparity between low unemployment among the college-educated and high unemployment among high-school graduates, suggests that America is not investing enough in its workers to remain a competitive location for high-value-added employers.

Maybe government isn't very good at worker training, and investments in other kinds of capital, such as improved infrastructure (high-speed trains, bridge and highway improvement, low-emission energy generation) may produce better returns. But what Congress seems to be saying, at this moment of increasing deficit hawkishness, is that government can't do anything at all about high structural unemployment. All it can do is maintain a safety net for the unemployed. Perhaps severe cutbacks in state government spending, forced by lower tax revenues, will induce the private sector to regain confidence in the economy. Alternatively, we'd better just get used to paying a lot of money for indefinite extensions of unemployment insurance.

(Free exchange comments on today's lacklustre jobs numbers. Photo credit: AFP)