Retraining plan aims to raise sights of US jobless

December 13, 2011 4:31 pm

Retraining plan aims to raise sights of US jobless

Patrick O’Malley lost his construction job the day before Christmas 2008. He had seen the warning signs as demand for new houses collapsed, but the scale of what happened was still a shock.

“There were about 50 or so field employees,” Mr O’Malley says. “The company is down to three people now.”

Mr O’Malley is one of the many skilled workers who found themselves dislocated, with their skills redundant, when the “Great Recession” hit.

All unemployed workers suffer. But those who lose a skilled career can suffer for the rest of their lives. A new job that does not use their unique skills will mean a much lower income. A worker with long tenure displaced by the recession may lose $220,000 in total earnings, according to a recent study.

But Mr O’Malley’s story did not end that way. He went back to college, retrained as a process engineer at Bellingham Technology College in his home town in Washington state, and now earns more than double his previous salary as a controller in an oil refinery.

“I wanted to have a steady job and be decently paid,” says Mr O’Malley. College taught him the science to understand a complex chemical process as well as practical skills for a job in which any mistake is dangerous.

Retraining should be the answer for more US workers trying to start again, but it has a spotty success rate. Dropout rates are high and a patchwork of federal and state funding programmes focus on getting people back into work – any kind of work – at the greatest speed and lowest cost possible.

But a new proposal for the Hamilton Project, an arm of the Brookings think-tank with close links to the Obama administration, argues that it is possible to do more for displaced workers.

“We owe it to them to do a better job of helping with their transition,” says Michael Greenstone, the Massachusetts Institute of Technology economist who runs the Hamilton Project.

The proposal uses the US labour department’s existing “one-stop” employment centres to match workers with technical courses that lead to good jobs. “IT courses have high returns but the probability of completing one if you didn’t do well in Algebra I in high school is pretty minuscule,” says Louis Jacobson, president of New Horizons Economic Research, and one of the initiative’s three co-authors.

One innovative proposal would award bonuses to training centres and community colleges based on the earnings of workers after they graduate. Technology can make that possible, say the authors, pointing out that their own research is based on matching up unemployment insurance and community college records on a large scale.

But the core of their proposal is a new system of federal retraining grants. The value of the grants would be tied to the earnings gap between a worker’s old job and any new job they take on to keep their family fed while they complete their studies. In effect, the grant becomes a form of wage insurance.

“What was striking is how many people took the right courses, but after their unemployment insurance benefits expired, they stopped,” says Mr Jacobson.

“I applied for a lot of grants and I didn’t get any because of the money I’d made the previous year,” says Mr O’Malley, but he was fortunate enough to be young and to have family to back him up. “I had some other funding – my dad is a disabled veteran – but I don’t know how people manage without that.”

The final part of the Hamilton Project proposal is some extra funding for community colleges, because high-return technical courses usually cost more to provide, and the recession has lead to cuts rather than increases in their funding.“Community college budgets are in a very difficult financial position,” says Mr Jacobson.

The difficulty will be exactly this: extracting money from Congress at a time of fierce austerity. The authors argue that even during a recession their proposal needs only a modest $2bn a year while the social return on investment could be between 7 and 12 per cent.

Mr O’Malley is a supporter even though he has not graduated. “I’ve just been working so much that I haven’t had a chance to go back and finish yet,” he says.