PRIORITIES
My
home country of Norway has an unemployment rate of 3.2%
(August 2009). The U.S. rate is 9.8% (September 2009).
Why
such disparity?
The
difference lies in the fact that in Norway, you either
work or you are in training. This maximizes the
productive capacity of the country and serves to
maintain a flexible work force. Furthermore, the
training makes it possible to pay some of the highest
wages in the world. The minimum wage in Norway is
$20.00 per hour, as compared with $7.25 in the United
States.
Norway has a social democratic government with a
hair-thin plurality in Parliament. Norway also is a
market economy. Could we learn something from the
Norwegians about employment policies, knowing they were
formulated through consensus of all the political
parties in Norway?
Let’s say the U.S. would aim for 3.2% unemployment, the
same as Norway. That would lower the current rate by
6.6%. If we also import Norway’s “work or in training”
program, that could put ten million unemployed Americans
into training, and with a very high probability, more
quickly into new jobs.
The
US did something quite similar at the end of World War
II, when millions of Americans flooded the labor market
after having served in the Armed Forces. About 2.2
million signed up for the GI Bill, passed in 1944 to
make the transition to civilian life easier. It is one
of the most successful programs in U.S. history. The GI
Bill looked at the demand side, and channeled
funds directly to the people who needed the money to
fund their personal choices for education and training.
It
jumpstarted the American Middle Class! Higher education
had mainly been for the elite; now it became an option
for anyone who had served in the military. Record
population growth followed (this was the start of the
baby boomers), and subsequently many of these baby
boomers were introduced to advanced education and
training through the example of their parents. Thus the
largest generation in U.S. history also became the best
educated work force in the world.
Let
us review what the Bush and Obama administrations have
done with regard to improving the economy in 2008 and
2009.
President Bush asked for and received $700 billion to
rescue the banking system and another $25 billion to
rescue two of the Big Three Detroit auto makers. An
economist would look at this as a supply side
intervention.
Supply side
interventions were also largely the thinking behind the
Obama Administration bill – the $787 billion went for
Medicaid ($87B); energy ($54B); roads, bridges and
construction ($90B); modernizing the education sector
($141B); and helping workers with extended and increased
unemployment payments, including some funds for
training.
Eighty percent of all capital is human capital. The
three stimulus packages, adding up to $1.512 Trillion,
barely touched investment in human capital.
But
investment in human capital yields the highest returns,
just as it did in 1946 with the GI Bill. And just as it
did in Japan in 1946, when the war ravaged country
looked for the best way to grow. Japan recovered from
WWII by investing in the only resource they had ― their
own people ― and became the second largest economy in
the world.
Let’s see how we could deal with U.S.
unemployment. After all, an unemployment rate of 9.8%
is a drag on the United States economy. We could have
produced $1.4 trillion more per year with those people
working rather than being idle.
What would an investment in training for 10 million
unemployed Americans cost?
Let’s do what the GI Bill did: Here is a voucher for
you to finance any education and training that you
desire and that will help you get another job. Let us
make the voucher $20,000 per year for up to four years.
That’s $80,000 per person ― $800 billion in total, about
the same amount the bailouts of the banking and auto
sector cost U.S. taxpayers.
But
the 10 million Americans are people ― not
delinquent mortgages, not brick and mortar, and not
machinery.
Let
us be conservative and assume that the trainees will go
from zero (negative pay, actually, if they drew upon
personal savings while looking for work) to average pay
once the education was completed. Average hourly pay in
the U.S. is approximately $20 per hour. Ten million
Americans will thus earn $20 per hour X 2,000 annual
hours X 10,000,000 people = $400 billion per year. Over
ten years, they will have earned at least $4 trillion.
From this, they will have paid some $1.4 trillion in
U.S. taxes. And that is a profit of $600 billion
in ten years after the entire investment of $800 billion
has been paid back ― with more gains to follow.
Not
improving unemployment already costs us $1.4 trillion
per year. That is an entire current U.S. GDP over ten
years. So our net return is really $14.0 trillion +
$600 billion, or $14.6 trillion, for an investment of
$800 billion. That is a return of 24.3 times the
investment over 10 years ― a 2,430% return on
investment.
I’ll be surprised if the three combined stimulus
payments packages implemented by the Bush and Obama
Administrations produce anywhere near this kind of
return on their $1.512 Trillion investment.
Why
don’t we invest in the most important and precious
resource we have ― our own people? Why don’t we admit
that meaningful work is a basic human need that helps
everyone when that need is met? Why don’t we focus on
avoiding the demeaning and undignified misery that
unemployment implies, and avoid the broken families, the
increased suicide rate, the known linkages to depression
and disease, and the economic catastrophe that
unemployment brings?
All
those who have been unemployed through no fault of their
own know what I am talking about. The pain of being
fired or laid off is real. It is like a dagger through
the heart for a proud and seasoned worker—it is the
brutal force of an uncaring market that we will never
forget. Why not create a market for willing learners to
counteract this pain? And make the power of the market
go our way? The jobs people will choose to
prepare for are the jobs of the future. Shifting the
focus from what has been to what will come is adaptation
at its finest.
I
don’t see a downside to a rule that says: “You either
work, or you are in training.” It is the closest we
come to nature’s own survival rule: If you can’t survive
the way you are, mutate!
It
is also the best investment we can make, and it has made
Norway one of the richest countries in the world. For
several consecutive years, Norway, among all the
countries of the world, has been chosen by the United
Nations as the best country in which to live.
There is grace and dignity in being able to work. And
there is grace and dignity in receiving the opportunity
to learn.
It
is almost too good to be true that study and learning
are the very best ways that we can use our scarce
resources when a recession is again upon us in a future
year. And when it comes, it is usually during the month
of October, when we are raking the dead leaves from a
glorious Midwest summer.
All
around us nature will be preparing for survival. It will
be a good time for us to follow nature’s example before
the gathering storm.
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