In a prior posting, we discussed Technological Change, its incredible and accelerating rate, and the good and the bad it brought us. The good, we can, of course, embrace, or ignore if we choose. The personal bad, increased pace of life and anxiety, has no political solution, only personal. But the societal bad, increased unemployment, decaying cities after factory closures, obsolescence of individuals, can be ameliorated by intelligent policy, created by a centrist party.
Why not by Republicans or Democrats? The Republicans are wedded to a belief in individual responsibility, which, while reasonable for problems of an individual, is not a good solution for the same problem that hits a mass of individuals. The Democrats are wedded to the belief that the Government can solve the problem, with only one more bureaucratically managed program. Are these characterizations unfair? Somewhat, I’ll admit, but historically we’ve seen them in operation.
What we cannot do, is return to the past. We cannot abrogate trade treaties to help some of our folks while hurting others. Trade will go on and liberalize without us, and we will be left in the dust by other nations who take advantage of what it offers. (I put globalization under technology, because only things like cellphones, the internet, and drones enable its vast scope.) We cannot put the genies of robotics and artificial intelligence back in the bottle. They will emerge, one way or the other. The marketplace may lose a battle, but it will always win the war, and the marketplace demands the best solution.
We can attack the problem from three different angles. First, we should look to employers. We know there are a tremendous number of job openings today, that go unfilled because there is a mismatch between the skills of the unemployed and the requirements of the jobs open. Rather than make government grants to training organizations, why not let the employers, who know best what they need, be incentivized to train applicants without the right experience? The government could reimburse the cost of training an unqualified candidate who remained on the payroll for one, two, or three years in the skill for which their training was covered. Not even taxpayers lose money on this deal, because the new employee is now paying his own taxes, and over his employment will more than likely pay back the government’s investment in his training several-fold.
One possible objection to this plan would be the incentive for employers to cheat, to claim funds from the government to which they were not entitled—either because they didn’t provide the appropriate training, or they hired someone who didn’t need training, and claimed the funds anyway. So, do we have another government organization to monitor the employers? I don’t think it is necessary. To claim the funds, let the employer specify and certify the training was done, have the employee agree, co-sign, and attach his resume, and then require the company’s financial auditors to audit the certifications.
On a second front, for the individual, let’s set the right incentives. Just as we allow a tax deduction for that portion of wages that gets put aside into a retirement account, e.g., a 401(k), where taxes are only paid after retirement as the funds are withdrawn, why not allow an individual to set up his own retraining account? Each employee could contribute 1-3% of his/her wages each year to set up a retraining fund, invested and administered by a third party, and available to him or her in the event of job loss due to plant closure, lack of demand for his/her skill and experience. We could even include a provision for a working spouse to similarly set aside tax-free funds for retraining for the child-raising partner.
And on the organizational side, why not require unions to set aside a small portion of union dues for a retraining fund for its members in case of skill obsolescence or plant closure? Employers could also be required to pay a one-time fee of 20% of the year’s pay for individuals affected by plant closure, and require the funds be used for retraining.
All of this is possible, if we can get politicians in office who are not wedded to the extreme positions of the current two parties.
Obviously there are other things we can do. We can improve K-12 education, so that high school graduates are better prepared to learn the skills needed today. We can urge teachers to stress the need for life-long learning. We can improve vocational training, and not make that a dirty word. We can improve the quality of education provided by community colleges, for those who cannot or should not take a 4-year bachelor’s degree. And we should investigate the German apprentice program to see if we think it could succeed here.
But the takeaway here is that there are good approaches to alleviating the problem. Good governance does not ignore the problem, nor try to recreate an impossible past, nor smother us all with well-meaning programs, that are poorly managed, and have unintended consequences. There is no cure-all, but good governance sets the framework under which employers, employees and organizations can succeed.
4 thoughts on “Coping with Technological Change”
This really makes so much sense. My question would be, that given the current status of our political parties, and the extent of lobbying money distorting the system further, who might be willing to initiate this “approach”?
Thanks for your comment and question, Sue. I’m not sure who would initiate this approach in the current Congress, but the question has motivated me to do some research. I’ll look at the House Committee on Science, Space and Technology, and the Committee on Education and the Workforce.
A little research has turned up that the market already has sort of a solution for this, a private unemployment insurance company.
Seems like they might be in a good position to offer retraining for an additional premium.
Thanks, Michael. I looked at the reference, and it’s a small step in that direction. The plan posed in the blog was that contributions were strictly for retraining, and they would be tax-exempt, at least until retirement, when, if unused, they would be returned to the owner and fully taxed.