« The Relationship Between Manufacturing Production and GDP | Main | The Velocity of Money and Recessions »

Saturday, March 25, 2006

What Jobs Should Laid-Off Workers Be Retrained To Do?

This article is an attempt to address an often repeated, but hard to answer question, what jobs to target when designing education and retraining programs for displaced workers. However, the article is more successful at identifying the problems than it is at finding a recipe for solving the displaced worker problem:

Retraining Laid-Off Workers, but for What?, by Louis Uchitelle, NY Times: Layoffs have disrupted the lives of millions of Americans over the last 25 years. The cure that these displaced workers are offered — retraining and more education — is heralded as a sure path to new and better-paying careers. But often that policy prescription does not work, as this book excerpt explains. It is adapted from "The Disposable American: Layoffs and Their Consequences" by Louis Uchitelle, an economics writer for The New York Times...

JO GOODRUM, a thin, energetic woman older than her audience of aircraft mechanics ... got their attention with a single, unexpected sentence... Her husband, she said, had been laid off six times since the late 1980's. And yet here she was, standing before them, in one piece, cheerful, apparently O.K., giving survival instructions to the mechanics, who would be laid off themselves in 10 days.

They were, in nearly every case, family men in their 30's and 40's who had worked for United Airlines since the mid-1990's. ... Confrontation had brought on the layoffs. Influenced by militants in their union local, Hoosier Air Transport Lodge 2294 of the International Association of Machinists, the 2,000 mechanics at the center had engaged in a work slowdown for many months, and then a refusal to work overtime. But rather than give ground, United responded by outsourcing, sending planes to nonunion contractors elsewhere in the country. That scared the mechanics. They quieted down and, in effect, authorized the leaders of Lodge 2294 to make peace. ... In this state of mind, the union was helping to usher the 60 laid-off mechanics quietly away. It had rented the conference room on this cold January evening in 2003 to introduce the men to what amounted to a boot camp for recycling laid-off workers back into new, usually lower-paying lines of work.

SIMILAR federally subsidized boot camps, organized by state and local governments, often in league with unions, have proliferated in the United States since the 1980's, and now many cities have them. Unable to stop layoffs, government has taken on the task of refitting discarded workers for "alternate careers." ... The presumption — promoted by economists, educators, business executives and nearly all of the nation's political leaders, Democrats and Republicans alike — holds that in America's vibrant and flexible economy there is work, at good pay, for the educated and skilled. The unemployed need only to get themselves educated and skilled and the work will materialize...

If the workers were already trained, as the mechanics certainly were, then what they needed was additional training and counseling as a transition into well-paying, unfilled jobs in other industries. If the transition failed to function as advertised, ... the accepted wisdom suggested that it was the fault of the workers themselves. Their failure to land good jobs was due to personality defects or a resistance to acquiring new skills or a reluctance to move where the good jobs were...

You cannot be an engineer or an accountant without a degree; in that sense, education and training certainly do count. Furthermore, in the competition for the jobs that exist, the educated and trained have an edge. That advantage shows up regularly in wage comparisons. But you cannot earn an engineer's or an accountant's typical pay if companies are not hiring engineers and accountants...

For the mechanics at the Days Inn, the retraining process would begin in a few days with workshops in résumé writing and interviewing skills, personality evaluations and job counseling — and, for a lucky few, tuition grants to go back to school. The mechanics were being "counseled out" of their well-paying trade, as some of them wryly put it...

In the blue-collar world, aircraft mechanics are at the top, and these were painful economies for them. They are the highly skilled people who repair and overhaul the nation's airliners. Each mechanic in the room had completed two years of college like schooling to qualify for the exacting ... work carried out at the maintenance center. Several compared their role proudly to that of a pilot, claiming as much credit as the pilots for the safety of air travel.

Now they were falling out of this high-level world, in most cases for good. They were unlikely to match or come close in their next jobs to the level of pay that would soon cease. They would be newcomers again in the work force. They must learn how to get a foot in the door... Their careers were gone, and the grief at this loss must be absorbed in order to move on. ...

Three months later, in April 2003, United abruptly laid off the 1,100 remaining mechanics... Outsourcing had won, hands down...

IN an earlier era, the two sides would have tried to settle their differences through negotiation and would probably have succeeded. There was really no other alternative. The outsourcing of maintenance did not exist before the 1980's; airlines did their own maintenance. But now layoffs and outsourcing had become an easy and acceptable option. Everywhere in America, the barriers to layoffs came down one after another starting in the late 1970's, and by the turn of the century there was acquiescence. ...

What had started as an escape from a unionized, often militant work force took on a second function. The outsourcing of heavy maintenance became a means for the airlines to cut costs, and nearly every major airline gradually moved that way...

The 60 mechanics gathered at the Days Inn that January evening were in the fourth wave to lose their jobs, bringing the total to 1,200. The recycling of former mechanics into new lines of work was now in full swing... Tori E. Bucko... turned out to be the main speaker, the chief of the boot camp that the mechanics were being encouraged to enter.

Given her responsibilities, Ms. Bucko was surprisingly young — only 30. But ... she would soon play a more important role in the lives of many of the mechanics than ... the union they were leaving behind. The program that Ms. Bucko directed was sponsored by the Indianapolis Private Industry Council, a coalition of companies, unions, government agencies and civic groups. Virtually all of the funding comes from Washington, which sends less than $7 billion a year to the states to recycle laid-off workers back into jobs. ... Ms. Bucko's task, in this initial presentation at the Days Inn, was to encourage the 60 mechanics to take the next step. There would be no help for them if they failed to show up at the AIR Project's center, in an industrial park not far from the airport. There, they would be asked to fill out a detailed enrollment application and submit to a series of workshops and evaluations.

What Ms. Bucko did not mention was the pressure on her employer, Goodwill Industries, and on herself, to meet the employment goals specified in the federal grant — to get most of the mechanics re-employed at 90 percent of their previous wage. Meeting this goal was a condition for getting more federal money once the initial grant expired. ... But the employment goals were not met. They could not be met; they were too optimistic, mythically optimistic. Ms. Bucko knew that as she struggled to meet the standard. ...

Job training, as a result, became a channeling process, channeling the unemployed into the unfilled jobs that do exist, with a veneer of training along the way. Yet job training is central to employment policy. It has been since 1982, when Congress passed the Job Training Partnership Act at the urging of President Ronald Reagan. President Bill Clinton took job training ... further, making it available to higher-income workers — including the aircraft mechanics in Indianapolis.

Saying that the country should solve the skills shortage through education and training became part of nearly every politician's stump speech, an innocuous way to address the politics of unemployment without strengthening either the bargaining leverage of workers or the federal government's role in bolstering labor markets.

But training for what? The reality, as the aircraft mechanics discovered, is painfully different from the reigning wisdom. Rather than having a shortage of skills, millions of American workers have more skills than their jobs require. That is particularly true of college-educated people, who make up 30 percent of the population today, up from 10 percent in the 1960's. They often find themselves working in sales or as office administrators, or taking jobs in hotels and restaurants, or becoming carpenters, flight attendants and word processors.

The number of jobs that require a bachelor's degree has indeed been growing, but more slowly than the number of graduates... The Labor Department's Bureau of Labor Statistics offers a rough estimate of the imbalance in the demand for jobs as opposed to the supply. ... On average, there were 2.6 job seekers for every job opening over the first 41 months of the survey. That ratio would have been even higher, according to the bureau, if the calculation had included the millions of people who stopped looking for work because they did not believe that they could get decent jobs.

So the demand for jobs is considerably greater than the supply, and the supply is not what the reigning theory says it is. Most of the unfilled jobs pay low wages and require relatively little skill, often less than the jobholder has. From the spring of 2003 to the spring of 2004, for example, more than 55 percent of the hiring was at wages of $13.25 an hour or less: hotel and restaurant workers, health care employees, temporary replacements and the like.

That trend is likely to continue. Seven of the 10 occupations expected to grow the fastest from 2002 through 2012, according to the Labor Department, pay less than $13.25 an hour, on average: retail salesclerks, customer service representatives, food service workers, cashiers, janitors, nurse's aides and hospital orderlies.

The $13.25 threshold is important. More than 45 percent of the nation's workers, whatever their skills, earned less than $13.25 an hour in 2004, or $27,600 a year for a full-time worker. That is roughly the income that a family of four must have in many parts of the country to maintain a standard of living minimally above the poverty level. Surely lack of skill and education does not hold down the wages of nearly half the work force.

Something quite different seems to be true: the oversupply of skilled workers is driving people into jobs beneath their skills and driving down the pay of jobs equal to their skills. Both happened to the aircraft mechanics laid off by United.

    Posted by on Saturday, March 25, 2006 at 02:00 PM in Economics, International Trade, Policy, Unemployment | Permalink  TrackBack (1)  Comments (46)


    TrackBack URL for this entry:

    Listed below are links to weblogs that reference What Jobs Should Laid-Off Workers Be Retrained To Do?:

    » The trouble with job retraining from Daniel W. Drezner

    Louis Uchitelle has a must-read excerpt from his forthcoming book The Disposable American: Layoffs and Their Consequences in the Business section of the Sunday New York Times. The article covers the fallout of union militancy at a United repair shop... [Read More]

    Tracked on Sunday, March 26, 2006 at 08:31 PM


    Feed You can follow this conversation by subscribing to the comment feed for this post.