Two areas of emphasis should guide the policy discussion over preparation: skill development and redevelopment using community colleges, and enhanced training and skill development within firms. Public-policy changes can advance both.
Hubbard believes that a central policy challenge is to permit the creative part of creative destruction while mitigating the effects of destruction. His essay includes a reasonable set of proposals aimed at these goals.
Great link Arnold.
1. Props to Hubbard: approving cites Rodney Dangerfield in Back To School. The movie is underrated.
2. Captures a key problem I haven’t much thought about: we think of ourselves as “producers.” Instead….
“To conceive of economic actors most fundamentally through their roles as consumers … is to illuminate the ways in which a thriving economy can improve living standards.”
Yes. If you first think of yourself as a “Judge” (consumer) you probably like that, and you may accept the price that you are judged (as a worker/producer).
Hubbard decries Oren Cass where the individual first thinks of himself as a worker. “Such an approach casts jobs, not consumption, as the star.”
3. Good alternative to UBI.
4. Quibble:
Hubbard proposes “a supply-side program of federal grants to provide new funding to community colleges, contingent on institutional measures of degree-completion rates and labor-market outcomes.”
a. High schools in the past 12 years have been judged on degree-completion. Our schools haven’t improved (no change to NAEP scores for 17 year olds) but all kinds of slippery new ways to lower the bar have emerged. Bad idea for CCs.
b. Measuring CCs on labor-market outcomes is more promising. In theory. But Arne Duncan tried to do that with Ed Schools under Obama. They resoundingly defeated him.
*
Why prop up incumbents CCs with contingent grants?
Why not work to build an actual Consumer-Driven market?
Re 4a:
If only 50% of young people can successfully complete a rigorous college prep program, but just about every high school student is required to take one, either 50% of students won’t graduate or the schools will find ways to graduate them anyway. Not surprisingly, they generally choose the latter.
We ask high schools to do an impossible job. We should not be surprised that they “cheat”.
The kids aren’t cheating.
The adults are. Kids legitimately hitting the lowered-to-near-zero bar offered to them.
https://fordhaminstitute.org/national/commentary/time-press-pause-credit-recovery
“To get back to an economy where low-skilled workers can earn the sort of incomes, relative to highly-educated workers, that they could earn in 1965, you would have to squeeze an awful lot of toothpaste back into the tube: computers, the shift from goods to services, the emergence of China and India, and the decline of the traditional family. You could send home 100 percent of the illegal immigrants and I think at best a tiny amount of toothpaste gets back into the tube.”
-ASK circa 2016
I’m thinking that none of the toothpaste makes it back into the tube from any of the policy suggestions from Hubbard. If only life was as easy as additional community college funding.
I think you (and ASK) are right on the money here.
One thing that strikes me as absent from PSST (which dramatically changed my lens on life) is a discussion of the cognitive psychology literature on expertise. In fungible industries, it will take a lot more than some brief re-training to reach similar levels of productivity in a new industry. There is pretty scant support for generic skills that can quickly transfer at high levels.
I personally budget with the expectation that the standard of living my family presently enjoys will not survive global competition for my working career. I don’t think it has much to do with immigration (legal or otherwise).
“I personally budget with the expectation that the standard of living my family presently enjoys will not survive global competition for my working career.”
FWIW (not much) – we have always been very conservative with our spending, investing the excess in real estate and large/medium cap ETFs. No regrets so far (keeping our fingers crossed). So, I’m definitely with you and share your concerns.
However, I’m highly skeptical of the average person’s ability and willingness to save for a rainy day. The personal savings rate in the U.S. is abysmal.
If it was easy and fast to learn how to do something else, a lot of other people could learn how to do it too, including those abroad, and it won’t pay very much. If the retooling takes a long time and is difficult, it’s not a good answer. Internships solve an important and widespread problem with education, signaling, and risks with hiring, but you almost never see older interns.
If I was in a career pickle, I would be looking to get re-trained in services that can only be provided locally (e.g. HVAC, plumbing, auto mechanics, fracking, truck driving, BLM activism, etc.). I’m fairly certain that the community college system is already providing these offerings at reasonable prices.
Can everyone work in HVAC? Won’t wages collapse if we all become HVAC technicians? Based on a little internet research, it doesn’t seem like HVAC people earn a whole lot. Not enough to buy a house in a decent school district.
I think the main problem workers face is rising costs for things they need. That reduces real wages. Most respond by trying to decrease supply and increase demand since that worked for the people providing the things they can no longer afford.
In case you missed it, one of the main points of the article was in trying to find meaningful employment opportunities for those that don’t have marketable skills. The policy suggestion was to invest yet more funds in community colleges. I’m pushing back on this by saying that these training programs are already available at reasonable prices from these institutions. You personally may not like the prospects of becoming an HVAC technician, but the article isn’t about you – it’s about those without skills.
And, of course if everyone became [insert your preferred occupation here], it wouldn’t scale. I obviously didn’t argue that, so not sure where you are headed.
Lastly, an HVAC technician would do just fine here in North Texas. The home prices are still quite reasonable for the middle class with reasonable commutes and neighborhoods. You seem to like to whine endlessly about the home prices in your metro area (presumed to be NY/DC/SF, etc). Maybe it’s time to stop whining and actually do something about it? And, no your silly HOA restrictions will never work.
It couldn’t scale as a technique for everyone, and it’s heretical to say this on a libertarian blog, but one form of insurance could be to always be applying for federal government jobs. It can take a year – sometimes more – to get a bite and make it through the process, and one can always back out at any time. If one was sufficiently diligent, one could always have at least one contingency plan ready to go at any moment, should their current job fall through.
Always having a “in case of emergency, break glass” job like that could become something of a cultural institution, especially if subsidized on both the supply and demand side, and even made a requirement for unemployment insurance or other welfare benefits. That way, people would be retooling themselves all the time: night school, “youtube academy” at a desk job, etc.
“It couldn’t scale as a technique for everyone”
Can you name an occupation that scales for everyone outside of say homemaker?
“always be applying for federal government jobs”
Why stop there? Plenty of decent government jobs at the state and local level as well and many with obscene pension benefits. Total ripoff for the taxpayer, but definitely works for an unemployed individual looking to improve his/her lot.
This article discusses a very important problem. I like that. However, all of it’s answers involve greater government. Perhaps a better starting point would be to look at government actions that make the problem worse and then get rid of them. An example is occupational licensing. Do barbers really need 3000 hours of instruction and a license to cut hair? During the shut down, my daughter watched a couple of Utube videos then cut mine. She did a pretty good job. With a little practice, she could do just as good a job as the licensed barber that normally cuts my hair could. This won’t work for all professions, but it should for many.
“Let them eat community college certificates”
In our new service economy no less.
When haven’t we heard that before and when has it ever worked?
“Among the training programs with available data and rigorous impact studies, the evidence shows that most government training programs are not effective at securing higher paying jobs for participants. “ – https://www.whitehouse.gov/wp-content/uploads/2019/06/Government-Employment-and-Training-Programs.pdf
Why would a Kling/Hubbard industrial policy of hiding abject submission to Chinese global economic five year plans (AKA “creative destruction” ) by funding more government jobs in the tax exempt education industry for the victims of offshoring to beg new credentials from work any better than the last dozen times it has been tried.
Cutting taxes on employment, expanding the tax base to cover tax exempt industries and transactions, and making the USA a more attractive and competitive place to do business would be the preferred revenue neutral alternative.
Rather than accepting the destruction warmed over industrial surrender policy with a side of bureaucracy, how about creative creation? Andrew Yang’s VAT-funded UBI would be much more pro-growth and pro-freedom. A UBI would let people make their own creative choices like starting a business if they wanted rather than be forced into government program servitude.
No more submission, no more servitude. Make people free to choose.
Excellent – free welfare for everyone via UBI! And, it magically pays for itself with a VAT! Let’s go for it! What could possibly go wrong?
Would you like to start with UBI first or go with your previous idea for more low skilled immigration? I’m thinking we go completely bonkers and do both at the same time!
“ We should replace the ragbag of specific welfare programs with a single comprehensive program of income supplements in cash — a negative income tax. It would provide an assured minimum to all persons in need, regardless of the reasons for their need…A negative income tax provides comprehensive reform which would do more efficiently and humanely what our present welfare system does so inefficiently and inhumanely.”
-Milton Friedman
Even the best golfers will still sometimes shank a shot. This would be an example of one of those shanks.
Friedman very specifically said it was a package deal, get rid of all welfare programs and replace them with a negative income tax. I also suspect he would support replacing the many U.S. taxes with a VAT. What he would NOT support is adding a UBI and VAT to the present system.
If you say so but then he never got it accomplished either.
The USA tax and social safety net can be made less destructive than they are today. The Yang plan would eliminate eligibility for all the welfare programs for those who take the UBI. Unfortunately it would also add another horribly destructive tax on carbon, but, perhaps a single carbon tax could eliminate all the fuel taxes and the mindless subsidies for inefficient and environmentally damaging wind and solar.
I’m not sure what Friedman would think of the Yang plan as a package deal, but I would hope he wouldn’t oppose a marginal net improvement in favor of some notion of the ideal. FWIW, here is the short description of the plan from the Yang campaign site:
“The means to pay for the basic income will come from four sources:
1. Current spending: We currently spend between $500 and $600 billion a year on welfare programs, food stamps, disability and the like. This reduces the cost of the Freedom Dividend because people already receiving benefits would have a choice between keeping their current benefits and the $1,000, and would not receive both.
Additionally, we currently spend over 1 trillion dollars on health care, incarceration, homelessness services and the like. We would save $100 – 200+ billion as people would be able to take better care of themselves and avoid the emergency room, jail, and the street and would generally be more functional. The Freedom Dividend would pay for itself by helping people avoid our institutions, which is when our costs shoot up. Some studies have shown that $1 to a poor parent will result in as much as $7 in cost-savings and economic growth.
2. A VAT: Our economy is now incredibly vast at $19 trillion, up $4 trillion in the last 10 years alone. A VAT at half the European level would generate $800 billion in new revenue. A VAT will become more and more important as technology improves because you cannot collect income tax from robots or software.
3. New revenue: Putting money into the hands of American consumers would grow the economy. The Roosevelt Institute projected that the economy will grow by approximately $2.5 trillion and create 4.6 million new jobs. This would generate approximately $800 – 900 billion in new revenue from economic growth.
4. Taxes on top earners and pollution: By removing the Social Security cap, implementing a financial transactions tax, and ending the favorable tax treatment for capital gains/carried interest, we can decrease financial speculation while also funding the Freedom Dividend. We can add to that a carbon fee that will be partially dedicated to funding the Freedom Dividend, making up the remaining balance required to cover the cost of this program.”
I am sure Friedman “wouldn’t oppose a marginal net improvement in favor of some notion of the ideal.” However, I am fairly sure he would also feel that a bunch of new taxes on top of what we already have would not be a net improvement. Especially since they can all be raised in the future and any old taxes that are abolished can be brought back.
So he might support a constitutional amendment that was a package deal, a UBI at some level, no other welfare programs, a VAT but not income, financial transactions, etc. taxes.
Reality check: unless you’re living in a libertarian utopia, the UBI would never be a replacement to the various welfare programs that exist. It would always be a supplement.
People will inevitably make poor decisions with their UBI windfall, particularly at the low end. And, no one is willing to deal with the visceral images of people starving, remaining homeless or dying from those poor decisions. Thus, the populace will always demand some backstop against having to see those visceral images.
Until you’ve solved the personal accountability problem (which will never happen, at least not here in the U.S.), you’re not going to get your stand-alone UBI. So, open up your wallet and prepare to watch it get emptied.
I agree we’re not going to get a standalone UBI. I was just saying that Friedman did not support a UBI plus. For him, a major reason to support a UBI was to get rid of all the pluses–and to stop any new ones.
@Roger Sweeny
My rant was directed at my favorite poetry buff from Chile and not you. Sorry that I didn’t make that clearer and thanks for your reply.
Reply to Hans re “reality check”
Yes undoubtedly some people would make mistakes. Hopefully they will learn from them.
The alternative is the Biden campaign platform for the government to throw around hundreds of billions and pick winners and losers. From the Biden web site:
“BUY AMERICAN. Make “Buy American” Real and Make a $400 billion Procurement Investment that together with the Biden clean energy and infrastructure plan will power new demand for American products, materials, and services and ensure that they are shipped on U.S.-flagged cargo carriers.
MAKE IT IN AMERICA. Retool and Revitalize American Manufacturers, with a particular focus on smaller manufacturers and those owned by women and people of color, through specific incentives, additional resources, and new financing tools.
INNOVATE IN AMERICA. Make a New $300 Billion Investment in Research and Development (R&D) and Breakthrough Technologies — from electric vehicle technology to lightweight materials to 5G and artificial intelligence — to unleash high-quality job creation in high-value manufacturing and technology.
INVEST IN ALL OF AMERICA. Ensure Investments Reach All of America so we draw on the full talents and invest in the potential of all our communities and workers. America is not at full strength when investments, venture capital, educational opportunities and paths to good jobs are limited by race, zip code, gender, gender identity, sexual orientation, disability, religion or national origin. Biden will ensure that the major public investments in his plan — procurement, R&D, infrastructure, training, and education — reach all Americans across all states and regions, including urban and rural communities, with historic investments in communities of color and an emphasis on small businesses.
STAND UP FOR AMERICA. Pursue a Pro-American Worker Tax and Trade Strategy to fix the harmful policies of the Trump Administration and give our manufacturers and workers the fair shot they need to compete for jobs and market share.
SUPPLY AMERICA. Bring Back Critical Supply Chains to America so we aren’t dependent on China or any other country for the production of critical goods in a crisis.”
The cost of mistakes will be much greater.
According to McKinsey & Co., 45 percent of jobs today will be gone within 20 years because of automation.
I would hope when the Biden package goes to Congress, somebody is able offer a superior, pro-growth, pro-freedom alternative other than massive subsidies to community colleges. A UBI that is paid for and eliminates multiple redundant programs, might be such an alternative.