Sunday, March 26, 2006

Another Problem Markets Can't Solve!

Retraining Laid-Off Workers, but for What? - New York 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. Knopf will publish the book on Tuesday.

“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. Summoned by their union, they had gathered in the carpeted conference room at the Days Inn next to Indianapolis International Airport, not far from United's giant maintenance center, a building so big that 12 airliners could be overhauled in it simultaneously. That no longer happened. Most of the repair bays were empty. The airline was cutting back operations, and the 60 mechanics at the meeting were in the fourth group to be let go.

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. Their hope was that if they cooperated, United would ease up on the layoffs and revive operations at, arguably, one of the most efficient, high-tech maintenance centers in the world. 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." In deciding as a nation to try to rejuvenate them as workers, we put in place a system, however unrealistic, that implicitly acknowledged layoffs as a legitimate practice.

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. Education and training create the jobs, according to this way of thinking. Or, put another way, an appropriate job at decent pay materializes for every trained or educated worker.

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, well, 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.

That was the myth. It evaporated in practice for the aircraft mechanics, whose hourly pay ranged up to $31. Not enough job openings exist at $31 an hour — or at $16 an hour, for that matter — to meet the demand for them. Jobs don't just materialize at cost-conscious companies to absorb all the qualified people who want them.

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, or are hiring relatively few and can control the wage, chipping away at it.

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… ”

The real myth, the one that's killing our hopes and dreams, is the myth that markets, and that's markets alone, solve all economic problems and every social problem with a major economic component.

The invisible hand of the market has been credited for the subtitles under the ‘American Dream,’ before that dream had a name, before there was an America to dream about.

When we wrote our constitution we left the words slave and slavery out, counted on the market to solve the problems of all those other persons it terated as three fifths of a person for purposes of representation.

Nearly a century after our civil war we were still waiting for the market to solve segregation. We're still waiting for the market to enable Pulitzer prize winner Clarence Page to have the certainty of being able to catch a taxicab near the Chicago Tribune's headquarters in downtown Chicago.

Markets failed to enable auto workers the ability to afford the cars they made. Nor did markets solve the post World War Two housing shortage, create the suburbs as we know them, or guarantee their racial composition.

They won't solve their racial problems either. Not anymore than markets get black people test drives at auto dealerships.

Deliberate systematic government actions created all white suburbs in the forties and fifties. Policy and politics created the inner city ghettoes. Banking regulations made most urban blight inevitable, simply by failing to mandate equal access to loans for people in equal financial circumstances.

Peoples livelihoods are threatened by National policies far more than global markets, because there are no truly free markets. There are certainly no markets where everyone is regulated by the same rules.!


http://www.nytimes.com/2006/03/26/business/yourmoney/26lou.html?pagewanted=all
con·cept: Another Problem Markets Can't Solve!