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What To Expect When It Comes To Training For The Pandemic Economy

The Main Question Now Is Whether Policymakers Will Take The Steps - Including Apprenticeship Programs & Expanded Funding For Community Colleges And Technical Schools - That Are Most Likely To Make It Easier

Published Thursday, July 16, 2020
by Barry Eichengreen/
What To Expect When It Comes To Training For The Pandemic Economy

(BERKELEY, CALIFORNIA) – COVID-19 is not going away and other dangerous viruses may be coming.  This means it’s time to face the grim truth: many of the pandemic’s effects on our economies and societies will be persistent, even permanent.

Some of these changes are already evident.

There is less demand for the services of dine-in restaurants, hotels, airlines, brick-and-mortar retail, and large entertainment venues - and fewer employment opportunities in those sectors and facilities.

There is more demand for everything on-line, and for health-care, childcare and home-care services.

Substantial numbers of Workers therefore will have to move and new entrants to the Labor Force will need different sets of skills.

Economists tend to assume that when something is necessary, it will happen - that “the market will take care of it.”

Workers will recognize the need for new skill sets, the argument goes.

Employers who benefit from a workforce possessing those skills will impart them.

This is wishful thinking.

The typical Trainee doesn’t know what the economy will look like in the Summer of 2022 when he or she graduates from a two-year Vocational Program.

He or she doesn’t know what skills will be required of Health Care Professionals in the age of tele-medicine and genomic sequencing.

Moreover, he or she is unsure about where to go to get suitable training.

He or she is financially constrained.

He or she will have heard of for-profit institutions of so-called higher learning that promise to teach students coding skills, but don’t position them to complete their degrees, much less find a job.

For their part, firms have limited capacity to provide on-the-job training, especially in times like these, when they, too, are under financial stress.

And they have limited incentive to do so, because Workers, once trained, are free to leave.

Costs can be shared by paying Trainees less than other Entry Level Workers, but pay in many health care, homecare, and elder care jobs, especially in the United States, is already at rock-bottom levels.

More generally, we know that individuals and firms, left to their own devices, under-invest in human capital.

The contribution of education and training to economic growth, and to society generally, is greater than their acquisition cost.

This positive externality is not something that Workers and firms, deciding on their own, have adequate incentive to consider.

Government, therefore, should develop its own training schemes.

Unfortunately, experience with Public Sector Training is disappointing.

The U.S. Council of Economic Advisers evaluated these schemes shortly before the pandemic and found that they are not very effective at imparting skills and enhancing job prospects.

Generally speaking, the larger the program, the worse the results.

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