Director of The Earth Institute, Jeffrey Sachs, thinks he has the solution to US unemployment. His ideas are set out in the Financial Times, 11th November, under the title “Obama has lost his way on jobs”. The latter title, pretty much a statement of the obvious, is the only thing right with this article.
Sachs’s first solution to unemployment is increased exports. Well, the dollar depreciation is already doing this to some extent, as he points out. But he wants to boost this with “government support for export financing, for example extended to credit-constrained low-income countries”. So he wants to pay other people to buy US goods, or lend them the money to buy US goods. Pure genius!
This idea has great possibilities. For example, are you looking for work? Then why not lend some employer the money to pay you your wages? There has to be a catch in this idea, but I’m darned if I can spot it.
Sachs’s second brilliant idea is a “massive expansion of education spending and job training”. Well if inadequate training is a bar to full employment, how come the US had more or less full employment between say 2000 and 2005? After all educational standards were not significantly different then to now. Current standards of education and training are clearly not a bar to full employment.
This is not to deny the possibility that educational standards should be higher. Calculating the optimum amount to spend on education is not easy, but if it can be shown that more education pays for itself, then go for it. But this has little to do with the sudden rise in unemployment over the last two years. And it has equally little to do with the question as to how to get those people thrown out of work back into jobs as quick as possible.
Incidentally, when looking at studies into the question as to whether more education pays for itself, be VERY WARY of the large number of totally useless studies around which fail to control for the social background of those studied. I’ll explain that. Many if not a majority of studies into the benefit of university education simply look at the better pay that graduates get, compared to non-graduates and base their calculations on this. Unfortunately, graduates tend to come from stable and/or middle class family backgrounds, and people from this sort of background tend to earn decent salaries EVEN IF THEY DON’T GO TO UNIVERSITY.
So: studies which don’t control for social background are useless. But such studies keep hundreds employed at the taxpayers’ expense. I’d prefer to have people dig holes in the ground and fill them up all day long: at least the fatuousness of the latter is obvious and out in the open (in more than one sense).
Returning from fatuous educational institutions in general to a specific and not entirely un-fatuous educational institution, namely Columbia University, Sachs’s third brainwave for employment creation is investment in low carbon gismos and paraphernalia, plus infrastructure (roads, rail, etc).
Well obviously we need to go for low carbon energy production. But this tends to be high tech: it’s production requires a fairly narrow range of skills, and creating those skills takes time. Doubtless more people should acquire these skills. But this relatively small sector of the economy on its own will have a negligible effect on total unemployment.
As for infrastructure projects, these take years to plan, and cannot be simply turned on and turned off willy nilly. It seems that Sachs has not heard of the phrase “shovel ready”, in which case he should not be writing on this subject.