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Will Obama's Job Retraining Programs Save The Unemployed?

Economics / Recession 2008 - 2010 Jul 15, 2009 - 02:08 AM GMT

By: Mike_Shedlock

Economics

Best Financial Markets Analysis ArticlePresident Obama is mulling rental options for foreclosed homeowners. Furthermore Obama seeks job training for the unemployed, concedes unemployment is getting worse, says auto jobs are not coming back, yet magically assumes job retraining will save the day.



In short, Obamaitis is setting in. Please consider the following news stories.

Obama Says 'Give It To Me'

On the burden of fixing the economy Obama Says 'Give It To Me'

Conceding unemployment will get worse before it shrinks, President Barack Obama on Tuesday unveiled a $12 billion plan to help community colleges prepare millions of people for a new generation of jobs. Challenging critics, he said he welcomed the task of turning around the economy.

"The hard truth is that some of the jobs that have been lost in the auto industry and elsewhere won't be coming back," Obama said. "They are the casualties of a changing economy."

To that end, he proposed an "American Graduation Initiative" to bolster the two-year community college field that serves millions of students as a launching point for careers or a step toward expanded higher education. The idea is to train people for jobs, such as those expected in the clean energy industry, when the economy turns around and begins to create jobs again instead of shedding them.

Under the plan, competitive grants would be offered to schools to try new programs or expand training and counseling.

The White House says the cost would be $12 billion over 10 years; Obama says it would be paid for by ending wasteful subsidies to banks and private lenders of student loans.

Meanwhile, former Federal Reserve Chairman Alan Greenspan told Republican senators on Tuesday at their private weekly luncheon at the Capitol that the government's $1 trillion deficit was the single biggest hurdle to economic recovery.

Question of the Day

Why is that Greenspan is ignored on the few occasions where he makes any sense, yet people fawn all over him the vast majority of the time when he makes no sense at all?

Obama Mulls Rental Option For Homeowners

Inquiring minds are reading Obama mulls rental option for homeowners.

U.S. officials are weighing a plan to let borrowers who have fallen behind on mortgage payments avoid eviction by renting their home instead, sources familiar with the administration's thinking said on Tuesday.

Under one idea being discussed, delinquent homeowners would surrender ownership of their homes, but would continue to live in the property for several years, the sources told Reuters.

A U.S. Treasury spokeswoman said late on Tuesday that "we are constantly reviewing new ways to help struggling homeowners and stabilize the housing market. This is just one idea among many that has been considered, but no decisions are imminent on the matter."

Officials have been frustrated as red tape and rising interest rates have slowed a housing rescue plan announced in February that was meant to refinance the mortgages of 5 million borrowers and lower monthly payments for 4 million more.

Since one in five homeowners owe more than their property is worth, they have little cushion if they lose their job or face another crisis, said Jay Brinkmann, the chief economist for the Mortgage Bankers Association.

"Foreclosure is a double trigger -- does someone have a job and do they owe more than a home is worth?" Brinkmann asked.

Obama Says New Jobs Will Require Training

BusinessWeek is reporting Obama says new jobs will require greater training.

President Barack Obama says lost auto industry jobs in states such as Michigan will not come back and new jobs will require greater training and post-high school education to achieve a higher skilled work force.

Under Obama's college initiative, schools could qualify for "challenge grants" so they'll have money to try new programs, or expand training and counseling. Dropout rates would be addressed by designing programs to help students who want to earn an associate's degree or transfer to a four-year institution do so.

Money would be spent to renovate outdated facilities or build new ones, and to develop online courses and make them freely available to students and others who want to use them.

The total federal cost is $12 billion over a decade. Of that, $9 billion would go toward challenge grants and addressing dropout rates. Half a billion, or $500 million, would go toward online education. The remaining $2.5 billion would be used to spark $10 billion in renovation and construction nationwide, said James Kvaal, an Obama economic policy adviser.

Federal Job-Training Programs Have Record Of Failure

Some of what Obama says sounds good on paper. However, inquiring minds are not satisfied with what sounds good. It has to feel good as well. The sad reality of the matter is Federal Job-Training Programs Have a Record of Failure.

The above study dates back to 2004, but little has changed except increasing competition for jobs. Here are a few snips.

The history of federally funded job-training programs strongly suggests that [the Workforce Investment Act] WIA will not substantially raise participants' incomes. Similar programs funded under the Job Training Partnership Act (JTPA) of 1982 were found to be largely ineffective.

Three types of JTPA activities were evaluated: classroom training, on-the-job training and job-search assistance, and "other services" tailored to participants on the basis of their age.

Over several decades, Congress has "reformed" federal job-training programs numerous times. Each of these reforms promised to fix federal job-training programs--to no effect.

According to Professor Gordon Lafer at the University of Oregon Labor Education and Research Center, "As successive generations of job training programs fail to produce the hoped-for results, policy makers have cycled through a stock repertoire of procedural fixes that promise to solve the problem."

For WIA, these procedural fixes fall under the mantra of "increased flexibility" and "One-Stop Career Centers." However, none of these fixes are likely to improve the effectiveness of job-training programs. Professor Lafer reasonably concludes that the "lesson of the National JTPA Study is that there is no managerial fix which can create dramatically more effective training programs."

The dismal failure of federal job-training programs should lead Congress to abolish WIA--along with other federal jobs-training programs.

Job Retraining Cannot Possibly Work

It should not take a genius to conclude job training cannot possibly work. There are so many qualified, experienced, out of work individuals that few if anyone would hire a GM welder retrained in JAVA programming for a programming position. Moreover, no one would hire a banker as a welder. Nonetheless, president Obama and colleges are both touting such retraining as a way to get a job.

Bear in mind, I am all in favor of education, but the idea that 40-50 year old assembly line workers, home builders, mortgage brokers, etc etc can be retrained and compete against those with 20 years experience and still out of a job is absurd.

President Obama is bright enough to understand this. Yet, instead of telling the truth, Obama is willing to waste billions of taxpayer dollars spreading false hope.

Under guise of political expediency, Obama simply cannot tell the truth to those out of a job. The sad truth is the situation is hopeless for many if not most of those who are over 40 and recently lost a high paying job.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2009 Mike Shedlock, All Rights Reserved

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