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Training: A Targeted Policy Proposal

Phillip Swagel Kenneth Troske

Preliminary Draft: April 25, 20111

This paper proposes a new training program meant to address some of the labor market impacts of the Great Recession. We see this program as filling an unmet need and as a constructive role for government action and an appropriate use of public resources. Our proposal is motivated by the idea that training helps to improve skills and incomes, but it works better for some people than for others. A key focus is on improving the human capital of people with belowbasic skills but evidence of motivation, including substantial labor force attachment. We look to help the reliable but unskilled janitor or garage attendant gain the skills to become, say, an MRI technician. There are already considerable incentives for this to happen—after all, an MRI technician earns more than a janitor. But there are also substantial obstacles, notably financial ones, and we look to help overcome those.

This proposal will not help everyone dislocated in the recession. Workers with higher skills are more likely to find new jobs on their own but at a substantial earnings loss, especially in the case of workers who had considerable seniority at their previous employer. This is an important phenomenon given that the recession hit especially hard at manufacturing and at construction trades where there is likely to be firmand industryspecific knowledge that would be lost for workers switching occupations or industries. On the other hand, our proposal would be helpful for unskilled construction workers. This proposal is thus but one piece of a policy response to the recession.

1 Kenneth Troske is the William B. Sturgill Professor of Economics at the University of Kentucky; ktroske@uky.edu. Phillip Swagel is professor of international economic policy at the University of Maryland School of Public Policy; pswagel@umd.edu.

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