Beyond relief and stimulus: More jobs and more skills

The U.S. labor market is now quite weak. Job creation in the past few months has slowed dramatically, as the COVID-19 caseload has surged this winter.

On the other hand, assuming Congress passes and President Biden signs the roughly $1.9 trillion American Recovery Plan in March, the job market and broader economy will begin to recover, perhaps quickly.

Still, we will need to clear two major hurdles before the job market returns to its pre-pandemic strength or beyond. One problem involves where and when jobs will be available for unskilled workers who have lost their earlier work; the other involves the skills these workers will need, especially if they want higher-paying jobs. The new economic relief bill should address both concerns.

The labor market will remain weak for some time. Though the national unemployment rate in January was 6.3 percent, it is 8-9 percent in several major states; and a broader measure of underused labor for the U.S. overall (known as U6) now stands at 11 percent. Things are even worse in some key sectors — for instance, 100,000 jobs were lost in retail and leisure/hospitality just last month. The employment numbers for February might be worse.

Workers who have lost jobs in leisure/hospitality tend to be Black or Brown, and those in both sectors generally have little schooling. Jobs there will recover slowly, and many are permanently gone — as businesses will now rely more heavily on online orders and delivery. The downtown restaurants and sandwich shops which have served professional workers there will also cut jobs permanently, as many will keep working at least partly from home. Sales jobs in “brick and mortar” retail will return slowly as well, if ever.

Indeed, permanently displaced workers now total nearly 4 million and rising, with the heaviest concentration among fairly low-wage workers. Their skill sets and work experience will not immediately lead them to new jobs, and they face the prospect of long periods without work or lower wages than before, even if the overall labor market tightens.

For these reasons, a two-pronged approach would help address these job market challenges. First, we could use a targeted job creation strategy — beyond just broad relief and stimulus — for the workers hit hardest by the current recession and in regions with the most job loss. This strategy could include tax credits for firms with large payroll growth or even public sector employment; but the best approach would be to subsidize jobs in both the private and public sectors.

In the Great Recession, the federal government quickly created about 250,000 subsidized jobs, in an effort that enjoyed broad political support and was widely considered successful. Most jobs went to workers with limited skills and work experience; many jobs would not have been created, and many workers would not have been employed, without the subsidies. A temporary effort to subsidize jobs in this manner would help relieve job market pain quickly and efficiently; but we might also use it afterwards to raise employment among the hardest-to-serve populations (like those with criminal records, substance dependence or disabilities).

Second, we need a skill-building strategy. As the economy recovers, more jobs will require some level of digital as well as technical or social skills. Much job growth will be in particular sectors, like health and elder care, advanced manufacturing, information technology or transportation and logistics; these were growing strongly before the pandemic and have already been bouncing back. Most jobseekers will not have the broad or industry-specific skills to do this work without new job training efforts.

And there will be skill deficiencies in other sectors that will limit opportunities for many workers to get good-paying jobs. As Baby Boomers continue to retire, there will be opportunities to replace them for workers with the right skills. And if Congress passes and the president signs an infrastructure bill later this year, many more workers will need construction skills that most now lack. Workers now employed at low wages in “essential” jobs also deserve an opportunity to gain new skills and the better-paying jobs that might soon be available.

To meet the skills challenges, we need both short- and long-term approaches. We should inject several billion dollars quickly into our nation’s existing workforce programs, as we did in the stimulus bill of 2009-2010. Some should also go to community colleges, to directly finance training programs in the sectors where new demand will be immediate and strongest, and to students with the most need.

But we should also build some community college programs more slowly and for the longer term. Research evidence shows that carefully developed training efforts in sector-based partnerships, between training providers and industry, can produce lasting earnings gains for disadvantaged workers. Support services for these workers, including some basic skill remediation as well as help with job placement, child care or transportation are also critical.

As Congress prepares a nearly $2 trillion bill to provide relief and spur recovery, we cannot ignore either the need for targeted job creation or for greater skill-building among displaced and disadvantaged workers. But we now have an unusual opportunity to provide both. Let’s not miss that opportunity.

Harry J. Holzer is LaFarge Professor of Public Policy at Georgetown University and a nonresident senior fellow in Economic Studies at Brookings.