Saturday, January 8, 2011


I enjoy Prof Rajan's ideas regarding the understanding of the economy and unlike so many others he is not the polemical position promoter we see in those who spend their lives telling others how to do things they have not the slightest clue about in reality. However in a recent post by Rajan I take some considerable exception.

He states:

The lesson for policymakers is clear: instead of constantly trying to boost spending and potentially creating problems for the future, a more sustainable way to improve job growth is to facilitate the “re-skilling” of the unemployed, especially those who were in construction-related jobs. Eventually, better labor-force supply will create healthy and more sustainable demand.

The problem is that I know a great many construction types, I grew up in a family of electricians, plumbers, carpenters, I worked as an electrician and our oldest is one as was my brother.  The mere idea of reskilling these people in general is impossible. For example, if you take a union crafts person, they have developed a mindset of the type that they are owed more than anyone else and they owe no one else anything. I have seen this close up again and again, one need just look at the trade unions in New York, they in my opinion make the Mafia look like the Elks Lodge at time. What jobs would you send these people to, and try and find an electrician, they are more scarce than hen's teeth, no unemployment there.

Thus the point he seems to be making has weak foundations. First, for craft union types they are not re-trainable, for independent contractor types, if they are good and self motivated they still have more work than they can handle, for those with no work, they most likely could not be hired no matter what, they just will not perform. Thus the three categories; (i) union types, they fell entitled and are arrogant, (ii) self employed, they have no need, (iii) unemployed, often of their own making.

In addition there is the simple question, train them for what? You cannot say train them and the jobs will come. There must be a need, a demand, and then you fill it. Train them as an engineer, well Prof Rajan is a grad of IIT, the most highly respected engineer school in the world, and it takes a fraction of a percent of the graduates. If these folks could be so trained it would have happened decades ago, it is too late.

This sector, the construction types, are either self sustainable or potentially lost until the economy is willing to use the marginal worker.