Angst in the Heartland

It’s only when the tide goes out that you find out who’s been swimming naked. - Warren Buffett.

After a meeting I attended recently, I was talking about the recession with an economic development acquaintance who brought up a line of questioning I’ve been hearing increasingly often. “What if jobs never recover? Is it possible that something is occurring on the scale of the industrial revolution, where jobs, as we traditionally view them, will not be created in anywhere near the number to which we have become accustomed? What if our region recovers from the current economic crisis at a new lower point of equilibrium where the number of jobs needed to produce our outputs has been significantly reduced and despite the emergence of new industry sectors will not support full employment?”

These are fair questions, and ones that were also asked several years ago as productivity increases driven by technology began to reduce the labor needed for the manufacturing of durable goods. Amidst the apprehension accompanying the approach of a new millennium, futurists pondered the trends established in the late 20th century and offered visions of a number of alternate realities. Like the multiple dimensions common in science fiction, some futures were characterized by a vision of a nation embarking on a golden age where wealth, created by scientific advances, was sufficient to meet the general needs of our population and individuals were empowered to indulge their interests and self-development. Others painted a much darker future where the wealthy and educated profited immensely from overall expansion of output, but those lacking resources to invest or highly specialized education or skills, joined the traditional poor in a fully stratified society of haves and have-nots.

While these dark visions of a new America, slouching towards Bethlehem, were frightening, it was hard to view these fears as anything more than the paranoid ramblings of a pessimistic few. Despite the major structural shifts occurring in regional economies based on the manufacturing of durable goods, new industries and service jobs were expanding, productivity was increasing, immense wealth was being created, and the slowly rising tide was keeping (almost) all boats afloat.

Suddenly, with the deep global recession from which we have yet to emerge, these fatalistic concerns have taken on a new life. A University of Cincinnati Poll, released today reveals the current depth of pessimism among Ohio residents. How does this impact our workforce development strategies. Over the past several years we have focused our energies on being “demand-driven” in our services. What then, when resources are avaialable but demand is limited? Do we assume that, upon recovery, the historic labor market trends that existed prior to this recession will pick up where they left off? Will our industries which have adopted less labor-intensive methods to survive the downturn return to previous patterns of employment or will Darwinian survival eliminate the weak leaving only those most able to benefit from technology and globalization at the expense of a large segments of the labor force?

These speculations, despite their implications, divert us from what must remain our immediate focus. There are significant resources currently available with which to prepare our existing workforce for an uncertain future. It is especially critical that we use these resources effectively to provide the services and training which will best prepare our population to participate in any future economy. Where do we start? It is certain that we must broaden the focus of our efforts. We must engage our communities, recognize our common needs, develop new alliances and leverage existing assets to operate effectively on a regional scale. While it remains critically important to ensure the skills of the regional workforce are adequate to support the replacment needs of our remaining large industries and the specialized needs of emerging growth sectors, the mechanics required for that effort are not new. It remains substantially the same demand-driven structure with which we have become familiar. However, we must also develop pathways for those who will not gain access to those jobs to enable them also to prosper in a changing environment. These workers will need to be more flexible and entrepreneurial than ever before. Demand in this context will be immediate and fleeting. Their “jobs” will often not resemble the traditional jobs of the past. (Peter Creticos did a nice paper on the inadequacy of our current metaphors to describe work in this current context) Their ability to utilize technology will be increasingly important as companies continue a trend towards parceling out smaller portions of old jobs online, creating opportunities for new specialization in all industrial sectors. Critical thinking, time management, team processes will all become increasingly important as many workers will need to package multiple short-term or part-time engagements, sometimes simultaneously, and work with virtual ad hoc teams of co-workers. New companies will emerge which connect virtual networks of individual workers possessing specialized skill sets to meet short-term needs of other industries. Where we may have limited ourselves, through policy, to a focus on traditional “family-sustaining” jobs with benefits provided by a single employer, we may have to re-think those self-created barriers in the light of a rapidly changing reality.

When the facts change, I change my mind. What do you do, sir? - John Maynard Keynes

Funding Distribution and the Noveau Poor

During my time as state workforce administrator for Ohio, one of the duties that had become a ritual responsibility with each economic downturn was my journey to the Cleveland/Cuyahoga County Workforce Investment Board to explain why their allocations were smaller than those from the prior year. Not that they were alone in questioning the reductions they experienced, I was also receiving letters from the workforce boards of the Appalachian counties in southeastern Ohio asking the same question.

The board members all knew that the allocation formula was based primarily on poverty and unemployment. Hadn’t we provided WIA training that clearly told them about that? The funding reductions seemed to defy logic. After all, weren’t these areas among the poorest in the State? The economies of each had experienced higher than average unemployment for many years. Lack of transportation, industry change, aging infrastructure, inadequate financial support for schools, and multi-generational poverty presented challenges to these areas on a much larger scale than many areas of the state. They questioned the State’s calculations. Surely the numbers must be wrong. Things had not gotten better, if anything they had gotten worse. Reducing their funding seemed to defy logic.

Each time, I would dutifully explain how funding formulas worked. That poverty was based on decennial census data and would remain unchanged until the next census, effectively taking that factor out of year-to-year funding variations. What remained as the factor driving the calculations was unemployment data. They would listen quietly as I explained the relative nature of the calculations. That the thresholds for ASU unemployment and excess unemployment were fixed and that as the economy declined and more areas experienced employment loss, those areas with historically high unemployment that always exceeded the established thresholds were being joined in that group by additional areas that now qualified due to increased unemployment. They sighed as I explained that without additional resources being added, the same amount of funding was being shared by more areas who met the qualifications for excess and ASU unemployment. Eyes glazed over as I explained that excess unemployment had little impact because it counted only those unemployed in excess of 4.5% of the labor force but ASU unemployment was the real culprit, because it counted all those residing in such an area, giving heavy impact to the densely populated counties surrounding the metro areas. Ultimately,they accepted that the calculations were correct, but never that they were right. It was difficult to accept that the poorest areas of the state with the highest unemployment would experience reductions while suburban areas, with comparably healthier economies were receiving increases. They would shrug and leave the meetings further convinced in the illogic of government regulation and the fundamental unfairness of it all.

While the ability to comprehend the complex and arcane science of government had always been a source of some ego satisfaction for me, I never felt good leaving those meetings. Like a professional spin-doctor, I left feeling empty, aware that I had successfully defended a policy that I could not rationalize in my own mind.

Since my retirement, those duties now fall to someone else. But, as I read about the rollout of the new decennial census, an uneasy thought crossed my mind. Could we see something similar occurring when poverty is recalibrated among the areas of the state? Could the current recession set a new departure point for poverty based upon the impacts of large-scale layoffs and income loss that will remain in place for the coming decade skewing the distribution of resources away from the areas of historical poverty towards areas more likely to recover in the coming years? I’m not sure. But in any event, it will be someone else’s charge to explain that one.