*THE UNIVERSITY OF CHICAGOGraduateschoolof BusinessSelected Papers. No - PDF document

*THE UNIVERSITY OF CHICAGOGraduateschoolof BusinessSelected Papers. No. 4Retrainingthe UnemployedBY ARNOLD R. WEBER ARNOLD R. WEBER of Indus-trial Relations and Director of the Doctoral Pro-gram at the Graduate School of Business of theUniversity of Chicago. He received his Ph.D. fromthe Massachusetts Institute of Technology andserved as a faculty member at that school beforecoming to the University of Chicago.Mr. Weber is a member of the Labor Panel of theAmerican Arbitration Association and of the Ad-visory Group on Automation of the National Insti-tute of Labor Education. He was Director of theMcKinsey Foundation Seminar on Collective Bar-gaining in 1960, and is a consultant to the ArmourAutomation Fund Committee. He is the author ofvarious articles on collective bargaining, tradeunionism, and adjustments to technological change.Recently, Mr. Weber has been administering a re-training program for displaced workers in FortWorth, Texas, under the auspices of the ArmourAutomation Committee. This essay grows out ofthe Fort Worth experience and other research he isconducting in the general area of retraining. RetrainingtheUnemployedIn the next few years that time worn axiomabout teaching old dogs new tricks will besubjected to one of its severest tests. With thepassage of the Manpower Development andTraining Act of 1962, the federal governmenthas made a major commitment to the task ofretraining workers to meet the labor force re-quirements of a rapidly changing economy.The Manpower Act augments previous gov-ernment programs in the area of retrainingand presages additional ventures of a similarnature.This burgeoning interest in retraining re-flects a serious concern with the persistence ofduring the prosperity phase of the businesscycle. In only one month during the last fiveyears has the seasonally adjusted employmentrate fallen below 5 per cent of the labor force:since July, 1960, the level of joblessness hasThe picture is equally uninspiring whenattention is focused on the long term or “hardcore” unemployment. Twenty-one months aft- 2er the trough of the 1960-61 recession hadbeen reached, over 900,000 workers were with-out jobs for fifteen weeks or more. Over one-half of these had been idle for at least twenty-seven weeks. In the first nine months of 1962,the long-term unemployed comprised between24 per cent and 33 per cent of all jobless work-ers. Moreover, in recent years each completeturn of the business cycle has been associatedwith an increase in hard core unemployment.A substantial part of this increase in per-sistent unemployment is attributed to techno-jobs and has had a particularly heavy impacton unskilled and semi-skilled workers. Com-country.Paradoxically, the same forces that have lefta residue of long term unemployment havemoving to new areas often find that the localber of workers qualified in the skills necessarysee a sharp upgrading of the skill requirementsof the nation’s labor force in the next tentions in many occupations.Against this background of present and fu-ture labor shortages in the midst of chronic un-employment, retraining has been advocated as opment On-the-jobintensive Additional federal expenditures for retrain-ing are likely to be forthcoming in the imme-diate future. As a quid pro quo for organizedlabor’s support of the Kennedy administra-tion’s program, the Trade Expansion Act of1962 includes a provision for retraining work- ers who are “adversely affected” by tariff reduc- tions. Again, the cost of instruction and a weekly subsistence allowance for the retrainees will be borne by the government. One esti- mate indicates that as many as 100,000 workers may be eligible for retraining under this pro-gram in the next three years.The Scope of Altogether, at least a half billion dollars willbe expended for public retraining in the nextthree years. While some officials view this de-velopment as a triumph of legislative wisdom,other observers are skeptical, if not downrightcritical, of the entire undertaking. As a generaltext, these criticisms question the investment ofsuch extensive resources in an economic weap-on of unproven effectiveness.Retraining, it is frequently contended, can-not create jobs-unless you count the expectedboom in the employment of specialists in voca-tional education. Essentially, this judgment iscorrect; retraining programs are not likely toincrease the total number of job opportunitiesin the economy. Large scale, persistent unem-ployment ultimately can only be dissipated by maintaining the appropriate levels of aggregate demand and production, a goal best attainedthrough government monetary and fiscal pol-icies. Indeed, the experience with retraining inSweden and France indicates that training ac-tivities are most effective in an economic cli-mate of full employment.The possible application of governmentsponsored programs is further limited by thescope of private efforts in this area. Powerful considerations of self-interest have driven man- agement, unions, and individual workers to facilities. supplementary mentdefipoint, 9Committee. Following the shutdown of itsplant in Oklahoma City, the Armour com-pany, in cooperation with two unions, offered431 of the displaced workers the opportunityto participate in a special retraining project.tion.Other cases have reinforced the skepticismbred by this incident. In 1960, General Elec-tric established a “job opportunity” planwhich, among other things, offered employeesfacing permanent layoff retraining with al-the termsof the plan and nearly all had elected to takethe separation allowance rather than the re-training.Under what circumstances, short of com-pulsion, are unemployed workers likely totake part in training activities? Doubtless, psy-chological variables are important, but theresible, though, to enumerate certain objectiveconsiderations that appear to promote par-ticipation in training programs.First, jobless workers are likely to enter re-training when the personal costs of the in-struction are minimized. These costs consistthe program perse, and any foregone income during the pe-riod of training. In the Armour case, the Au-tomation Committee paid the first $60 of thecost of the training course, plus one-half ofdid not exceed $150. In some instances, thismeant that the unemployed worker had to as-The GE experience illustrates the other sideof the concept of cost. Here, workers werethe sacrifice of current income by workers definitealtruistic. endorsementrecruit 12appraisal of the characteristics of the longterm unemployed. Approximately 40 per centof those unemployed for fifteen weeks or moreare over 45 years of age; 38 per cent had lastworked as laborers or semi-skilled operatives;and an estimated 75 per cent had not finishedhigh school. The relative importance of older,less skilled, and poorly educated workersamong the ranks of the chronic unemployeddoes not encourage optimism about the suc-cess of retraining.The results of recent training programsseem to bear out this gloomy view. In theArmour case, only 60 out of 170 applicantsprojects in Rhode Island and West Virginiaindicate that about half of the workers seek-Bridgeport, Connecticut, the large majority ofcandidates for a state sponsored course in ma-chine shop skills were disqualified in the ini-tial screening.In view of the characteristics of the longterm unemployed and of the maximum dura-tion for which subsistence benefits can bepaid, training for highly technical occupationsis not a realistic goal. This does not mean,high disqualification rate noted above reflectsnot so much the debilities of the applicants asa narrow concept of retraining and excessive-ly restrictive standards of selection.The Armour experience is a case in point.Here, the Oklahoma Employment Service in-ferred that over 100 persons who had beenusefully employed by the company for up totwenty years could not benefit from vocationalinstruction and advised them to seek work aslaborers. Further doubts about the standardsfor qualification are posed by specification ofprac- necticutinitial 14On one occasion, duPont sought to retraindisplaced rayon workers for complex jobs aschemical operators at a new dam-on-producingplant. Many of the workers were over fortyand an aptitude test revealed that a majoritycould not add a series of two-digit numbers.To remedy this deficiency, the company insti-tuted a special educational course to bring theemployees up to a minimal competence indacronplant. The entire program took less than ayear, and management reported that nearlyall the employees successfully qualified forjobs in the new unit. Experience duringWorld War II also revealed that many personsWhether or not many unemployed workerscan be taught new skills will depend to a sig-tional training and the standards for accept-ance adopted by the program administrators.er’s general capacity for learning rather thandecimals. This does not imply that retrainingmiddle aged a grammar school education. Thehowever, should be broadenough that instruction in the basic compo-nents of literacy necessary for the acquisitionof particular vocational skills comes withinthe scope of retraining. Unless this is done,more “successful” programs may be achievedat the expense of those jobless workers whoneed help the most.The Impact of Retraining ProgramsThe ultimate criticism of government re-training activities focuses on the aggregateimpact of the program. Actually, two pointsare at issue. First, even if it is possible to give 15jobless workers a new vocational competence,the retrainees may be equipped with super-ficial or ephemeral skills so they will revert todeniably, this danger exists and it is mag-nified by the pressure to relate retraining toavailable job opportunities. Thus, retraineesin Carbondale, Illinois are learning to mixadhesives, run coating machines and carry outof cellophane tape. In the event that the firmis unequal to the adversities of competitionand is forced to lay off employees, it is un-likely that the displaced workers will find awide market for these skills. Similarly, anotherARA project involves training unskilled farmequipment used in fruit and vegetable farm-to prepare workers for the demands of auto-mation.The fear that government sponsored re-training will become an ineffectual palliativeshould not obscure its potential contributions.For the ex-coal miner in Illinois and the fieldhand in New Jersey the training in any in-dustrial occupation or the rudiments of farmmachinery is a notable achievement. Throughof the complexities-and opportunities-ofthese extreme cases, many of the ARA projectshave given attention to skills that have a goodchance of surviving the next wave of economicchange-machine tool operation, typing andstenography, electronics and automotive re-pair.The second element of concern is the nu-merical adequacy of the federal program. Un-timistically expected that 570,000 workers willsons will receive instruction as part of ARA 16projects. Together, these programs will ac-commodate only a limited proportion of thelarge number of workers who are likely tothe foreseeable future.An obvious response to this criticism is toincrease substantially the appropriations allo-cated to retraining. The debate preceding thepassage of the Manpower Act makes it equallyunderwrite a massive retraining effort. ThisARA training programsthat have already been completed. The av-erage cost for each trainee was $559, includingThese projects provided training benefits fora maximum duration of only sixteen weekscompared to the fifty-two week limit permittedby the Manpower Act.In assessing the probable impact of the newlegislation, the total number of workers af-fected should not be the only yardstick. Thelong term unemployed does not consist of atune. Some workers have the vocational back-structure of employment opportunities andautonomously move out of the ranks of thechronic unemployed. Others suffer from phys-effect if it is directed to the group of joblessperience necessary to strike out on their own.By concentrating on this component of thearithmetic totals would indicate.The federal retraining program got underway in earnest in September, 1962 when the first referrals were made under the terms ofthe Manpower Act. At this point, there canthis approach will be acure-all for the problem of unemployment.Retraining is a limited remedy that worksbest as part of a general effort to promote eco-kets. Moreover, many obstacles and precon-ceptions must be overcome before even themodest potential of retraining can be realized.It is apparent that in the next three years, theretrainees will not be the only ones to learnsomething from this new departure in na-tional economic policy.GRADUATE SCHOOL OF BUSINESSOFFICERS OF ADMINISTRATIONGEORGE P. SHULTZDeanWALTER D. FACKLERAssociate DeanROBERT L. FARWELLAssociate Dean for PlanningROBERT K. BURNSAssociate Dean and Director ofThe Industrial Relations CenterHAROLD R. METCALFDean of StudentsDAVID M. G. HUNTINGTONDirector of Placement