The long-running Selected Paper Series features notable work by University of Chicago faculty. This essay is an edited excerpt: the original, “Retraining the Unemployed,” was written while Weber was administering a retraining program for displaced workers in Fort Worth, Texas, under the auspices of the Armour Automation Committee. It was published in the early 1960s.
In the next few years that time-worn axiom about teaching old dogs new tricks will be subjected to one of its severest tests. With the passage of the Manpower Development and Training Act of 1962, the federal government has made a major commitment to the task of retraining workers to meet the labor-force requirements of a rapidly changing economy. The Manpower Act augments previous government programs in the area of retraining and presages additional ventures of a similar nature.
This burgeoning interest in retraining reflects a serious concern with the persistence of relatively high levels of unemployment, even during the prosperity phase of the business cycle. In only one month during the last five years has the seasonally adjusted unemployment rate fallen below 5 percent of the labor force: since July 1960, the level of joblessness has been just over 5 percent or more.
The picture is equally uninspiring when attention is focused on long-term or “hard core” unemployment. Twenty-one months after the trough of the 1960–61 recession had been reached, over 900,000 workers were without jobs for 15 weeks or more. Over one-half of these had been idle for at least 27 weeks. In the first nine months of 1962, the long-term unemployed comprised between 24 percent and 33 percent of all jobless workers.
A substantial part of this increase in persistent unemployment is attributed to technological change and what economists decorously refer to as structural factors. New technology has rendered obsolete many traditional jobs and has had a particularly heavy impact on unskilled and semi-skilled workers. Competition from abroad and the development of new products have undermined the market position of established domestic industries such as coal and textiles; and geographical shifts in population have induced the dispersion of manufacturing units from the historical industrial centers to other parts of the country.
Paradoxically, the same forces that have left a residue of long-term unemployment have also created pockets of labor shortage. Firms moving to new areas often find that the local labor market cannot provide a sufficient number of workers qualified in the skills necessary for efficient operations. Unfilled openings exist in such service trades as automotive repair. The Department of Labor has cited unsatisfied demands for workers in gyrodynamics, data telemetry, human factor science, and other exotic callings. In addition, experts foresee a sharp upgrading of the skill requirements of the nation’s labor force in the next ten years with resultant shortages of varying durations in many occupations.
The enactment of the Manpower Development Bill in March 1962 signaled the most ambitious government venture in the field of retraining. Although Congress was clearly responding to the unhappy picture of the current unemployment situation, the act embraces a broader vision of comprehensive manpower planning. Under its terms, the secretary of labor is directed to study the consequences for the labor force of immediate and long-term economic change.
Federal agencies are authorized to initiate a variety of occupational training programs. Unemployed workers receive priority in referral, but other persons with a need for the acquisition of new skills are also eligible. On-the-job training, as well as formal classroom instruction, is encouraged. Subsistence benefits can be paid for a maximum of 52 weeks; the amount of the allowance again is related to the level of state unemployment benefits.
Within this framework, the retrainee will be given the close attention usually reserved for bonus rookies in spring training camp. He will be tested and counseled by agencies of the Department of Labor to determine his qualifications and aptitudes. Once accepted for training, he will be referred to programs set up or approved by the Department of Health, Education, and Welfare in conjunction with the vocational education unit of his state. Upon completion of the program, intensive efforts will be made to place the trainee in a suitable job.
Altogether, at least a half billion dollars will be expended for public retraining in the next three years. While some officials view this development as a triumph of legislative wisdom, other observers are skeptical, if not downright critical, of the entire undertaking. As a general text, these criticisms question the investment of such extensive resources in an economic weapon of unproven effectiveness.
Retraining, it is frequently contended, cannot create jobs—unless you count the expected boom in the employment of specialists in vocational education. Essentially, this judgment is correct; retraining programs are not likely to increase the total number of job opportunities in the economy. Large-scale, persistent unemployment ultimately can only be dissipated by maintaining the appropriate levels of aggregate demand and production, a goal best attained through government monetary and fiscal policies. Indeed, the experience with retraining in Sweden and France indicates that training activities are most effective in an economic climate of full employment.
The possible application of government-sponsored programs is further limited by the scope of private efforts in this area. Powerful considerations of self-interest have driven management, unions, and individual workers to engage in a continual process of upgrading the skills of the labor force. Fortune reports that General Motors retrains about 7,200 workers a year for jobs with more complex skills than those presently demanded. IBM has initiated 100,000 persons annually into the mysteries of computer operation to provide the personnel needed to man the machines it sells and leases. Among the unions, the Plumbers, Electrical Workers, and Machinists have instituted post-graduate courses for members whose earlier craft training is no longer adequate. Retraining clauses are being included in collective bargaining agreements with increasing frequency. Beyond these institutional endeavors, individual investment in acquiring new skills amounts to billions of dollars each year.
Under the Area Redevelopment Act of 1961 and supplementary state programs, priority for retraining has been given to unemployed persons with limited opportunities or resources for self-improvement. Courses in specific occupations have been set up with an eye “toward current needs.” The occupations generally are applicable to small or moderate-sized firms, many of which have been attracted to the community as part of a plan for economic rejuvenation. In the first year of an Area Redevelopment Act program, courses were authorized for training 1,500 machine-tool operators, 600 automobile mechanics, 2,000 clerical and sales workers, 360 electronic mechanics, and other workers for more specialized occupations.
Although critics may concede that public support for retraining can serve a useful purpose, it is often asserted that the unemployed don’t want to be retrained. Considerable hand-wringing on this count, much of it unjustified, was provoked by the highly publicized experience of the Armour Automation Committee. Following the shutdown of its plant in Oklahoma City, the Armour company, in cooperation with two unions, offered 431 of the displaced workers the opportunity to participate in a special retraining project. Only 170 employees responded to the invitation.
Other cases have reinforced the skepticism bred by this incident. In 1960, General Electric established a “job opportunity” plan, which, among other things, offered to retrain employees facing permanent layoff with almost full pay or a generous, lump-sum separation allowance. Through August 1961, about 1,700 employees came under the terms of the plan, and nearly all had elected to take the separation allowance rather than the retraining.
Under what circumstances, short of compulsion, are unemployed workers likely to take part in training activities? Doubtless, psychological variables are important, but there is insufficient evidence to draw any firm conclusions concerning these factors. It is possible, though, to enumerate certain objective considerations that appear to promote participation in training programs.
Jobless workers are likely to enter retraining when the personal costs of the instruction are minimized. These costs consist of two elements: the costs of the program per se, and any forgone income during the period of training. In the Armour case, the Automation Committee paid the first $60 of the cost of the training course, plus one-half of the balance, so long as the total amount paid did not exceed $150. In some instances, this meant that the unemployed worker had to assume a substantial financial burden.
Government programs generally minimize the cost of retraining to the jobless worker. The entire expense of specific courses is borne by federal and state agencies. In addition, qualified persons undergoing retraining receive allowances related to unemployment benefits so that there will be no monetary advantage in refusing the opportunity for instruction. If any problem exists, it stems from the fact that unemployment benefits, and therefore training allowances, are often not high enough to avert economic hardship for the recipient.
Second, regardless of cost, there is persuasive evidence that attitudes toward retraining are vitally affected by the prospects for employment at the conclusion of the program. The more definite the promise of immediate employment, the more likely it is that workers will be induced to enroll in particular occupational courses. This judgment will surprise only the most altruistic. In a free-labor market, the process of allocation is guided by perceptions of self-interest.
Getting the jobless worker into the classroom may be a minor difficulty compared to the problem of teaching him new occupational skills. Pessimism about the capacity of the jobless for retraining stems, in part, from an appraisal of the characteristics of the long-term unemployed. About 40 percent of those unemployed for 15 weeks or more are over 45 years of age; 38 percent had last worked as laborers or semi-skilled operatives; and an estimated 75 percent had not finished high school. The relative importance of older, less-skilled, and poorly educated workers among the ranks of the chronic unemployed does not encourage optimism about the success of retraining.
The results of recent training programs seem to bear out this gloomy view. In the Armour case, only 60 out of 170 applicants were judged to show real promise of benefit from retraining. Preliminary reports of ARA projects in Rhode Island and West Virginia indicate that about half of the workers seeking retraining failed the qualifying test. In Bridgeport, Connecticut, the large majority of candidates for a course in machine-shop skills were disqualified in the initial screening.
The Armour experience is a case in point. Here, the Oklahoma Employment Service inferred that over 100 persons who had been usefully employed by the company for up to 20 years could not benefit from vocational instruction and advised them to seek work as laborers. Further doubts about the standards for qualification are posed by specification of the particular training courses that were instituted. These included typing and office practice, furniture-upholstering, welding, meat-cutting, and cake-decorating—none of which seems to demand exacting prerequisites.
The same stringent approach to qualification for retraining was adhered to in the Bridgeport project, carried out by the Connecticut Department of Labor. Of 2,143 prospective candidates for retraining, 143 were ultimately admitted to the program. Many of the candidates declined the opportunity because of lack of interest, but over 750 were rejected on the basis of tests and interviews. At last report, 57 of the trainees had completed the five-week course, and 53 were employed by firms in the local area. This project has been pronounced a success by government observers.
The initial experience under the ARA does not indicate that the administrators of the program have adopted a more permissive approach to the selection of applicants for training. About 87 percent of those engaged in retraining have at least a ninth-grade education while only 13 percent came from the group that went to school less than nine years. An analysis of the characteristics of the first 4,500 trainees under the Manpower Act shows an almost identical pattern of selection of the younger, better-educated workers.
The ultimate criticism of government retraining activities focuses on the aggregate impact of the program. Actually, two points are at issue. First, even if it is possible to give jobless workers a new vocational competence, the retrainees may be equipped with superficial or ephemeral skills so they will revert to their former plight with the next economic downturn or surge of technical change. Undeniably, this danger exists, and it is magnified by the pressure to relate retraining to available job opportunities.
The fear that government-sponsored retraining will become an ineffectual palliative should not obscure its potential contributions. For the ex-coal miner in Illinois and the field hand in New Jersey, the training in any industrial occupation or in the rudiments of farm machinery is a notable achievement. Through these efforts, he is at least initiated into some of the complexities—and opportunities—of modern industrial society. Moreover, beyond these extreme cases, many of the ARA projects have given attention to skills that have a good chance of surviving the next wave of economic change—machine tool operation, typing and stenography, and electronics and automotive repair.
The second element of concern is the numerical adequacy of the federal program. Under the Manpower Development Act, it is optimistically expected that 570,000 workers will be trained by July 1965. Another 20,000 persons will receive instruction as part of ARA projects. Together, these programs will accommodate only a limited proportion of the large number of workers who are likely to feel the repercussions of economic change in the foreseeable future.
In assessing the probable impact of the new legislation, the total number of workers affected should not be the only yardstick. The long-term unemployed do not consist of a mass of resigned victims of economic misfortune. Some workers have the vocational background and resources to adapt to the new structure of employment opportunities and autonomously move out of the ranks of the chronic unemployed. Others suffer from physical or mental disabilities and probably would not benefit from federal aid. By concentrating on this component of the unemployed, government activities can have an incremental effect greater than simple arithmetic totals would indicate.
The federal retraining program got under way in earnest in September 1962 when the first referrals were made under the terms of the Manpower Act. At this point, there can be few illusions that this approach will be a cure-all for the problem of unemployment. Retraining is a limited remedy that works best as part of a general effort to promote economic growth and well-functioning labor markets. Moreover, many obstacles and preconceptions must be overcome before even the modest potential of retraining can be realized. It is apparent that in the next three years, the retrainees will not be the only ones to learn something from this new departure in national economic policy.
Arnold R. Weber was professor of industrial relations and director of the doctoral program at Chicago Booth, where he served on the faculty from 1958 to 1973.
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