I went down to hear Jeffrey Lacker this morning at Lynchburg College. He’s the President of the Federal Reserve Bank in Richmond. He’s educated, articulate and has been a dissenting voice in Fed policy decisions since the mid-2000’s. That alone makes me warm up just a bit. Today’s lecture was part of a fed tour through the region collecting data and other wonky things, I’m sure, but this morning’s stop was an opportunity for business leaders to get a look at the belly of the beast.
To the topic – workforce development. For some time the Fed has not only been tasked with monetary policy with the trickier task of promoting maximum employment. The state of that affair can be affected by monetary policy, but Dr. Lacker’s point was to distinguish between the cyclical unemployment (the kind you hear reported on FOX or NPR), and the rate of unemployment which caused by structural changes in the economy.
For example, a down-turn in the economy may produce layoffs of a cyclical nature and widely thought to be affected by monetary stimulus. But when a long-term trend occurs, such as off-shoring textile jobs to Bangladesh or China to take advantage of low labor costs, this is understood as structural unemployment. No amount of tinkering with monetary policy will fix it, because those who lose jobs in that environment don’t always have the skills to transfer to other kinds of work. This results in the paradox of a large pool of unemployed persons, but a shortage of the kind of labor that is needed in the new market.
Why is this important? Dr. Lacker went on to show that employment prospects for newly minted college grads or for the nearly-retired baby boomer, are influenced by factors beyond formal schooling. Skills “such as following instructions, patience and work ethic — lay the foundation for mastering more complex cognitive skills and may be just as important a determinant of future labor market success. These basic emotional and social skills are learned very early in life, and it can be difficult for children who fall behind to catch up: Gaps in skills that are important for adult outcomes are observable by age 5 and tend to persist into adulthood.”
These are the kinds of things that should be taught at home, but are often pushed aside in schools. They are exactly the kinds of things we emphasize at New Covenant Schools.
It’s easy to fall prey to the idea that a college degree is my child’s best ticket to a middle class life. It is true that those who earn a college degree will earn on average $2.3M over a lifetime, compared to $1.3M by one with a high school diploma. That’s sobering, but it’s not the whole story.
Boatloads of students will arrive at college this fall, many of whom will be dazed and confused by an environment for which they are ill-suited, ill-prepared, or both. This accounts for the fact that only 60%, 6 out of 10, students graduate from college or university. Let that sink in. It tells us that not every student is or should be college-bound, and it tells us that we have to be careful that our academic planning makes students aware of the larger opportunities available in fields not channeled by a college degree. As Dr. Lacker says, “If…students believe that the only reason to complete high school is to attend college, they might not see much value in graduating. But learning about alternative career and educational opportunities that also require a high school degree could increase the perceived value of high school completion…A growing number of vocational or apprenticeship programs offer specialized training in areas that are in high demand, such as health care and advanced manufacturing.
Indeed, 27% of the economy in Campbell County, VA is manufacturing and requires skilled labor. That’s more than double the national average for one sector of a diversified economy. One would think that with 5.6% unemployment in Central Virginia, manufacturers could fill the jobs. Instead, they struggle to find qualified labor. A student who didn’t find himself comfortable spending $100K for a major he didn’t like, while racking up thousands of dollars in student loans, might find that vocational and advanced training in certain places makes a lot of sense.
I would urge my colleagues, parents and students to consider that our economy is changing and that is undergoing structural changes that will not correct with the next business cycle. Preparing for the future will require you to entertain options you may not have considered before.
Read Dr. Lacker’s entire remarks here.