What type of jobs will exist when the recession fades?

Bernie Buzz Original Article

We asked an economics professor at the University of Vermont and the president of a local nonprofit that specializes in work force training the following questions:

What are the short-term prospects for job creation in Vermont? What kind of jobs are most likely to be generated as the economy recovers? And what can the government do, specifically, to improve the labor situation and bolster wages?

Here are their replies.

Stephanie Seguino, Professor of Economics, University of Vermont
Stephanie Seguino, Professor of Economics
University of Vermont

The 2008 federal stimulus package moved the economy in the right direction, but too slowly to shield many families from the devastating effects of long-term joblessness.

Without further stimulus, unemployment is predicted to stay above pre-crisis levels until 2017. The private sector is unlikely to lead the economy of this recession. Firms will hire more workers if consumer spending rises and banks increase lending, but that is not happening. People are reluctant to spend in the face of high unemployment and economic uncertainty. And high unemployment depresses wages and spending - holding down job growth. Banks don't want to lend in the face of economic uncertainty.

Government has an important role to play in "priming" the economic pump. Experts agree government spending increases, even if borrowing is required, are appropriate and desirable in a recession.

What should Vermont spend on and where would the money come from?

Vermont can lay the groundwork for future economic growth by strategically stimulating investment in "green" jobs, physical infrastructure, and social infrastructure (education and social services). Funding could come from three sources. First, spend down the Rainy Day Fund to support the state budget and avoid critical cuts to education, social services, and health care. Second, adjust spending priorities in the existing budget, doing away with untargeted corporate tax credits. Shift those funds to physical infrastructure projects, incentives to firms that invest in strategic green industries, and educational programs to develop skills of workforce in "green" production. Third, raise taxes on high-income groups who benefited from the "roaring 90s" and have the lowest state and local rates. This group has disproportionately been shielded from the joblessness effects of the crisis; fairness suggests they share the burden. These investment will benefit the private sector by lowering production costs, making them more competitive.

A recent study by Jeffrey Thompson, titled "Prioritizing Approaches to Economic Development in New England: Skills, Infrastructure, and Tax Incentives" provides evidence of the benefits of infrastructure investments. The job stimulus obtained from investing $875 million in universal pre-school education, for example, is 14 times greater than from investing in untargeted corporate tax incentives.

Far from being fiscally irresponsible, well-targeted state spending is a key to getting out of the recession sooner and in better economic health. It can also stimulate the expansion of better paid jobs.

A word of caution: care needs to be taken to ensure that barriers to job access are reduced in recognition of the fact that gender and racial and ethnic job segregation continue to be pervasive.

Gerry Ghazi, President
Vermont HITEC, Inc.

Vermont HITEC is a nonprofit focused on work force training. The Williston, Vt. organization has employed hundreds of Vermonters over the past decade years in the fields of health care, information technology and manufacturing partnering.

 What are the short-term prospects for job creation in Vermont?

Larger companies (IBM, Fletcher Allen Health Care, and GE) are being driven by a conservative return on investment focus when creating new jobs. Job creation is likely to be slower for large companies as a result. In our 10-year experience, we see small to mid-sized companies taking a more entrepreneurial-type approach and are hiring where a more aggressive model can be built. As a result, intellectual resources are moving from larger companies to smaller ones, where the jobs are being created.

What kind of jobs are most likely to be generated as the economy recovers?

The most likely areas for job creation are in the health care, advanced manufacturing, service, education and information technology industries. We have seen a switch from an environment where college graduates are hired into well-paying jobs to one where graduates accept lower-paying jobs that eventually lead to higher-paying jobs. On-the-job experience, "sweat equity," and performance incentives are driving advancement, which in some cases can take a number of years.

And what can the government do, specifically, to improve the labor situation and bolster wages?

Using a return on investment model such as the one the Vermont Training Program has used, government could offer dollars to allow companies to pay for services that can quickly bridge the gap between an individual's competencies and those necessary for a job. This focused approach was used at Dealer.com, where entry-level positions started at $25,000 - $30,000. Through grant-supported training and mentoring as part of an apprenticeship, job-specific performance metrics were set and, if reached, salaries increased to as much as $50,000 within one to two years. Government can encourage higher paying jobs by basing the level of financial support on the wages being offered by the company, balancing the return for both the company and the taxpayer.