We Pay People to Be Unemployed— Maybe We Could Pay Them to Learn

Pop quiz. How many people who lost their jobs in the Great Recession have returned to, or surpassed, their previous salary? The answer is 7 percent. For every 14 people laid off, only one has recovered the same income in a new job. (I didn't say it was a fun quiz.)

That sad statistic comes from a Motoko Rich story in the New York Times Friday. It's validated in a new report from the Hamilton Project that looks at ways to help the unemployed fight their way back into the work force, even if (especially if) they need to learn new skills.

The typical worker who lost a job and found a job in the last four years didn't recover his old wage. Instead, he earns about 20 percent less than he would have at his previous job, costing more than $200,000 in lifetime earnings. Alas, here's what that looks like in a graph:

retraining1.png

How do we fix this, besides sitting back and waiting for the economy to grow again? The Project has a big new idea: Pay laid-off workers to learn new skills. It's a bit like unemployment insurance, which hands money to the jobless provided that they look for work, but for retraining.

Here's how the program, aka Displaced Worker Training, works:
-- While unemployed, some displaced workers would be eligible for Pell grants up to $5,500 per year.

-- After workers find new jobs, they would be eligible for DWT program grants, set at one and a half times their reemployment earnings losses up to a maximum of $36,000.

-- DWT grants could be used for out-of-pocket expenses such as tuition, books, transportation, and child care.

--  DWT grants would be put into training accounts every six months based on most recent earnings losses up to a maximum of $5,500. Tuition and fees would be paid directly to the training providers, but payments for supportive services would be paid to grantees biweekly.
retraining2.png

Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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