Unemployment is an ugly thing. It not only injures people financially, but socially and emotionally. I was reading a fascinating article by Arthur Brooks entitled “I Love My Work.” He chronicles what happened to a small town in Austria in the 1920s when the local factory closed and most men were unemployed. Despite being paid unemployment insurance, their lives began to take on a very different – and not a happy – shape.
Many of us may have had a bout of unemployment and know how empty a day becomes when it is without purpose or goal. We miss the social interactions, the distractions and diversions from our own problems.
Employment, even when people are not really pleased with the work they are doing, gives meaning to life. It provides a reason to get up, to join social events, and is a primary source of happiness. Certainly, there are many people who for a while enjoy the leisure of unemployment, but almost all eventually became bored, dissatisfied and start looking for something meaningful to do.
Ultimately, unemployment becomes an issue that can threaten the stability of governments and lead to riots and worse. Germany’s Nazi government was partly an outcome of the unemployment created by the Great Depression combined with massive inflation.
The solution to unemployment is to create jobs. Most recessions lead to the destruction of jobs in industries and areas that have been automated or made obsolete by newer technologies and methodologies. And at the same time, new jobs are created in emerging business areas. This has happened here in Silicon Valley many times. As semiconductor production was sent to Asia, software and bio-tech firms began to emerge and picked up many of the unemployed workers. Venture capital fueled the growth of Yahoo, Google, and hundreds of other firms. And these firms employed thousands and attracted some of the world’s most talented and educated people to the United States. Innnovation and creativily are employment engines are they are idling when they should be at full power. Event the U.S. Patent office is slowing down as innovative dries up.
Yet in this recession we have seen venture capital investment fall to record lows and, after a peak of 22 companies filed for an initial public offering in 2007, only 2 have done so since. New companies are not being created with the zest of the past and lack of money keeps many innovative firms small and less able to make an impact on the marketplace or to employ many people.
As a nation we face several conundrums: As Richard Florida points out in an article in The Atlantic, unemployment is highest where there are the least educated and skilled people and where the likelihood of new companies investing is low. Fewer private companies are going public, venture capitalists are investing less money, and education of technical and scientific talent is at a low.
We are not going to come out of this recession by employing people in massive public work projects or by propping up failing companies with obsolete and non-competitive products and services. Even if these measures work at all, their impact will be small and short.
Our stimulus money should go to entrepreneurs, inventors, and creative people who will dream up the new services and the new tools and products that will fuel growth and employment. We need to incentivize investment in high unemployment areas and provide education and training at no cost to those who need it. We should be investing in education of all types, but especially in non-traditional areas that hold the potential to help people learn faster, cheaper and with more enjoyment. Education is partly to blame for the uneducated and unskilled workforce we have. It did little to make learning fun, challenging, or useful. It still relies on pain as the main indicator of learning quality; if a course is fun or easy then the student must have not learned very much.
The on-line universities, video learning, podcasts, virtual tutors, and other non-traditional tools may be the game changers education needs. It will take government investment to make this mainstream. Pouring tax dollars into yesterday’s industries is not only wasteful but very dangerous.
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“The solution to unemployment is to create jobs.” – I disagree with this. In the long run, it would be better to wean people off their dependence on the “job” as their sole wealth-creation vehicle. The job is a relatively new construct and may have outlived its usefulness to society and the economy. Most of our support mechanisms (EI, health) are based on the concept of employers & employees but these were created after people moved off the land and into factories. As we abandon the factory model, we also need new models for people to earn a living. Look to the new economy and see how people are starting to structure their work and their lives. I think we will see some radical changes in the next two decades.
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I agree with most of this. However, and even though most of my direct environment would benefit by what you propose, most jobs are lost in companies and jobs that are operated by people that are depending on “old industries”. If an internet developer looses his job, he might -even from home and without a budget- still decide to have his “flash of genius”. But how about people that operate production lines at Chrysler? What about people that just cannot adapt to new technologies? Maybe helping them find a new (but old fashioned) job will not help the economy as much, but there are still a lot of people without good education. And they are the first to suffer from recession, while being less able to adapt to new circumstances.
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Second the post and third Mark’s comments. Doing a better job than normal on assessing the human assets behind the business plan would help avoid having the government need to muscle out the founders and run start-ups. That would not be pretty or effective.
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Good points Kevin. It is unfortunate that the political climate (and most of those in charge) are only interested in the “here and now” as opposed to taking a long-term ROI perspective that you advocate. What we need now, more than ever, is an environment that will encourage business leaders (public and private sector) to take calculated risks, invest for the long-term, and not worry about getting hauled in front of a congressional sub-committee to either (1) get chastised for rewarding people for driving exceptional results and/or (2) be told how they will run their business or risk “regulation”. Unfortunately, building infrastructure (which is needed) is a quick win. Infrastructure is something someone can point to and say ‘see what I did to help the economy’ and creating the environment that will encourage young people to take up science and mathematical studies will only pay back a dividend long after most policy makers have moved onto other things.
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Excellent points (as usual), Kevin. We are modeling our relief efforts after the 1930s when we should be shaping them for the 21st century. Instead of the WPA (i.e., “shovel-ready projects”), we should be forming the VCA (Venture Capital Administration). Entrepreneurs would pitch their ideas to panels of investment “juries” which would be drawn from the ranks of business and academia for periods similar to civil grand juries. Investments would be repaid once the venture goes public or is purchased and the monies earned would be plowed back into the VCA.
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