Revisiting Retraining

A week ago, we asked whether the employment picture is as bad as it seems, or whether positive glimmers were becoming visible. One executive-economist squarely in the bad (or even worse than it looks) camp is Mohamed El-Erian, the CEO of the investment giant Pimco, who has called unemployment “large in magnitude and increasingly structural in nature.”

“At its root, America’s jobs crisis is the result of many years of under-investment in human resources and the social sectors,” El-Erian contended in a recent article. “It must move now to address the problem’s sources through multi-year programs that range from educational restructuring and worker retraining to productivity enhancement and housing-sector reform.”

Peter Drucker would likely have agreed with many of El-Erian’s points. The trouble with a knowledge society, as Drucker pointed out many times, is that it leaves the unskilled worker behind. This is especially true in today’s recession, in which the burden of unemployment is falling most heavily on the unskilled and undereducated. “The pressure on government to preserve the unskilled worker, if not to restore his former position, will be great,” Drucker wrote in The Age of Discontinuity. “There is every reason to help him—if only because his lack of skill makes him unable to help himself. Retraining, for instance, is badly needed and so are placement services.”

Image source: US Library of Congress

But retraining is easier said than done, even during boom times. “The United States has, next to Japan, by far the lowest unemployment rate of any industrially developed country,” Drucker noted in The Frontiers of Management, which was published during the mid-1980s, when jobs were relatively plentiful. “Still, there is surely need also for systematic efforts to retrain and to replace redundant blue-collar workers—something that no one as yet knows how to do successfully.”

Training and retraining can also be expensive—something that, as the New York Times pointed out today, is leading lots of companies to buy machines instead of hiring people.

Still, as hard as successful retraining might be to implement, it is better than creating make-work employment or propping up ossified businesses. “Policies that pay old industries to hold on to redundant people can only do harm,” Drucker wrote in Managing in the Next Society. “Whatever money is being spent should instead go to subsidizing the incomes of older laid-off workers and to retraining and redeploying younger ones.”

What do you think: Is retraining effective? If so, how should governments go about encouraging—or overseeing—it? And what obligation do companies have to provide training?