In the private sector, the free market ruthlessly punishes failure: A product that doesn’t do what it’s supposed to do is a product that will soon be gone. In government, however, failure is just an excuse to redouble the commitment.
The Republican takeover of Congress has been a mixed blessing, but it holds some promise of breaking that government habit. Last week, the House took the novel step of cutting and even eliminating federal programs merely because they don’t work.
The most conspicuous example is job training, a longtime Democratic favorite that also happens to be Bill Clinton’s panacea for everything from welfare dependency to income inequality. During the presidential campaign, he vowed to make every company in America spend a fixed percentage of its payroll on worker education and training.
Earlier this year, he touted job training as a way of “lifting incomes and prospects and optimism and real hope for the future among people who are carrying the load in this country.” When Clinton cast his first veto, just two months ago, his main purpose was to force Congress to restore $619 million in spending on his all-purpose remedy.
But the fight isn’t over. Last week, the House passed an appropriations bill that killed the federal youth summer jobs program and cut the President’s proposed spending on other job training by $1.7 billion. That would bring total federal expenditures for this purpose down to a piddling $4.7 billion.
The House may not get its way, unless of course Clinton decides to actually examine the value of these programs, which can be summarized as lying somewhere between zero and less than zero. The only legitimate grounds for criticizing the House is that it didn’t cut even more.
Federal job training appeals to the innate American belief in giving people a hand up instead of a handout. But in reality, it provides neither. It has compiled an almost perfect record of futility.
Summer jobs for inner-city teenagers may sound like a sure way to help kids out of poverty, but in fact, they have been not just useless but positively harmful. As University of Chicago economist James Heckman notes in a recent study for the university’s Center for Social Program Evaluation, participation in the program manages to reduce the long-term earnings of young males–and may actually have a worse impact on wages than spending time in jail.
Part of the reason may be that they furnish only make-believe work that gives kids a dangerously false impression of what is expected by private employers. Summer youth programs have been known to pay teen-agers for such “jobs” as playing basketball, discussing race relations and serving school detention–skills that are not in great demand among employers. Only one federal enterprise, the Job Corps, can point to any achievements in preparing disadvantaged kids for the real world.
The record of adult training efforts is not much better. Training for displaced workers, we have demonstrated beyond all doubt, does nothing to raise their long-term wages. Workers who have gone through other government programs do earn a bit more than similar workers who haven’t, but even the most successful experiments produce underwhelming improvement.
If things go right, an expenditure of $16,550 on a worker raises her annual income by less than $600 a year–a 3.5 percent return on the investment. When companies train their own employees at their own initiative, by contrast, the returns, in the form of higher wages, are typically at least 10 percent.
“To the extent that effective training can be produced on the job, it is produced in the private sector and not in the public sector,” reports Heckman. “Except for the Job Corps, no public sector program produces a rate of return even close to 10 percent.”
If the government does a poor job of training people and private companies do a good job, it makes sense for the government to facilitate private training–which it does by such policies as letting employers immediately deduct the full cost of training. But Bill Clinton has done just the opposite by recommending an increase in the minimum wage. One way employees get companies to invest in training them is to accept lower wages. An increase in the minimum wage deters firms from hiring unskilled workers and teaching them what they need to know–which soon gives them access to better-paid jobs.
The Clinton administration’s approach to job training is to lavish funds on worthless methods while discouraging those that are proven to do some good–rewarding failure and penalizing success. Be grateful the federal government doesn’t run the auto industry. If it did, we’d all be driving Edsels, and no one would have ever heard of Toyota.
