Tuesday, September 13, 2011

The other cause of high unemployment

We know that unemployment is high because of lack of demand.  Consumer and business spending are way off and companies aren’t going to hire until they see demand for their products and services increasing.  That’s the reason we need government spending and a lot of it.  However, something else is keeping unemployment high.  The Brookings Institution just released as study in which they looked at the education level required for the average job today and the education level of the average U.S. citizen over the age of 25 today.  Brookings found that the average education level required for the average job increased during the recession and now has outstripped the average education level of the typical worker.  It short, we have an education gap as well as a demand gap.  This comes at a time when we are cutting education spending and laying off teachers.  Once again, we are doing just the wrong thing as a nation.  Instead of increasing government spending to increased demand and close the demand gap, we are fixated on the deficit and cutting spending.  Instead of increasing spending on education to close the education gap, we are cutting education spending.  It makes no sense.  The following charts tell the story.  The first shows the education gap.  The second compares the unemployment rate in metro areas with a high versus low education gap.

If we really want to get unemployment under control, now is the time to drastically increase spending to create demand and a major part of that spending should be on a massive investment in education to significantly upgrade the skills and education level of our workforce. 

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