A common argument against free trade is that when companies find it more profitable to move production overseas, they do, resulting in closed factories and unemployment at home. Economists have argued constantly, and accurately, that this is a good thing. More efficient production of goods means lower relative prices which means that everyone is a little bit richer in the long run. The unemployed can then go on to work in fields where they are more efficient producers.
This argument doesn't really ring true with the common laid off employee though. The sudden loss of income doesn't really led itself to the idea of "Congratulations! You're now richer and able to produce more efficiently!" What would be ideal is immediately after being laid off, the now unemployed worker would be either directed to a new job, or directed to new training for a different field while still being fiscally supported.
To a certain extent, this already happens. Many unemployed, especially in good times, quickly find new jobs, and unemployment insurance helps the rest get by while they're going through training or until they get reemployed.
However, in times like these, it's easy to notice that our system doesn't go far enough. Some individuals find their unemployment insurance lacking or even nonexistant, and many qualified indivuals don't bounce back as readily when unemployment is at 12% than they did when it was at 6%.
Having thought about this problem for roughly five seconds, I suggest that when a factory closes down and it's employees are laid off, a guidance counselor of sorts is sent with the resources to help the newly unemployed either find new jobs or direct them to the most beneficial training while simultaneously helping them make ends meet until they are reemployed.
The trouble that comes to mind is who will pay for it? If each company does it on a voluntary basis, then the practice will die out as soon as it begins, as the companies that do it find themselves at a disadvantage compared to the companies that don't.
Likewise, making it compulsory but still funded by the companies who are laying off the employees sounds tempting, but it perverts the incentives of the free market by making it more costly to move production overseas and therefore making US companies less competitive globally.
Asking the individual employees to take out loans to foot the bill seems unreasonable, but doable. Even assuming that banks would be willing to make reasonable loans to the unemployed, it ignores the psychological but real toll of going heavily into debt - something that most people would rather enjoy.
Asking local governments to foot the bill also seems counterproductive - the program would be expensive so local taxes would have to rise, scaring away more companies, adding to the cost, forcing taxes to rise even more, and the cycle continues.
Finally then, we are left with making the program part of federal policy. In theory, I'm not opposed. We can toss the cost on the deficit, and as long as it pays off at a higher rate than our debt (which overall, it will), than it will be worth it (see my previous post on deficits). The danger is in its becoming a bloated bureaucracy.
Perhaps the ideal compromise would be that unemployed individuals could take out the loans from the federal government at low rates (say, what the government's current interest rate is). That way, the individuals get reeducated and their ends are met, our economy improves, and the government doesn't lose any money (except for those who default on their loans).
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