The Vanishing of Okun’s Law and the Usefulness of the Education System

Last week the Jobs Report came out and although it had elements of
promise in it, it was pretty bad. Since its been a week there are
revelations coming out. One such idea is that the US has moved away
from Okun’s Law.

Back in the 1960s Arthur Melvin Okun
noticed a correlation between the business cycle (growth and recession)
and the number of jobs created or lost. The two marched fairly closely
in step with each other. However, the recession in 1990-1991 time frame
was considered a jobless recovery.

As a writing in called Jobless in America: Is Double-Digit Unemployment Here to Stay?
by Joshua Cooper Ramo talks about, this move away from Okun’s Law could
be a real shift in the way the US works. The article talks about how
the Obama administration needs to focus on job retraining since people
need to learn new skills, especially skills that are more than just
button pushing.

For the most part I agree, but since I’ve been
blogging about similar concepts for over two years I have some further
depth on the subject. The first is that there is a need for the middle class to be educated beyond what other nations are doing. For instance,
early in the 1900s the US dedicated vast sums of resources to create a
public education system. This ensured almost all individuals had the
chance to be educated. At the time, that was remarkable. It created a
large grouping of people that had skills that from a volume
perspective, no one else in the world could match. This resulted in a
middle class in the US with a buying power unlike any other.

the public education system in the US is largely the same as it was 100
years ago. That to me is just strange. We live in a hyper competitive
nation and yet our education system is almost the same as its ever
been. This is where the rot in the US is. Kids today are taught to pass
tests. No Child Left Behind is a policy that motivates everyone to that
one goal. The problem is that in the real world there are no tests. no
multiple choice questions, or True and False. Kids need to learn how to
solve diverse problems. The focus for schools should be less on tests
and more on accomplishments. Students should be pushed to build car engines or write software programs or pen a musical. The learning will
come in two dimensions: the straight forward what makes an engine work
and the more subtle realization that you need others to help you in one
way or another. So you learn persuasion, negotiation, trade, patience,
self confidence, and resourcefulness. These attributes of education
somewhere along the way were forgotten. And places like China, Russia,
and India have their students learning math and science beyond what the
US teaches. We can differentiate on creativity, ambition, leadership,
and problem solving.

The article also mentions that there is a
possibility that 8% – 11% unemployment might be the new norm. I agree
in a classical sense, but also think that what it means to be employed
could change. Freelance work or self employment is a very real
alternative to what people are used to today. Mini entrepreneurship
could take hold where collective networks assemble and separate fairly
frequently depending on what projects are underway. This requires a
flexible skillset and a willingness to accept ambiguous pay schedules.
There are people who already thoroughly enjoy this freedom. But many
others might have to come to accept it as a possible future.

As I’ve stated before, the future is four areas: Energy, Health Care, Information, and People. Each of these will generate so many employment opportunities, I’m now thinking that leadership for them will come from outside the US.


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