Sunday, November 28, 2010

Education: More Second Chances

I believe that a major flaw in our economy is that we give too little support to those that need retraining or that need to upgrade their skills later in life.  I do realize that we have a multitude of different targeted programs that seek to address this, I'm not suggesting that we make the system more complex by simply adding additional programs.  Rather, I'd like to suggest that we make a broader set of programs with simpler rules that would be accessible to most anyone working.  In my next post I'll get into some more involved ideas, in this post I'll lay out some more basic ones.  The objective here is to focus on making education and training accessible to people at every stage of their life and in particular people that have made mistakes that make getting training more difficult.

1.  Expanded education tax credits.  This would supplement existing programs and would allow for a broader range of expenses to be targeted by the credit.  Existing credits would be expanded to cover the entire cost of part time attendance at a state school (this would likely be in the ballpark of up to $8,000 a year total), as well as related expenses including text books and child care.  I had looked at New York State data for rough numbers but quickly realized the subject was too complicated to be worth the time in making specific recommendations in a blog post.  These credits would have to be written carefully, the target is a full time worker going to night school in order to get a better job in the future, or to get new skills because of fear of a job being eliminated or off-shored.  This is not meant as a tax break for wealthier families to put their kids through college, though a kid wanting to pay for their own college would be a perfect target for this credit.  While generally opposed to means testing it is also likely worthwhile to phase this out at high incomes to prevent it from being a subsidy for executive MBAs who don't really need it.  A gradual phase out starting at $100,000 a year may be in order, or if a more complicated provision isn't too distortionary, a lower phase out with an additional allowance per child could also work.  In any case, this credit should be designed so that families don't have to make hard choices about taking a chance on their own success or being able to better provide for their children's needs.  This tax credit should be limited to the income earner, or alternately for dual income households, to the secondary income earner as well.  Other household members should not be eligible for this expanded credit.

2.  Supplementary unemployment benefits.  This program would be designed to encourage unemployed workers to update their skills so that they are more likely to be able to get a job after unemployment at a higher wage then when they went on unemployment.  It would also be designed to encourage them to continue working while receiving unemployment.  The requirements would be that the beneficiary be enrolled in school full time and also that they look for part time employment while in school.  Unlike regular unemployment, beneficiaries would continue to receive benefits if they take a part-time job while in school.  It would extend the unemployment benefits, though it would likely be beneficial to make this at a reduced rate, for up to two years to supplement the income they make from working part time to something closer to the income they received while fully employed.  The objective would be to use periods of economic disruption as an opportunity to upgrade the workforce to meet changing economic needs and reduce long term structural unemployment.  It would also prevent long gaps in resumes by encouraging workers to take jobs that pay much less while unemployed and feeling justified in doing this by having school as a reason for doing this.

Both these suggestions would likely be expensive in the short run, though longer run cost would be more unpredictable since they would be likely to result in larger long term government revenue.  I believe paying for these out of slightly higher taxes on high incomes would be justified and likely acceptable to most Americans.  After all, this isn't giving out freebies, it's giving people an opportunity to work hard to better themselves that they might not otherwise have due to choices they find difficult to make.  Only those willing to take on the task of both working and going to school would qualify for either program.

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