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Economic Growth Strategy: Investing in People

June 27th, 2014 by ProOrbis

In a recent speech, Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond discussed his research findings, which address the need to rethink how the country looks at workforce development. In his speech, Lacker emphasizes the importance of distinguishing the difference between cyclical and structural shifts in the labor market in order to inform policymaking. Unlike the former, the latter is unlikely to be affected by monetary policy. Instead, by shifting the paradigm and focusing on structural shifts, policymakers and business leaders may be able to encourage workforce development in the long term through early investments in human capital.

Lacker argues that non-cognitive skills (i.e. following instructions, patience, and work ethic) lay the groundwork for mastering more complex cognitive skills and may be just as important a factor in achieving future success in the labor market. These basic skills are learned very early in life and can be difficult for children who fall behind to catch up. He suggests expanding the scope of workforce development strategies to include early childhood education and to provide young people information about the risks and returns of multiple career and educational options. For high school students who are unable or may not wish to attend college, knowing other opportunities may increase the perceived value of high school completion. Finally, he warns us against focusing exclusively on remediating older workers’ problems through training, when a more appropriate course of action could be to involve a greater use of the social safety net.

Lacker closed his speech with the note that workforce development and investments in early education are critical not only on the individual level but for the country as a whole in order to achieve long term growth. “The accumulation of knowledge over time is essential to the process of uncovering and deploying technological innovations that fuel economic growth. And when we look at disparities in economic outcomes across our society, it is clear that differences in human capital accumulation play a large role,” Lacker says. “Doing our utmost to help the next generation of workers make the best use of their talents and opportunities will lay the groundwork for both them and their children to achieve their full potential and for the United States to achieve a more inclusive prosperity.”

ProOrbis’ proprietary framework has long treated human capital as an asset, which requires long term strategic planning. While human capital is the primary source of value for the country, the tools, such as reporting unemployment as well as education, to assess human capital have been lagging behind. The American Millennium Society, a nonprofit organization dedicated to increasing American competitiveness, was formed to address issues such as these. ProOrbis and the American Millennium Society are working with partners to study these issues and develop a blueprint to transform urban education and leapfrog the system to a position where urban students graduate with the skills and talents necessary to succeed in the global 21st century workforce. Lacker’s speech highlights the critical importance of viewing workforce development through the lens of human capital strategy in order to realize higher returns on government investments in the U.S. workforce and human capital stock.

Read and listen to the entire speech here.

 

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