How About Investing in Human Infrastructure?

 
 
As long as we’re talking about a trillion-dollar government-industry initiative on infrastructure, why not invest in humans as well as bridges? asks James Heskett. What do YOU think?
 
 
by James Heskett

There is increasing talk about stimulating $1 trillion in spending on the aging United States infrastructure over the next 10 years. Proposals being thrown around range from the federal government borrowing and investing that money directly to instead providing incentives such as tax credits to encourage private industry to participate.

The method and the final amount will be debated. But as long as we’re talking about a trillion-dollar government-industry initiative, why not include in the program an investment in humans as well as bridges?

If there is a topic more frequently discussed than infrastructure decay in the US, it’s inequality. Both are important sources of lost productivity and economic growth. The largest investment in human infrastructure in the nation’s history, called the GI Bill, had one of the highest rates of return to the economy that the government has ever realized. The GI Bill enabled me to complete graduate studies. In addition, just six months of Army classroom training during a term of service as a draftee left me with skills that have had lifetime benefits. And it contributed to significant growth of the American middle class. These experiences prompt the following speculation.

"The largest investment in human infrastructure in the nation’s history, called the GI Bill, had one of the highest rates of return to the economy that the government has ever realized"

What if the proposed investment in infrastructure were split into two major programs, one for physical repair and construction and one for human development? Let’s assume optimistically that this gives us $500 billion (not all from public funding) to work with over 10 years.

That’s enough to design a six-month $10,000 retraining program (focusing on skills defined by unfilled jobs) plus a $10 per hour wage funded by the government followed by six months of on-the-job training during which the participating employer provides the training and splits the wages with the government. For one worker for a year, the cost would be $25,000 to the government, $5,000 plus on-the-job training costs to the employer, after which the employer would hire the worker full-time.

Assume that the retraining raises the annual revenue-producing capacity of the worker from $60,000 (a rough figure for the hospitality industry) to $110,000 (a similarly rough figure for “health care and social assistance”). A $30,000 investment in human infrastructure, based on these assumptions, would foster an increase in revenue-producing capability of $500,000 over just the first 10 years of the remaining working life of the trainee. I suspect there are few infrastructure investments that could produce as good a return as fast as this one.

How much impact could $500 billion of funding have? At $30,000 per person in retraining costs ($25,000 of which would be provided by the government), a joint public-private partnership of the type described above could retrain 16.7 million workers, or an average of 1.67 million per year. At the end of the 10-year period, they would collectively be adding about $835 billion per year to the economy. More importantly, the investment could add significantly to the depleted middle class, which Ganesh Sitaraman in his new book The Crisis of the Middle-Class Constitution has labeled the foundation of the US republic.

What could go wrong? Of course, coming up with the money is always an issue, particularly in a government facing a future of deficits. Paul Krugman has suggested that the infrastructure program would likely be a “giveaway to cronies with little new investment.”

There is always the possibility for educational scams. But we know how to do this. Organizations like FocusHope in Detroit are taking people from unemployment to good jobs (in the case of FocusHope, in partnership with the auto industry). The US community college network, by instituting the kind of co-op program with industry similar to the kind Northeastern University has been providing with great success for many years, could play a key role in the effort. With cooperation and some oversight by private industry, it might have a decent chance of success.

So how about investing in human infrastructure? What do you think?

References

Brad Reed, A giant ripoff’: Paul Krugman explains why Trump’s infrastructure plan is already DOA (rawstory.com, March 28, 2017)

Ganesh Sitaraman, The Crisis of the Middle-Class Constitution: Why Economic Inequality Threatens Our Republic (New York: Alfred A. Knopf, 2017)

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