Brain Burp

[Because this is a family blog.]

I had this one this morning while out on one of my walks.  It concerns a free market economy, bankruptcy, the bankrupt company’s employees, and what we ought to do about those employees.

In an ideal world’s free market, then, here is my gaseous expulsion.  It comes against the backdrop of my long-held disdain for the citizens of one State being forced to send their tax dollars to another State via the mechanism of Federal transfer payments in order to indemnify the recipient against its own foolish spending.  That backdrop also includes James Madison’s remark, on the occasion of Congress’ considering money transfers to Haitians after a devastating earthquake

that he could not undertake to lay his finger on that article in the Federal Constitution which granted a right of Congress of expending, on objects of benevolence, the money of their constituents.

However, our prosperity has grown to the point that our free market imperatives need not remain so cold, and it is in our society’s interests to help the dislocated—employees who’ve lost their jobs due to their employer’s bankruptcy, in the present case—get back on their feet and resume being productive members of their communities and the nation.

Thus: I say, regarding companies faced with bankruptcy, that if the participants in our free market economy—private citizens and their businesses—do not think a company worth saving, then the Federal government should accept that judgment and not intervene to bail out that company: the company, regardless of its size, should be allowed to fail.  I think the same tack should be taken by State governments, but that’s for the citizens of each State to decide.  In the event, Federal monies supporting bailouts should not go to those States that choose to do them.

Against that, I propose assistance to the employees of the bankrupt in the form of a Bankruptcy Jobs Retraining Program, which would operate along the following lines.

Employees below a certain level in the bankrupt company (the idea being, after all, to help the employees, not the “managers,” even if it was market events and not strictly management failure that generated the conditions leading to bankruptcy) would get a job retraining stipend.  It’s important to specify, too, that the stipend would not be an education stipend, but only a job (re)training stipend.  The stipend would have the following parameters:

  • expire after a specified number of days elapsed in training
  • be issued as a loan to the retrainee, with payments—principle and interest—due monthly. If the retrainee gets a job within a specified time after graduation and holds it for a continuous year (with “continuous” defined by the nature of the job: some, like construction, tend toward seasonality), the loan would be converted to a grant with no loan payments due.  Disposition of the loan in the event of the retrainee not working for a continuous year should include at a minimum these possibilities: the retrainee would make payments from the day of graduation, payments would simply accrue and not be due until failure to get a job or on leaving the job for any cause before the first year was up, retrainees aging out of the training program without graduation
  • could not be used more than once in any specified interval (for instance, a 10-year period). A lifetime cap seems infeasible because the (retrained) employee has no control over market events or management failures that might drive his new employer bankrupt
  • a retraining expense amount, not a living expense amount

The issuance of the stipend would be managed by two or three private enterprises that are independent of the Federal government and independent of each other.  These Stipend Issuers would be funded by no-strings grants from the government, and they would be solely responsible for dispensing the funds.

Stipend Issuers would develop market indices that identify and track the most employer-needed jobs that have the shortest labor supply—the largest job gap—independently of geography.  The Job Gap Indexes would rank the gaps, and the Stipend Issuers would pay the largest stipend to retrainees training for those jobs with the largest gap and that have the most expensive training.  Whether the expense and gap should be measured at a national level or regionally is a question to be settled in open debate.

Job Gap Indexes shouldn’t be that hard to develop.  Lots of investors and investment companies and other entities (e.g., The Wall Street Journal) already are quite skilled at developing indexes for assessing/tracking investment markets; a Job Gap index is not that different.

Retraining could be done anywhere, independently of where the retrained-to job is located.  A San Francisco resident, retraining for a job type where the largest gap is in New York, for instance, would be able to take the retraining program in San Francisco.

From that, Stipend Issuers would be authorized to commit a small per centage of their Federal Retraining Grants to relocation assistance, with the proviso that this diversion would be for assistance, not for the total cost of moving.

Since unions are, by their own definition, in the business of helping their membership, union members would see their stipends reduced by the total amount of union dues (including the portion the union claims was earmarked for political activities) paid by the union member retrainee in the twelve months prior to the employing company filing for bankruptcy.

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