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about the 9 percent unemployment rate? Business recovery will make a modest dent, perhaps lowering the rate to 7–8 percent, or 10–12 million workers, with almost 10 million more suffering from hidden unemployment (having withdrawn from the labor force or working very few hours per month).4 For those workers, the solutions depend on circumstances. Millions of young people currently unemployed should not be in the labor force at all. They should be finishing high school, vocational school, community college, or a bachelor’s degree. Their problem is lack of financing for education and the pressing need to keep food on the table right now. A short-run measure, therefore, would be to increase public subsidies for a return to school of at least 1 million to 2 million of today’s unemployed young people under age twenty-five, cutting the unemployment rate by around 1 percentage point as a result. The budgetary cost would be on the order of $15,000 per student per year, or $15 billion to $30 billion in total. Remembering that the gross domestic product is $15 trillion per annum, we see that the added outlays would be on the order of 0.1 to 0.2 percent of GDP.

Another part of the short-term solution, which can actually blend with the longer-term benefits, would be increased job sharing with shorter working hours. Today’s full-time workers in America spend around 1,700 hours per year at work, roughly 200 hours or five weeks more per year than most of their European counterparts. If work hours were diminished by 5 percent, for example, the same total work hours could be parceled among 5 percent more workers. This is not merely a short-term remedy, though it could serve as that; it is also part of a long-term reform to help Americans rebalance work and leisure.

The sharing of work through reduced work hours and more employment has been under way, highly successfully, in Germany. The German government rearranged various social benefits (e.g., unemployment compensation) to promote a downward adjustment of work hours rather than number of workers during the latest downturn. The German unemployment rate was held down by around 1 percentage point or more through job sharing. This approach has not been explored in the United States, where adjustments are left wholly to firms and the brunt of the downturn has been felt not in work hours but in number of workers.

European countries’ active labor market policies also include much greater outlays than in the United States on job retraining and career services to match workers and jobs. Given the amount of flux in the world economy and technology, old jobs are not coming back. Middle-aged workers are often bereft of the information communications technology (ICT) skills they need for the new economy, and job training is needed to restore their employability. Yet such efforts are costly. Many European countries spend on the order of 1.0 percent of GDP on active labor market policies programs, compared to just 0.2 percent of GDP in the United States. All these measures—youth subsidies to return to school, retraining of older workers, and job matching services—would require another 0.5 percent of GDP per year.5

Macroeconomic measures to boost aggregate demand, including more fiscal stimulus and quantitative easing by the Fed, should be put aside. They are no solution for America’s job crisis and threaten to destabilize the financial markets and undermine the country’s long-term budget solvency. Yet increased public spending on infrastructure, properly financed, will have a kind of “stimulus” effect, not through aggregate demand per se but through the increased employment of relatively low-skilled construction workers. The challenge vis-à-vis infrastructure, described below, is to recognize that the necessary projects are not shovel-ready; they will come on line in the course of a decade, not a year.

Breaking the Poverty/Education Trap

I’ve repeatedly emphasized a dismal reality of America’s education system: the failure of low-income and even middle-income kids to find a successful path to