Does professional training generate employment?

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By FERNANDO NOGUEIRA DA COSTA*

No entrepreneur will be willing to acquire new productive capacity unless it assures him profit prospects.

At the end of my first class in the elective discipline “Behavioral finance for financial life planning”, offered at Unicamp, I left the following question open. I asked the Economics students to respond, at the beginning of the next class, to a new colleague, coming from the performing arts. Does professional training generate employment?

I had exposed: there was greater massification of higher education, reaching about 8,7 million students in 2020, 78% of which in private paid Higher Education Institutions (HEIs), ¾ in evening courses. There were 5,6 million enrolled in face-to-face courses and 3,1 million in distance courses (36% of the total). Around 2 million students were enrolled in public Universities, almost 2/3 in Federal ones.

According to the 2010 Census, 9.501.162 people had a university degree, of which 8.979.706 were graduates, 451.209 had a master's degree and 70.247 had a doctorate. Between 2011 and 2014, each year there were around one million graduates; between 2015 and 2020, they averaged 1,2 million per year.

However, in ten years of follow-up, only 40% of those entering in 2011 completed their entry course, 59% dropped out and 1% remained in it. About 37% of freshmen dropped out of their entrance course by the end of the 3rd year.

A Education at a Glance 2021 compares the shares of people aged 25-34 with tertiary education in the PIA (Working Age Population) of each G20 country. Brazil with 24% only surpasses South Africa with 15%. It is below Mexico (25%), Colombia (30%), Argentina (40%). This has the same average proportion as the G20, below the 45% of the European Union. The United States has 52%, Russia 62%, Canada 64% and Korea 70%. It is one reason for our backwardness in cultural-scientific development.

The 27,4 million people of all ages (and not just in the 25-34 age bracket) with complete higher education in Brazil represented 16% of the PIA in 2021. Added to those with complete secondary education or incomplete higher education, they represented 52% of it, that is, just over half compared to people with low education.

At the beginning of its time series, in 2012, the PNADC announced that 15,659 million people had completed higher education. In the workforce, there were 13,116 million and 12,643 were employed, with 10,374 million in formal jobs.

Only 473 were unemployed, so the unemployment rate with higher education was just 3,6%. In the following year, it dropped to 3,2% and in 2014 it rose to 3,7%. However, it has increased by depressions (2015, 2016 and 2020) and recessions. In 2021, the percentage (7,1%) of unemployed graduates almost doubled.

This justifies the question: does professional training generate jobs? There was an increase in the supply of graduates in higher education, but the demand for employing them did not increase. What is (are) the cause(s) of the increase in job supply?

The “trick” of the question is in the impulse of a layman in economics or an orthodox person to respond according to “a little world revolving around his own navel”: – “Yes, the more I study, the more chances I will have to get a job”. It's ½ true! Or ½ lie?

I will start the next class with an analysis of the students' answers. Then I'll compare them to the GPT Chat. The AI ​​(Artificial Intelligence) response was: “Vocational training can help generate employment in several ways. Here are some of them:

Increase in skills and knowledge: professional training improves individuals, making them more qualified and competitive in the job market. This can lead to better job opportunities and a higher salary.

Adaptation to changes in the market: It can also help workers adapt to the introduction of new technologies or changes in employer demands. This can make them more attractive to employers and help them keep their current job or find a new job.

Entrepreneurship: professional training can also help develop entrepreneurial skills and lead to (i) the creation of new businesses and (ii) the generation of jobs for other people.

However, it is important to remember: professional training alone is not a guarantee of employment. There needs to be demand for skilled workers in the labor market and job opportunities available for training to lead to job creation.

In addition, factors such as the global context of the economy and the government's employment policy also play an important role in job creation.”

Approved! Grade 10? In fact, Chat GPT escapes the mental trap of thinking about the world from within, that is, from the individual experience lived. But only at the end of the answer does he draw attention to the macroeconomic context and public employment policy.

This was the great revolution in the history of economic thought, carried out by John Maynard Keynes, when he rethought the theory of unemployment inherited from (neo)classical economists. unemployment was not caused by wages being set too high as they (and the capitalists) thought. They said: "if the workers accepted lower wages, it would become profitable to offer more employment".

Unfortunately, the determination of the level of employment does not depend on workers' decisions. Worse, the merchant caste cannot continuously employ all those workers and outcasts with a desire to work. The capitalist mode of production does not offer a social contract capable of serving everyone in search of income.

In an economy of private initiatives, business decisions determine the number of jobs to be offered to the working class. However, entrepreneurs are subject to different expectations.

They decide based on one or another future scenario, according to each particular interest (and degree of financial leverage or indebtedness), in a changing economic environment. The decisions of each one influence the decisions of others as they result in dynamic contexts.

There is no action planning or central control. Any macroeconomic result is a consequence of numerous decentralized individual actions, but interdependent in terms of economic strategies. Not surprisingly, the interplay of free decisions by individuals often results in irrational consequences.

The production of goods and services depends on profit, so employment will only be offered if the products can be sold profitably: does this not just depend on labor costs? No, the production of goods and services will fundamentally depend on the respective demand. This implies monetary expenditure – not need or desire.

The need does not constitute effective demand unless it is accompanied by expenditure. Production falls short of its potential – given by the use of all production capacity in terms of labor, machinery and equipment, inputs, etc. –, when aggregate demand is deficient. This even if the population has an immense need for goods that can be produced.

The demand for goods and services depends on each economic agent's net stock of wealth and on the credit eventually obtained. The flow of income received is immediately transformed into inventory, either with expenses or in portfolio investments – balances of various assets, including monetary ones.

The more solid the asset record, the easier it is to obtain loans. The source of expenses consists of own resources (including capitalized) and third-party resources, not just the income received.

Aggregate income is the result of spending on consumption and investment. Each agent earns its income by meeting the demand of the others. The expenditure of one is the income of another, that is, the income of each depends on the expenditure of others.

Not all income received is used for expenses. According to the expectations of an economic agent (family or firm), he may want to apply part of his income stream received to accumulate wealth. It can be motivated by precaution, by speculation or to receive more income, for example, through interest or rent.

That way, he spends less than his net worth allows. This would not create any problem if the decision to accumulate liquid capital taken by some provided resources for others, determined to immobilize new capital, that is, to expand their capacity to hire labor and produce more. The desire to retain “non-productive and non-productive wealth” would therefore not be a cause of unemployment.

However, no entrepreneur will be willing to acquire new productive capacity unless it assures him profit prospects. If the individual desire to use income to increase private wealth not represented by new products is generalized, this does nothing to encourage entrepreneurs to expect greater profits on the capital invested in production, capable of generating more jobs.

So, the causes of unemployment are many (and even GPT Chat can answer): economic slowdown, technological changes, globalization, lack of skills and qualifications, demography, recessive economic policy, etc. But he didn't know how to answer in a synthetic way: unemployment is simply due to the fact that job supply and job demand are independent. Often, the first does not respond to the second…

*Fernando Nogueira da Costa He is a full professor at the Institute of Economics at Unicamp. Author, among other books, of Support and enrichment network.

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