11/20/2008 05:12 am ET Updated May 25, 2011

Economist: Bush Administration Needs A 180 On Unemployment Policy

Public labor exchange offices were established in the early days of the New Deal to help the unemployed find jobs. This function is now done in One-Stop Career Centers, which help to match workers to job openings and monitor that Unemployment Insurance recipients are actively searching for work. Some 3 million unemployment insurance beneficiaries a year are placed in jobs through the labor exchanges, and 9 million utilize their services. Separate funds are used to help refer other job seekers to jobs, such as trainees through the Workforce Investment Act. Still, the offices often co-locate or coordinate with each other.

Just as it has tried to with other government functions such as Social Security, the Census, the Federal Emergency Management Agency and national defense, the Bush administration has been trying to outsource or eliminate services for the unemployed. The agenda has been to consolidate the funding lines and administration of job placement services, and hand over control to local areas and the private sector.

While consolidation of programs and local control might generate some cost savings, there are reasons to suspect that it might raise costs and reduce job placements. For example, the various labor exchanges serve different clients with different needs and skills. An important function of the exchanges is to monitor the job search activity of unemployment insurance recipients to make sure that they actively pursue job opportunities. A system in which automated phone calls replace human contact is unlikely to spur those on unemployment insurance to search for work. Moreover, local employment offices with a narrow reach are less helpful than state agencies for workers who are willing to take a job in a different part of the state.