House wants unemployed to earn GEDs against all economic sense

Here is a doozy.

What is the purpose of the GED? Is it a market signal, indicating your employability to hiring agents or does it follow a human capital path wherein earning a GED is actually a process that increases your skill set?

The House wants all unemployed workers without a high school diploma to earn their GED. Their explanation is assuming that the GED works purely through human capital theory, e.g. currently unemployed workers who don’t have a high school diploma will earn more skills that make them increasingly employable by enrolling in and earning their GED. Is there any evidence for this?

If we look at what the research says ¹, we learn that the GED is only effective at boosting earnings of lower skilled recipients. Tyler suggests that this may indicate that the GED is acting as a labor market signal, demonstrating to future employers that they have the work ethic and extra motivation low-skilled high school drop-outs are believed to lack and are worth hiring. This is supported by the fact that not only are low skilled GED earners the only ones who see greater earnings and employability as a result of earning a GED but also by the fact that there is a lag to the “GED impact”. One possible mechanism for this lag indicates that the GED is a signal for unobserved characteristics that suggest an employee is ready to learn and earn those additional skills they do not current possess, and therefore, low-skilled workers who earn a GED are more likely to be placed in a position where they will have the opportunity to increase their human capital and future earnings. Since high skilled employees don’t seem to gain any benefit from a GED, that suggests that their existing skill set already sufficiently operates as a signal of employability such that there is no need for an additional signal of initial readiness for hiring. Even if this were the case, if the GED was truly ruled by a human capital model, we would expect high skilled GED recipients to have become increasingly skilled through the GED process and, therefore, they should also benefit from increased earnings due to receiving a GED.

So what does this all mean? Let’s remember that the unemployment benefits being offered only exist for 99 weeks now (and would be lowered to 59 weeks in the House proposal). This means that all the unemployed we’re worried about were in fact employed within the last year and seven weeks. Do we believe that those who were employed as recently as one year ago, already deep into the economic downturn, who do not have a high school diploma fall into the low or high skilled group? It seems obvious to me that if you were employable 59 weeks ago you would almost certainly be in the upper half (if not higher) of the skills distribution among those who don’t have high school diplomas. So the result of the GED policy is likely going to lead to no benefit for these workers and will probably even decrease their earnings since they will have some costs associated with earning the GED– be it the fee for a course, the fee to take the test, the opportunity costs associated with spending time studying and working toward a credential that has no benefit, etc.

Worse, by dramatically changing the contexts where folks earn a GED, we’re likely to completely change what signal the GED will send future employers. In essence, the impact is unpredictable, but it’s hard to see a path whereby earning a GED increases in value as a result of policies that make certain that GEDs will be earned more broadly and under duress and not  by voluntary action.

So forget about all the other stuff you read on the GED requirement. We don’t have to worry about fairness, discrimination, or just plain shitting on people when they’re in some of the most dire straits they’re likely to see by adding even more to their burdens. The GED-only policy on unemployment benefits is simply unlikely to do anything other than transfer resources from the unemployed to the American Council on Education and companies that have GED prep classes.