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Home Publications Blogs Beat the Press Structural Unemployment: Does Anyone Care About Evidence?

Structural Unemployment: Does Anyone Care About Evidence?

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Wednesday, 09 February 2011 05:41

Most news outlets have given considerable space in recent weeks to the argument that the U.S. economy suffers from structural unemployment. This means that the reason that people are unemployed is that they lack the skills necessary for the available jobs. This contrasts with the idea that the unemployment is primarily cyclical, which means that it is the result of a lack of demand in the economy. This issue is central to our understanding of the economy since it effectively raises the question of whether we blame unemployed workers for lacking the skills needed to get a job or we blame policymakers for lacking the skills needed to run the economy.

The evidence for the structural unemployment argument has mostly been anecdotal -- interviews with managers who complained that they could not hire people at the wage they wanted to pay. The news reports on structural unemployment have not sought to look for the sort of data that would support this view of the economy, such as evidence of rapidly rising real wages for some occupations or a large increase in job openings.

One item that had been cited as supporting the structural unemployment view was the modest increase in the number of job openings from the trough of the downturn in the summer of 2009. Job openings had risen by close to a third from their low, although they were still down by more than 25 percent from their pre-recession level. Openings also never rose above 25 percent of the number of unemployed.

In any case, given the importance of the job openings number for those making the structural unemployment argument, it might have been expected that the release of data from the Labor Department showing that the number of openings had fallen for the second consecutive month would have gotten considerable attention. Instead, it merited just a few small pieces or blognotes.

Comments (6)Add Comment
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written by Ron Alley, February 09, 2011 6:55
Dean,

What kind of a Republican are you anyhow? You must be off your meds. Evidence doesn't matter, it's the narrative that counts. We need a narrative that demonizes the population, not evidence that questions our core belief that the human race was created to serve higher corporate interests -- lower wages, serf like workers and lower taxes.

The core issue is that many journalists and many readers have never worker in an enterprise that actually makes products. Every day in a factory brings problems that challenge skills and calls for workers with greater skills. Sometimes workers with those skills can be hired, but they can almost always be trained. The cost of training (aka learning curve) is great but not insurmountable. Just look at Rosie the Riveter and industry in the 40's. When we actually have structural unemployment, managers won't be talking with journalists, they will be hiring employees who can train and coach.


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written by foosion, February 09, 2011 7:12
Does Anyone Care About Evidence?

No.

This has been another edition of simple answers to simple questions.
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written by izzatzo, February 09, 2011 7:16
The news reports on structural unemployment have not sought to look for the sort of data that would support this view of the economy, such as evidence of rapidly rising real wages for some occupations or a large increase in job openings.


Exactly. Take for example how the health care sector solved structural unemployment by suppressing competition to collect huge economic rents - high enough to eliminate labor shortages and fill all positions.

While the media have somehow missed this shining example of how to solve structural unemployment, it has become a banner of success under the Obama-Immelt Competitiveness Plan.
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written by dunkelblau, February 09, 2011 9:50
Does the record high rate of those unemployed longer than 26 weeks suggest a structural component to this problem? Or is this just one very slow cycle? And if 99 weeks isn't enough to cover it, how long will it take?
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written by dunkelblau, February 09, 2011 10:03
Also I imagine being over 50 is a structural problem-- one that no amount of retraining can fix. Not to worry though, any day now Google will launch that time machine they've been working on.
think globally Dean!
written by pete, February 09, 2011 11:16
Of course its structural...we have folks trained as laborers, when due to increased trade, use of laborers, especially unionized types, has kind of drifted overseas. Jeese, pay attention. Our wealthy country is paying folks like 20X the global labor rate NOT TO WORK! Unemployment is higher than the minimum wage. Please do the math. And as Dunkelblau points out, those out of work the longest have increasingly low prob of getting hired. Well, sorry to say that rational employers (unlike school districts) will fire the least productive first...and they will also be the last hired. Always a sign to me of a peak in the business cycle when the clerks at McDonald's have serious issues with making correct change and so forth. Unfortunately, the structural issue is much more subtle than a simple counting of openings versus unemployed.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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