I was very happy to see Krugman post today about the structural unemployment-education issue that I’ve been repeatedly flogging here. As usual, he’s got the goods:
via Mark Thoma, the very cautious Dave Altig looks at recent studies and concludes that
“we’ve been pretty sympathetic to structural explanations for the slow pace of the recovery. Nonetheless, we have yet to find much evidence that problems with skill-mismatch are more important postrecession than they were prerecession. We’ll keep looking, but—as our colleagues at the Chicago Fed conclude in their most recent Chicago Fed Letter—so far the facts just don’t support skill gaps as the major source of our current labor market woes.”
Am I totally certain that the problem isn’t structural? Hey, I’m not totally certain of anything! But there really is no evidence, none at all, for a story that nonetheless gets asserted as absolute fact in op-ed after op-ed.
Maybe the word will get out. It had better. To pick just one example, from the Atlantic yesterday:
In a structural crisis, employers rid themselves of employees who had the skills appropriate to earlier stages of economic development, but who are no longer increasing their productivity, and replace them with workers that have new skills that lead to faster rises in productivity. During such junctures, economic growth does NOT simply lead directly to more jobs and higher wages.
Gladstone, I should be quick to point out, identifies other causes for the recession, and his piece is overall worthwhile. It just seems to be another case of the temptation of the structural narrative to overwhelm the need to show evidence.
I grow discouraged!
thanks for the post. I tried to read the link to the Atlantic article by Prof Goldstone in the Atlantic, but gave up trying to decipher it.
There is a mismatch – it just doesn’t involve skills. It involves how much or little workers are willing to be paid for their skills. And it’s structural in that even if there suddenly was a will to work for considerably less, most Americans can’t afford to feed, house and educate themselves and their children if they are paid much less.
It’s just not polite to come out and say that directly in those op-eds, but I’m sure it will be eventually.
Krugman and Peter Capelli make a good case that there is not a skills gap or a highly structural component to the recession. but this,
isses the larger point that entire industries are collapsing or being moved overseas. There are fewer jobs and wages have been low for decades.
HP will soon lay off, what, 27,000 and locally the supermarket Albertson’s is going to lay off 2,500. Company’s continue to offer early retirement buyouts and simply eliminate the jobs altogether as the companies shrink and provide the same goods and services with fewer people.
I just watched Barbara Chow of the OMB perfunctorily toss out “persistent structural unemployment” as one of our current big challenges, and I had to do a double take to see if the consensus among economists on this issue has changed. And it sounds like, if it has changed, the change may have been to the contrary of Barbara Chow’s claim.
comrade scott's agenda of rage
Anytime I hear someone yammer on about the so-called skill mismatch being a drag on employment, all I think of is one thing:
It’s a load of crap used as an excuse to find lower cost labor sources be they via the H1B Indentured Servant program, moving production offshore or to the Neo Confederacy in a pinch.
I’ve got a friend who’s a pointy-haired mid-level manager at Microsoft. He’s been there 20+ years and is exceeedinly wealthy and a good card-carrying DFH.
Except when it comes to this. He claims M$ can’t find “qualified” developers, engineers, etc., despite the fact such people are all over the place and more than you might think have the mobility to move to Seattle for the chance to work at M$.
No, instead M$ lobbies hard for H1B Visa increases. When that didn’t happen to their liking, they created a satellite work “campus” in Vancouver where they bring in tons of indentured servants, pay them a pittance *and* don’t need to sweat their health care costs.
When people wonder why it’s hard to find a job at a place like M$ despite their pleatings about a skill mis-match, this is why.
Wash, rinse repeat around the country.
@comrade scott’s agenda of rage:
In the case of MS, I would argue that, if they’re the ones that define “qualified”, then I think your friend may be right. The problem is generally that MS’s definition of “qualified” is fucked up. The proof is in the products.
@comrade scott’s agenda of rage:
My place has two civil engineer openings and received well over a hundred apps. Yeah, we have a shortage of technical help, alright.
comrade scott's agenda of rage
There’s also a mobility mismatch. How many people simply can’t afford to leave their current residence? Walking away from a house and a mortgage simply isn’t an option for most people.
I know I’ve read some pieces on the geography mismatch and how ‘Murkins are a far less mobile society now than we were 30 years ago. But those same pieces could be based on the same bullshit foundation as the ones about a skill mismatch.
comrade scott's agenda of rage
Yeah, like I said, skills mismatch is simply a dog whistle.
I am a Fed gubmint employee. Whenever we advertise an IT opening in my agency (for a position in DC), we limit the applications to the first 50 because apparently our HR people don’t want to plow thru expected 500+ that we get for any job.
And I remember back in the day that people who were actual Fed IT people (as opposed to
scabs, contractors) were laughed at because we could make *so much more* in the private sector. Now it’s us who “make too much” and have benefits “far too generous.”
As I’ve said in other posts, the war on the middle class started in 1980 and we’re seeing it come to it’s logical conclusion now.
I grow discouraged!
I think it needs to be viewed as “some growth is discouraged.” I have come to the realization that though Rethuglicans talk about the mythical prosperity for all under their enlightened and noble leadership, that actual universal prosperity is exactly what they’ve never wanted. People are like weeds and too many resources available for their benefit would promote the growth of the *wrong* classes.
Look at our history. Redlined communities, educatioal disparity, employment restrictions, etc.
Just as in the way Southern bigots wail about the damage the “mud races” do to the (white)(right) species, ignoring the sheer irony who was responsible for carting them over here by the shipload (though they would merely counter that it wasn’t the transport that screwed to pooch, but in ultimately thinking that they ever deserved “rights”, let alone “equal” or otherwise).
Considering all the culture wars taking place, I wince at what could have been when I think of how the minority students in Little Rock during the school integration flap looked straight out of “Leave It To Beaver.” Imagine if instead of the pervasive hated spewed during the whole Civil Rights struggle (continuing to this day), they were warmly welcomed as equals and were encouraged to contribute to the greater good of society.
Clearly, that some cling to the notion of civilization being diluted by inferior humans, will continue to held us back as it adds a level of extreme dysfunction to what should truly be a merit based society.
I concede that government is the most successful form of banditry, but am sick to death of GOP gangsters who proclaim without shame or irony, that “Nobody can be trusted to hold the money, so it’d be best if *we* held the money” so to speak.
Voting for/supporting the lesser of two evils makes sense when you consider one is somewhat less rapacious than the other. I understand and reluctantly accept that governments waste gobs of money, but can they at least f#ckin’ waste it on sh!t we can use like jobs and infrastructure?
Gin & Tonic
@comrade scott’s agenda of rage: The biggest drag on worker mobility is health insurance. If you can’t leave your job because you don’t know how you’ll be covered, or what will be excluded as “pre-existing”, you stay put.
@Gin & Tonic: I remember a good point made when Rethugs were bashing Caadian healthcare, how it actually help many Canadian companies compete for contracts more effectively because they didn’t have that element of uncertainty hanging over their heads all the time.
@comrade scott’s agenda of rage: And I just read, I think it was in the Atlantic or some place, that the problem is that we move too much. I think it was something posted on Sullivan about how the youth are moving up and and away.
(I guess that might just be another standard anti-youth rant. Get mad if they move back home. Get madder if they move away.)
@comrade scott’s agenda of rage:
Have been going through some historical documents and learned during St. Ronaldus’ governorship, he endured some state employee strikes, so I think he came into the White House armed and ready for the first federal strike–hence the air traffic controllers.
Just Some Fuckhead
There’s a skill mismatch insofar as we don’t have the skill to figure out how to continue selling overpriced houses to each other when the bottom has fallen out of the market and banks aren’t lending.
We’re ruled by fools.
Here is an interesting piece that gave me some hope, at least the parts of it which claim that austerity will ultimately cause the self-asphyxiation of the rentier class http://ftalphaville.ft.com/blog/2012/06/08/1030801/the-end-of-artificial-scarcity/.
I don’t understand your comment.
If there is good empirical evidence from a variety of sources that there is no big skills mismatch creating a lot of structural unemployment, how can one of many of Goldstone’s unsupported assertions be evidence against it?
Is there evidence that we are going through the greatest transformation of productive techniques since the Great Depresssion?
What is your evidence that layoffs at HP and a supermarket chain have anything to do with transformation of production technique?
Standard labor theory classifies unemployment into cyclical due to business cycles, frictional due to normal movements in and out of the labor force and around the economy, and structural due to disequilibrium in the labor market due to shortages of certain skills.
Those three components are always there, the question is, what proportiosn of unemployment are due to each factor.
All the evidence that I have seen is that the cyclical component dominates the others.
I keep reading about this productive transformation stuff. What is it? Smart phones? MMO ‘puter games? Green energy? Sudoku puzzles? What are the sectors? What is the transformation?
Bruce Bartlett has been on this forever, as I think has the less econ-y David Frum.
It’s interesting to read excommunicated conservatives on economic issues. I always like to test my assumptions by reading people I disagree with; but you can’t learn anything about reality by reading NRO. It appears that everyone who cares about empiricism even a little bit has been arguing that the problem is demand, for a long while.
Not that it’ll affect our political discourse or policy decisions, but it is important to try to understand these things.
I don’t know. The linked article sounds like an anarcho libertarian wet dream. I don’t see how it provides a solution to anything. For example, the last section of the post talks about giving goods away for free and moving to a barter system. So, who needs an advanced civilization when people can just move back to small villages, eliminate money and credit, and move to subsistence living under a barter system?
Judas Escargot, Your Postmodern Neighbor
That is a good, good article IMO.
If there’s a ‘terminal state’ to Capitalist economies, it would (by definition) have to be some kind of steady-state, post-growth (and yes, post-scarcity) environment.
I sometimes wonder if Japan, with its high growth in the 1970s-1990s, just happened to leapfrog us and get there first. Then in 2008, we finally showed up to join them. And now it’s Europe’s turn.
In other words, maybe ‘malaise’ is where a Capitalist economy has to inevitably end up, given enough time.
If something like this is really true, China will have to hit a “growth wall” of its own at some point.
Won’t that be interesting…
Interesting chart from TPM
Is ‘The Private Sector Doing Fine’? (CHART)
The chart is depressing.
The recovery in the private sector is weak and sickly but but it is a recovery. But very week. Three years after the recession ended and less than half the lost jobs replaced.
Other comment is, if you want to worry about structural unemployment, how about starting with government? I suspect at least some of the advocates of structural unemployment explanation think that the bitter medicine of a forced large reduction in government services is what this economy needs. In which case things should start to boom any time now. But I would not place any bets on it. The rich people and mega funds that invest for a living aren’t betting on it, they are stuffing all of their money into holding public debt of countries who have their own currencies. Sort of like using the governments of Japan, the US, Canada, Europe IEdit: not Europe, I meant Germany!] and the UK as ginormous mattresses into which money they cannot find anything to do with will be stuffed. They don’t see a surge in productivity or economic activity over the next five years at least.
@comrade scott’s agenda of rage:
The definition of “qualified” has changed over the last 20 years. 20 years ago, the definition of “qualified” was more “is trainable to do this job in few years” than “can do this job the minute he or she walks in the door.”
Before I started work as an engineer some 30 years ago, most major American corporations has extensive training programs that took a graduate with a good basic engineering education and provided substantial additional technical training needed to further the company’s long-term strategic goals. It was part of the womb-to-tomb culture of these organization. Engineers stayed for 30 or more years with the same company. That started to die shortly after I started working, as these programs were cut back severely to improve the short term bottom line.
Now, workers are viewed more as fungible commodities that you pick up on a spot market. Employers don’t really want entry-level; you’re supposed to supply your own training, whether through the education you financed yourself or through training gained from some other employer. While programs like government-sponsored education and job training are laudable, they’re doing what the corps used to have to do for themselves. It may be enabling the short-term mentality, because the private sector can assume that the government will take care of the long-term strategic concerns about human capital and they can simply concentrate on short-term gains for the management and shareholders. It makes you wonder if this is such a great idea if you don’t recoup the government investment through taxation.
@Judas Escargot, Your Postmodern Neighbor: Haven’t you wondered where the “We need to be more like China” rhetoric has disappeared to recently? I have.
@jl: Looking at who is unemployed and long term unemployed, the skills mismatch is in low skilled labor. Kids and the unskilled. One of the industries that shed a lot of labor during the recession was retail, for instance.
But how much of the unemployment in low skill sector is cyclical? What proportion of low skill people could find jobs if there were a sudden increase, on average, in demands for all final goods and services? That is the question that needs to be answered.
When you say that unemployment is sructural, then you are saying that a big increase in demand for all goods and services would not affect their unemployment much. Do you find that scenario plausible?
@Brachiator: I thought the article was a little flaky myself, but still noteworthy just for the fact that it dispenses with all our most commonly held assumptions. The crisis in the Eurozone seems to be spawning some new ways of thinking. Most of this new thinking is absolute nonsense, but eventually someone is going to strike ideological gold.
@jl: If only Obama had said “improving”. Annoying how a minor (practically irrelevant, given the context) change in verbiage can send the children into a tizzy.
That said, is there a word for describing the structure of our economy as being problematic without the jargonist overtones of “structural unemployment”? Like the fact that the structure of our economy relies too much on consumerism/financial gimmickry and not enough on social services and real world problem-solving is an issue, right? Is there a word for that kind of challenge in econo lingo? Or do economists not really deal with the impacts of our economic structure on the real world outside of the confines of things like unemployment and GDP?
@Suffern ACE: One has to wonder if the internet destroyed those jobs for good, and that even in the unlikely event that the economy was to experience a 1990s style boom, retail employment would not come close to approaching its former levels.
@Suffern ACE: Is that a skills mismatch or an underemployment problem? I know people who are taking jobs that they’re way overqualified for. The phrase “shit rolls downhill” suddenly comes to mind.
Judas Escargot, Your Postmodern Neighbor
The Chinese govt’s numbers are not generally considered trustworthy, but some have looked at the inputs (energy and steel consumption, durable goods orders, construction supply orders etc) and claim that China’s already in a slowdown (which would explain this week’s rate cut).
China has done a good job of positioning itself as the manufacturing center of the world (at least for consumer goods). Problem is, the Western Middle Class Consumer is apparently an endangered species, and the Chinese government has done nothing to really increase their domestic consumer base.
With the US and Europe losing its taste for consumption, and with no domestic middle class over there to consume their prodigious output… China pretty much has to slow down at some point.
And yes, this would be a demand recession. Which (untreated) leads to deflation.
@jl: But if you look at that chart, the private sector job numbers are improving(albeit too slowly), while public sector jobs numbers are deteriorating. Those two things are intertwined. If the public sector was adding jobs at the rate they were during the Reagan administration, there would more aggregate demand, which would increase private sector employment.
I erased my snarky answer which was uncivil towards economics.
If you want to talk to an economist, for stuff like the market not taking damage of fossil fuels into account, or effect of corporate manipulation of consumer tastes, or real estate development incentives and patterns that mean no way to exercise or eat right and those have unexpected long run effects on health. Then you should talk about externalities or lack of required equilibrium in some sectors of market. If you got.
If you want to talk about health insurance and provider costs doing counterproductive and harmful stuff in the healthcare market. And you have to talk about problems of asymmetric information and market power.
‘Structural unemployment’ and ‘structural adjustment’ have established meanings in macroeconomics, and you are not going to uproot them easily.
But, as general advice, I would say that the jargon of economics is so strange, and the meanings so divorced from any sane and practical consideration, probably best to give a specific example and avoid the jargon as much as possible.
If anyone sees me jargoning too much, I give you damn kids permission to be uncivil, but you still need to get off my lawn!
You wanna talk standard labor theory or you wanna talk real world?
Jobs keep going away and not coming back. There are fewer jobs and yet despite the demand for jobs, wages continue to be stagnant.
I’m not seeing much of a business cycle. I see the steady elimination of industries and jobs.
I agree. And I think that point was in the TPM post. My main point, and very important goal in the comment was to snark, never snarked in as much detail or with as much care as before, around about this mystery structural adjustment that explains everything, but no one can name, or describe, or conceptualize in any way, except to say that it explains most of what is happening.
It is the most dominent economic force, shaping the biggest downturn since the great depression, but it never occurs to its proponents that you might want to fine out what it might actually be, someday, somehow, somewhere.
Oh, if only we knew, if only we knew…
we could still sit there and do nothing.
@Brachiator: OK, fine. I can’t understand what you are talking about when you try to describe the real world, though.
I agree with this. It goes along with my standard complaint about disciplines usurping common words for their own purposes. Stick with Latin, people. Nobody uses that anymore. Or, even better, just name whatever economic problem it is after Reagan. We’ll get it.
Fair point. On the other hand, I was listening to a recent BBC news story about persistent high unemployment among young people in Spain. A number of the most frustrated were looking toward an old idea, “let’s just get anngry and burn this shit down.”
But yeah, some people seem to be scrambling to look at the problem with fresh eyes, and let’s hope that this results in something that works better than the old tricks.
Is it really that hard? I teach a course in taxation. To try to make the numbers real, I ask the students to take a walk. So, we go to the city of Glendale, the corner of Colorado and Brand. There is a big, empty 3 story Borders. It went out of business because amazon killed ’em. The coffe shop inside went out of business. All the jobs, from stocking books, to selling books, to selling coffee went away. Much of the foot traffic went away. The restaurants where employees and customers ate breakfast and lunch went out of business. The movie theater that attracted some of the foot traffic closed down. (Another movie theater, still in business, fired most of the projectionists because fewer are required to handle digital screenings). The stores that came in to replace what is left are smaller, mom and pop family businesses with fewer employees, and almost none who are not family members. And they are barely scraping by. Sales are less than before, and realtors who try to maintain the previous premium levels of rents end up with empty buildings.
Whatever skills the former employees had or developed don’t much matter. Nor can the loss of jobs be laid to either structural issues or the business cycle.
Repeat, with variation across the country.
It just seems that industry can meet demand with current labor numbers but just demanding more hours worked and no increase in pay.
Any risk that practice may take is pretty much taken up by the goverment since many of these business are either too big to fail or simply liquid enough that the upper level of management can just helicopter off the org chart, declare banruptcy and drop down onto another stump of a buiness to repeat the cycle.
Millionares are protected, at the cost of creating new millionares (because that’d be a risk to the current class of wealth)
@jl: does the private sector define how well they are doing by employment? It’s crappy for people that care about jobs (especially given that it doesn’t include population growth rates, I think) and even if you think corporations are people, they care about profits not employment
If there were really structural unemployment, and there were really shortages of qualified personnel in key sectors, then there would be bidding wars for the services of the too-rare qualified people. Evidence for such bidding wars appears to be lacking.
“I can’t find enough qualified people” seems most of the time to mean “I can’t find qualified people willing to work for the handful of peanuts which is all I’m willing to pay right now”.
Snarki, child of Loki
From the vantage point of the 80’s and 90’s, I could look back to the Great Depression and ask “what the FUCK happened??? Why were they stuck in that deep hole for so long? How could so many allegedly smart people be so blind? Couldn’t anyone DO anything about it?”
From the vantage point of 2012, it’s all too clear.
@comrade scott’s agenda of rage:
It would be nice if they mentioned that. Many of those applications are very time consuming (I know because I’ve done them). I don’t want to think of the hours I’ve probably wasted because I wasn’t one of the first 50 to apply.
A friend and I have made a running joke out of this phenomenon. We’ve started a collection of “preposterous” job descriptions that we’ve seen. Three or four jobs under one title (sometimes with a “/” or “-” in there) paying very low wages. Jobs labeled as “entry level” that require years of experience. Lower paying job titles with responsibilities that have traditionally been the province of managers or even directors. Or the old favorite–full-time jobs being labeled as part-time.
It’s crazy out there. Even in states where employment numbers aren’t too bad. It’s hard to avoid thinking that there is a certain level of taking advantage of the situation. Income inequality levels and corporate profit margins would certainly encourage that kind of thinking.
I was reminiscing with my son the other day about how mad he used to get about people that said they couldn’t find a job. He’d say, if you can’t get a job on the first day (restaurant work etc) then you can’t really want one.
We laughed about it in a dark bitter way. He started working in 1998. His first time voting was 2000. He and his gf were up all night with the results, *so* excited. How the expectations and dreams of youth pass…
One of the reasons that some economists and “public policy” experts frustrate me is that their theoretical gibberish is easily contradicted by the actual behavior of real human beings. So the author of the Atlantic article, writes:
This assumes that a home owner is a rational actor with infinite amounts of money, who simply shifts his or her resources to savings in response to a decline in the value of his home.
But a home owner who can’t afford the mortgage and can’t sell the home is in a big ass jam. He probably has no savings and certainly isn’t going to increase savings until home prices rise again. And if the home owner and his or her spouse has also lost a job or had to take a pay cut, or sees living costs rise, you don’t need economic theory to see someone going broke, going into foreclosure and possibly losing everything.
@Brachiator: I only got as far as “we need a good war to blow all our extra shit up.”
Three years experience required using a programming language that’s been out two years.