Home > unemployment > No evidence of “structural unemployment” in the US (2 graphs)

No evidence of “structural unemployment” in the US (2 graphs)

from David Ruccio

Beveridge

Rand Ghayad and William Dickens (pdf) have discovered a shift in the so-called Beveridge Curve (Figure 1) associated with the growth in long-term unemployment (Figure 2).*

Their study is significant in that  they find no evidence of “structural unemployment,” the idea repeated ad nauseam by anti-stimulus economists that there’s a mismatch between job openings and workers’ skills—and therefore the problem of unemployment will be solved when workers decide to acquire the correct set of skills. Instead, they find pattern of increasing vacancies with little or no change in unemployment in the recovery from the most recent recession across all categories (e.g., industry, age, education, and blue- and white-collar groups) except one: short-term unemployment. Thus, “all of the increase in vacancies relative to unemployment has taken place among the long-term unemployed.”

In other words, what Ghayad and Dickens have discovered is a growth in what we might call the Reserve Army of the Long-Term Unemployed. It’s a large group of workers who have been unemployed for 27 weeks or more and who are being sacrificed on the altar of relying on private decisions to create jobs.

Well, private employers have not been creating an adequate number of jobs. Not by a long shot. The result is a large group of formerly employed workers who have no prospect of finding a job anytime in the foreseeable future—and who, at the same time, serve as a reminder to all the other workers who do have jobs that “there but for the grace of Capital go I.”

*The Beveridge curve—the empirical relationship between unemployment and job vacancies—is thought to be an indicator of the efficiency of the functioning of the labor market. The idea is that, when job vacancies rise, unemployment falls, following a curved path that typically remains stable over long periods of time.

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  1. sergio
    December 16, 2012 at 2:33 pm

    “… the problem of unemployment will be solved when workers decide to acquire the correct set of skills”

    What does this mean? This means that you are useless worker, since the money and efforts you spent to get your wrong skills are wasted. Now, in order to survive and be more efficient and productive you need to get correct skills. Nobody cares how old are you at the time you were told that skills you have are “not correct”. Nobody cares if you have enough resources to get new skills. But you need to get those new skills. Why? Simply to solve problem of unemployment for us. Oh, you don’t know what those correct skills are? Don’t ask us. We are economists. We are scientists, not volunteers to help workers. Use your brain, lazy inefficient worker.

    However, I see the problem in “economists” who say things like quoted. If that is all they can conclude from mathematically sophisticated neoclassical analysis, then such “economics” has wrong set of skills. It lost moral right to be taught in universities and call itself a science. The problem is that such economists, not workers, have wrong set of skills, and they urgently need to acquire correct set of skills. And in order for them to realize that, they should be unemployed, first. Yes, every mainstream neoclassical dogmatist should be unemployed, before they can make conclusion about workers’ skills. Workers, at least produce something material, they at least have some skills to produce. What do economists produce for economy? Nothing. Just empty stupid papers useless textbooks, full of fantasy ideas, and waste of money on conferences. What did they discover for the last 200 years? Utility? Equilibrium? Where are they? Most of the countries in the world are persistently poor, in spite the fact that we have Nobel prize winners in economics and army of “gods” who believe that using utility they can explain this real world. Mainstream economists is dead-weight loss for society, and the sooner they acquire workers’ or farmers’ skills the more productive our economy will be.

  2. December 16, 2012 at 2:35 pm

    Robots – and foreign workers paid slave wages – don’t buy what they make. So nobody has the cash to buy what could be produced. After 300 years of building labor-saving devices, the engineers have succeeded in permanently eliminating the need for much of the labor previously required. But society is not prepared for their success. The result is a permanent financial collapse.

  3. December 16, 2012 at 5:46 pm

    There need be no financial collapse if the unemployed workers are provided with a minimum guaranteed income which will support demand for goods and services provided by an increasingly automated production sector of the economy.

    • Steve
      December 16, 2012 at 9:50 pm

      Precisely Helge.

      All reforms to profit making systems are just “can kicking” means to a no longer relevant economic reality changed and made available by technological innovation. If we want to have the best of both profit making systems as well as a more humane system we must up our game to real wisdom and its evolutionary, paradigm changing ideas. Ideas like changing the consumer financial paradigm from loan ONLY to Dividend….(an evolutionary policy reflective of the wisdom of Grace, the free gift, and which is based on the legitimate idea of the “free lunch” of an inheritance, in this case the communally owned inheritance of the technological innovation {not the machinery of such itself}accumulated over the centuries)…
      and loan if desired and creditable. This transformational and yet perfectly practical policy, given the inexorable march of technological innovation and its effects on human effort and even human input/employment is what will enable us to maintain and humanize a profit making economic system. To demand that we keep either no longer adequately functioning profit making policies or equally non functioning employment policies as “solutions”, especially when the changing of the consumer financial paradigm enables both profit and employment to remain a part of the new transformed economy/society….is in the end nothing more than stubborn irrationality.

  4. December 17, 2012 at 8:02 pm

    The ‘Structural Unemployment Problem’ has nothing to do with a mismatch of skills to job requirements. Rather, our unemployment problem has been greatly exacerbated by over a decade of replacing HR Recruiters with software that doesn’t work, in the name of cost cutting.

    There are MILLIONS of jobs out there, and MILLIONS of applicants. Just because your resume doesn’t contain the exact keywords contained in the job description, or isn’t formatted in the only way the software can read it, doesn’t mean you’re not qualified – but good luck getting an actual PERSON to read your Application, because there’s no one at the office.

    … and just because the software companies now rely on to find candidates, can’t actually find candidates, doesn’t mean they’re not sitting there, in your company database, right now, just waiting anxiously by the phone for someone to respond to the Application they made AGES ago …

    With thousands of job openings on their websites, the Corporate Muckety Mucks blather on about ‘insecurities in the regulatory environment’ causing a reluctance to hire. Their only insecurity is whether the regulation will continue to support a corporate welfare state, so they don’t have to worry about actually RUNNING THE BUSINESS.

    Given the current hiring systems in place, a bank couldn’t find Warren Buffett if he applied for an Investment Advisor role, because THE SOFTWARE JUST DOESN’T WORK.

    But some Managing Director got a huge bonus for saving $millions on recruiting costs, and it’s cheaper to hire a few lobbyists than thousands of workers, so what the hay!

    We’ll just give it a fancy name like ‘structural unemployment’, and blame the applicants and the government for all our problems. Yeah, that’s it!

  5. February 5, 2013 at 12:16 pm

    The skills of most people whose seeking employment didn’t match the demand of most companies. More degree holder remains unemployed as they didn’t find their suitability to available job market. I think the only solution to decrease the rate of unemployed is not just education but also the drive of people to give it a try to unfamiliar field before saying that the job is not working or effective to them. You might also enjoy this article http://intellitalent.com/bob-marshalls-december-bls-analysis-1-4-13/.

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