Has Structural Unemployment Become Important in the United States? Becker

The persistently high unemployment rate in the United States during the Great Recession has led to claims that much of American unemployment is “structural”. According to this view, the demand for workers by companies is insufficient to employ all unemployed workers because there is a mismatch between the skills possessed by many American workers and the skills required by companies. The structural advocates believe the skills demanded by companies tend to exceed or otherwise be different from the skills possessed by many unemployed workers. As a result, so goes the argument, these unemployed workers cannot find jobs and remain unemployed for a long time.

 

Although I will argue that not much of American unemployment is “structural” or due to such a mismatch, the structural theory is on the surface supported by the large number of long-term unemployed, the most disturbing feature of American unemployment during the Great Recession. Structural advocates claim that unemployed individuals with skills that are only weakly demanded face prospects of remaining unemployed for a long time. Since the unemployment rate rose above 9% in 2009, the fraction of the unemployed who have been out of work for over 6 months has grown to over 40%. Prior to the start of the recession in 2008, long-term unemployed were a little under 20% of total unemployment. Although long-term unemployment usually rises during prolonged recessions, the magnitude of the rise during the current recession is unusual for the United States.

 

While long-term unemployment in the American labor market jumped up during this recession to unusual heights, there is no evidence of any large mismatch in US labor markets prior to the recession. In 2007, for example, the total unemployment rate was still under 5%, and less than 20% of the unemployed were out of work for six months or more. It is not credible to believe that the underlying structure of labor demand in the US has shifted so much in the few years since the recession began that almost 4% of workers (0.4x9%) will not have employable skills once the American economy gets out of its doldrums, and begins to grow at its “normal” long-term rate of about 2% per capita per year.

 

The JOLTS monthly data prepared by the federal government on new hires and job vacancies in the United States show over 3 million job vacancies in recent months, and over 2 million openings even during months at the height of the recession. Given this large number of job openings, I conclude that the millions of individuals who have been out of work for 6 months or more could find jobs if they are willing to be flexible on wages and other conditions of employment. Put a little differently, millions of job openings each month in a labor market with considerable flexibility in wages, which describes the American labor market, makes it really hard to argue that many of the long-term unemployed cannot find jobs.

 

How then can we explain the high and persistent levels of long-term unemployment during this recession? One clearly important factor is the extension in July of 2010 of unemployment insurance to cover workers who have been out of work for 99 weeks instead of having their payments end after 6 months of unemployment. Studies have shown that many unemployed find jobs just about when their unemployment payments expire, after 6 months of collecting benefits under the old system. It does not require any complicated economic analysis to conclude that the extension of unemployment payments to 99 weeks will encourage many individuals to remain unemployed after 6 months of unemployment, although they would have found jobs under the old rules. They will turn down jobs that may not be as good as those they had before becoming unemployed in order to continue to collect unemployment benefits. For that reason I opposed the extension to 99 weeks in my post on 7/25/2010 (“Should Unemployment Compensation be Extended?”).

 

Long-term unemployment may also partly be the result of uneven employment opportunities and uneven prospects for housing prices in different states and regions of the US. States like California, Nevada, and Florida that had major construction, jobs, and housing booms in the years before the onset of the recession suffered the largest hits to employment and to housing prices. Unemployed workers in such states may be reluctant to move to states where more jobs are available at good wages since they may be involved in foreclosure litigation and other issues related to the depressed housing market. They may also turn down jobs that pay much less then the unusually good wages they had during the boom times to continue to collect unemployment benefits for up to 2 years.

 

Other factors are also involved in the sharp rise in the number of workers unemployed for over 6 months.  Yet overall they do not justify the conclusion that many unemployed individuals are unable to find jobs because the American economy has too little demand for their set of skills.

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DR,Challenging elected oaficifls in the media seems to have little effect because they are propped up by the resources of the special interests that you rail against every day. You can fill an hour a day banging the drum with economists, journalists and commentators to drive home the point, but to what end? Until the representatives of the corporations in Washington are voted out of office in favor of representatives of the people, nothing will change. Incumbents have a huge advantage based on name recognition and the lack of credibility of 'unknown' challengers. You have a platform. You can use it to support challengers willing to run against incumbents from the corporatocracy. Economists, journalists and commentators can help you make the argument, but we need candidates to drive real change. By providing a platform for challengers to establish name recognition and present their views, you can help them gain credibility and give them a real chance against the Democratic and Republican political machines. Start Now.

[Sapet]

All thanks to the oucunsrtiog of US jobs, the manufacturing of US products overseas. The Einsteins that be thought it would be great to replace skilled workers with cheaper labor to product less expensive products, that we'd eventually pay MORE for, while those displaced workers took unemployment checks, couldnt afford their mortgages or health care (which is not being taken advantage of via the a good crisis should never be wasted' postulate). And, other workers who eventually DID find employment are asking if you want extra creme in that latte or fries with your order. The result? Your bleeding nation and it IS a perfect depiction of what is going on as it represents each of us, individually.

[Julio]

? Way to make yourself look silly anwyay, I disagree with both of you. It still doesn't look that great in Texas compared to Nebraska and North Dakota. Those states have the least amount of red/pink.I live in CA where things are super F'ed up. I haven't worked full-time in over a year I'm considering Taco Bell at this point.

[Asami]

Also, here's another poser Michigan is aomslt all 10+ red, even across the lake. That stops literally at the Northern border with Wisconsin. I don't know enough about that region to know how the two compare; is Wisconsin that much more laissez faire than than Michigan, or is the breakpoint actually pretty high on how far you have to go with unions/regulation to kill unemployment?

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