Structural Unemployment: Posner

The term “structural employment” means high unemployment that persists through the business cycle, rather than being high only during economic downturns, and so is likely to reflect features of the structure of the economy. Structural economy was a characteristic of the post-World War I British economy. Keynes explained it as the consequence of an overvalued pound, which by making British exports very expensive reduced exports and hence employment in production for export, and by making imports cheap reduced the consumption of domestic products and hence the producers’ demand for workers. Demand for labor was so weak that the going wage for many workers was lower than their unemployment benefits. There were also impediments to relocating from geographical areas of high to low unemployment within England; Becker points out that the depression in our housing market complicates relocation to low-unemployment areas in this country.

Unemployment in the United States rose rapidly beginning in the fall of 2008, and it remains abnormally high three years later. Since the economy is still in the doldrums, it is hard to tell whether the abnormal unemployment rate is structural—in which event it may be the “new normal”—or whether it is cyclical. Another complicating factor, emphasized by Becker, is the extension of unemployment benefits to almost two years. Unemployed persons often wait until their benefits are about to expire before they undertake a serious search for a new job, though my guess is that the longer the benefits period, the less the delay in job search; the worker worries about the erosion of his job skills and becomes financially pressed because unemployment benefits are lower than wages. 

Although it is premature to say that we have a problem of structural unemployment, it may also be premature to say that we do not. The financial crash and ensuing global economic crisis was a business-cycle phenomenon, but a crisis of such magnitude can bring about or be correlated with or highlight a structural change in the economy. The most inclusive measure of the U.S. unemployment rate—what is called U-6 and includes discouraged and involuntarily underemployed workers as well as unemployed ones looking for jobs (unemployment in the narrow sense)—has risen from a shade above 7 percent in 2000 to a shade above 16 percent at present. True, it fell sharply between 2004 and 2007, but those were years in which the economy was artificially pumped up by massive cheap borrowing interacting with deep tax cuts. Without the tax cuts and the cheap borrowing, and without a recession (more realistically, a depression), there might have been steadily increasing rather than irregularly  increasing unemployment over the last eleven years. 

The economic crisis is related to, and may have accelerated, trends that could create structural unemployment. One trend is increased competitiveness of foreign producers, resulting in Americans’ substitution of cheap imports for domestic products (and hence domestic production and therefore domestic employment), and in a reduction in exports. This is the same combination that caused or at least contributed to the structural unemployment in the U.K. that I mentioned. The severe ongoing economic crisis in Europe has also reduced demand for U.S. exports. And it is difficult for the U.S. to devalue its way to increased exports and reduced imports because of the role of the U.S. dollar as the principal international reserve currency. 

A related trend, also adverse to U.S. employment, is the decline in educational performance of American students relative to students in other countries. Furthermore, quite apart from the minimum wage and lengthy and generous unemployment benefits, American workers are expensive to employers because of workers’ legal rights and the extensive regulation of workplace safety. The costliness of these rights and regulations leads American companies to relocate as much of their production abroad as they can and accelerates the substitution of capital for labor inputs into production—and much of that capital equipment is produced with few workers. 

Persistent unemployment can feed on itself, because the unemployed have lower incomes and so spend less on consumption (and consumption drives production and therefore employment), and because the long-term unemployed lose skills. And if the pattern of employment shifts, many workers discover that they have not been trained for the types of work in which there are jobs. 

If all public benefits for the poor were abolished, along with unions, unemployment benefits, the minimum wage, and regulations of workplace conditions, the going wage would plummet and unemployment would fall. But as such draconian measures are not in the cards, we have to worry about the possibility of structural employment and think of civilized ways of heading it off.

Comments

[Christian Louboutin UK]

The bitter truth is that the employment prospects for a recent college grad are far more grim, especially full-time employment in their field of study.

[Air Max 2011]

The Occupy Movement and everyone else worried about earnings inequality should be emphasizing the need to find ways to encourage more high school dropouts and high school graduates to get the required background and study habits so that they can, and want to, continue on for a college education.

[Monster Beats Dre]

There‘s always going to be people that hurt you so what you have to do is keep on trusting and just be more careful about who you trust next time around.

[Monster Beats Studio]

As compared to the post-World War II era, Americans with high school diplomas today are much less likely to find manufacturing jobs, because there are 2-3 billion people in emerging economies with similar skills who are willing to work more cheaply in order to have a shot at attaining a middle class standard of living.

[Cheap Scarf Online]

Global demographics instruct that manufacturing job growth in nations with emerging economies will continue to outpace manufacturing job growth in America.

[gfdgdfgd]

Meredith you are simply amazing and I love you for being you choosing the most life affirming path you know how

[wedding520]

例えば、プロ結婚式ドレス
のテーラーから裾は非常に基本的な裾のための$ 55の複数の層のための$ 200までの範囲かもしれないが、ウエディングドレス縫製の部屋の周りに自分の道を知っている人にとっては困難な雑用ではないかもしれません。それはすべてのガウンの構造に依存する。裾は非常に単純であるが、あなたのカラードレス 格安
は、裾でのレースがある場合、それはより広範な作業を必要とするかもしれないことに注意することができます。<

[Cheap Air Jordan]

We have nothing like that in place or even in mind. Instead those desperate for any kind of job are to work longer hours for less pay and be appreciative for their opportunity.

[Christian Louboutin UK]

All of the sci-fi stories pointed to a shorter work week, more leisure time and industries developing around increased leisure time coupled with the income to enjoy it.

[Burberry Scarves Sale]

There‘s always going to be people that hurt you so what you have to do is keep on trusting and just be more careful about who you trust next time around.

[Monster Beats Spiderman]

Global demographics instruct that manufacturing job growth in nations with emerging economies will continue to outpace manufacturing job growth in America.

[Classic Ugg Boots]

Thanks Mr Becker for sharing the information.

[Air Maxs 95]

Thank you for such an informative website and post on the EU debt crisis. German tax-payer will react to the prospect of higher taxes oer many years to bail out weaker EU member nations. This is particularly the case when there seems to be constant and volatile opposition in these weaker EU nations to austerity measures.

[Air Force Nike]

I hope all is good and you will be blogging very soon! Sending all my positive thought to you!

[Cheap Air Max 90]

I think it's hilarious, albeit tragic and appalling, that those who think like pathological narcissists or sociopaths - content not to think beyond the cramped confines of their own comfortable little plutocratic niche.

[franklin marshall]

Paul Smith outlet est devenu de plus en plus populaire. Savez vous Paul Smith voulait devenir cycliste professionnel ? saviez-vous qu’il propose aujourd’hui 12 collections différentes ? chaussures paul smith, Paul Smith france parfum, Paul Smith montre, Paul Smith stylo, Paul Smith meubles, Paul Smith tapis, Paul Smith lunettes , sac paul smith , paul smith portefeuille.
Notre UGG france boutique vous offre collection de UGG bottes , achat de chaussures UGG ; UGG boots en ligne. Ici vente de UGG pas cher avec un meilleur prix mais très bonne qualité.
Acheter franklin et marshall sur notre franklin marshall pas cher boutique en ligne, vente pull franklin & marshall, franklin marshall femme, veste franklin marshall, Blouson franklin marshall de bonne qualité.

[Paul Smith]

Merci beaucoup pour votre article.

[lee]

not bad! thnk you

[Discount NBA Basketball Shoes]

Thank you for such an informative website and post on the EU debt crisis. This is particularly the case when there seems to be constant and volatile opposition in these weaker EU nations to austerity measures.

[Paul Smith London]

Have a safe holiday season!!

[Nike Running Shoes]

Merry Christmas, Professor Becker and Judge Poser.

[Buy cheap Microsoft Office software online]

obMnfy I am glad that your blog is constantly evolving. Such posts only gain in popularity!....

[college essay writing services]

I have not even heard of this pianist. Now I know!
You are doing a great thing that you write such articles.

[Asics Shoes]

Have you ever had a topic to write about that seems too big to tackle that you can’t even begin to write about it? Well, welcome to my world. I need to send educational supplies to Africa. I know! You have so many questions racing through your head right about now. Let’s just say – all of your questions will be answered in due time. For now, listen to my heart and my passion

[Kashmir News]

An example of structural unemployment is the technological revolution. Computers may have eliminated jobs, but they also opened up new positions for those who have the skills to operate the computers.