Is “Structural Unemployment” a Myth?

Many economists and pundits have been making the claim that the current round of joblessness is not simply a matter of a downturn in the business cycle (i.e., “cyclical” unemployment).  They claim that during the current downturn, employers (particularly in construction and manufacturing) have so re-engineered their operations that they now require fewer, higher-skilled workers.

The resulting unemployment is a product of this restructuring of economic processes (i.e., it is “structural” in  nature.)  Therefore, it follows, economic stimulus won’t improve the unemployment situation.  Rather its solution lies in long-term retraining programs.

Over at the Economic Policy Institute, economist Lawrence Mishel doesn’t buy it:

Presumably, if employers were having trouble finding adequately skilled workers, it would be taking them longer to fill vacancies and the ratio of hires to openings should fall. In fact, the opposite has occurred: the ratio of hires to job openings has been somewhat higher in this recovery (averaging 1.7 hires per job opening) relative to the earlier recovery (averaging 1.5 hires per job opening). Moreover, this ratio has increased since the recession started. There is no indication of a growing structural problem. Remember, too, how these data are timed. “Job openings”  is the count of available jobs on the last day of the month. “Hires,” on the other hand, is the sum of all hires completed throughout the month. As long as the number of hires is larger than the number of openings, it means that it is taking less than a month to fill those jobs.

Widespread claims that our unemployment crisis is structural are not only inaccurate, but they imply that macroeconomic tools such as fiscal policy (spending or tax cuts) or monetary policy can not address our unemployment crisis.  Surprisingly, perhaps amazingly, there’s no systematic empirical evidence for such assertions. Policy makers should understand that the problem faced by the unemployed is a simple scarcity of jobs, a feature of the labor market facing every group of workers regardless of education, sector, occupation or location.

He buttresses his argument with a variety of measures and analyses.  You can read the whole thing here.

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