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Wednesday, September 19, 2012

Low Skills Aren't Causing the Unemployment Crisis

Low Skills Aren't Causing the Unemployment Crisis

Worker training is not the issue. A growing wage-productivity gap might be.
Job seekers at a career fair in New York in June. (Reuters)
More than 12 million people in the United States are pounding the pavement, searching for a job without luck. This is fewer than a few years ago -- we had a high of nearly 16 million unemployed in 2010 -- but far more than at any point in recent memory prior to the Great Recession.
Why are people out of work? Some economists have been arguing that today's high unemployment is explained by a mismatch between the skills that employers are looking for and the skills that the unemployed have. "Firms have jobs, but can't find appropriate workers," the Minneapolis Fed President Narayana Kocherlakota said in Michigan in 2010. "The workers want to work, but can't find appropriate jobs." Indeed, there were 3.7 million unfilled job openings in the United States in June of this year, according to the Bureau of Labor Statistics.
However, it's unlikely that this phenomenon is a major driver of persistently high unemployment. In 2007, only about five percent of people in the United States who wanted a job couldn't find one. Eighteen months later, nearly ten percent of those who wanted a job couldn't find one. Did the skills of the labor force deteriorate so demonstrably in a year and a half that millions were suddenly unemployable?
Of course not. What happened was the collapse of the housing bubble and the ensuing financial crisis, which stripped trillions in wealth from family balance sheets and sank demand for goods and services.
Indeed, most economists agree that today's high unemployment is "cyclical." That is, we agree that most people are out of work because of the recession and its lingering effects on the labor market, not because there is something wrong with the unemployed. More at: http://www.theatlantic.com/business/archive/2012/09/low-skills-arent-causing-the-unemployment-crisis/262539/

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