Editore"s Note
Tilting at Windmills

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September 27, 2010

STRUCTURAL VS CYCLICAL.... There are different kinds of unemployment crises. You've probably heard about "structural" unemployment, which generally refers to an economy with specific kinds of jobs to fill, but workers untrained to fill them. There's also "cyclical" unemployment, which tends to describe job losses that result from an economic downturn (fewer people with jobs means fewer people spending money means layoffs).

The good news is, cyclical unemployment can be addressed through government intervention -- or at least could be if we had a functioning political system. In the meantime, those who oppose government intervention on ideological grounds keep pushing the notion of structural unemployment, because it becomes a convenient excuse for inaction.

Paul Krugman's been blogging about this quite a bit lately, and it led to a helpful column today.

What can be done about mass unemployment? All the wise heads agree: there are no quick or easy answers. There is work to be done, but workers aren't ready to do it — they're in the wrong places, or they have the wrong skills. Our problems are "structural," and will take many years to solve.

But don't bother asking for evidence that justifies this bleak view. There isn't any. On the contrary, all the facts suggest that high unemployment in America is the result of inadequate demand -- full stop. Saying that there are no easy answers sounds wise, but it's actually foolish: our unemployment crisis could be cured very quickly if we had the intellectual clarity and political will to act.

In other words, structural unemployment is a fake problem, which mainly serves as an excuse for not pursuing real solutions.

If structural unemployment were really the problem we'd see "major industries that are trying to expand but are having trouble hiring, major classes of workers who find their skills in great demand, major parts of the country with low unemployment even as the rest of the nation suffers. None of these things exist. Job openings have plunged in every major sector, while the number of workers forced into part-time employment in almost all industries has soared."

To a certain extent, this should come as something of a relief. Structural unemployment is a far greater policy challenge, and it takes much longer to address. Cyclical unemployment can be addressed though additional stimulus and intervention from the Federal Reserve.

But additional investment in job creation has been deemed unacceptable by congressional Republicans, and the Fed wants to sit on its hands.

And so the jobs problem persists -- and will intensify just as soon as the GOP is rewarded for failure in the midterms.

Steve Benen 9:30 AM Permalink | Trackbacks | Comments (9)

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Let's not forget Bill Clinton's validation of this talking point as well.

I remember over 10 years ago how millions of Americans were taking some courses in becoming Microsoft IT "engineers". The payoff was good: graduate and start making 60K a year. Of course, the tech boom was just about over at that point but even in those relatively good times Americans were ready to train for jobs in the new economy. So, why aren't they doing that now? Oh, yeah. They've gone Galt.

Posted by: walt on September 27, 2010 at 9:41 AM | PERMALINK

Yes, Walt. He really knows his economics. And also has a knack for instilling hope at the same time, detailing what can be done right now, what is being done, what actual positives have resulted of recent from these actions.

I haven't been following this blog, but I highly recommend everyone take a look at what Bill Clinton said in his recent interviews with both David Letterman (how so much can be done right now) and with Jon Stewart the week prior.

Some real gems in there about all this. I learned a lot.

Posted by: Bill Clinton knows how to reach a wider audience than Obama et al. on September 27, 2010 at 9:49 AM | PERMALINK

So, all this talk about H1B visas, importing welders from India, and Austrian ski instructors to Vermont, etc, is just anecdotal obfuscation?

I thought our community colleges were tasked long ago to train/retrain us to fill these jobs.

Posted by: DAY on September 27, 2010 at 9:52 AM | PERMALINK

Makes me laugh. Like recent letters here to the Orlando Sentinel by some Rube saying we need to by "American" to solve our problems. OK . Let's go to Walmart, Kmart, Target , Macy's , Best Buy or anywhere and try to find something made in America . That ship left years ago along with all the manufacturing jobs.

Posted by: John R on September 27, 2010 at 10:03 AM | PERMALINK

I remember over 10 years ago how millions of Americans were taking some courses in becoming Microsoft IT "engineers". -- Walt, @9:41

Not just that. In '99, I was working part-time helping the libraries (W&L U, W&L Law School, public, primary school) roll over from card to computer catalogues. And just about everybody working in the library was also taking courses in something computer related because it was obvious that, if you planned on keeping your job, you had to "upgrade" your knowledge. And those weren't youngsters, with brains like sponges; those were, mostly, middle-aged women who found computers somewhat bewildering. Yet, they still managed to learn what they needed to learn.

It's different today. You lose your job not because you're no longer qualified but because there's no need for whatever it is you're providing. That, and the need for your boss to maintain his super-duper lifestyle, of course.

Posted by: exlibra on September 27, 2010 at 11:17 AM | PERMALINK

One good way of fixing structural unemployment would be to either (1) give a tax credit to businesses that hire and and provide on-the-job training, or (2) pay tuition for unemployed workers who take classes in industries needing skilled workers.

This would be a no brainer, except for all the morons that think all government spending is evil.

Posted by: bdop4 on September 27, 2010 at 11:36 AM | PERMALINK

when they were selling how would change the world and give us more free time back in the seventies that missed the part that all of the secretaries would be canned because of the computer revolution.

Posted by: Jamie on September 27, 2010 at 11:49 AM | PERMALINK

"But additional investment in job creation has been deemed unacceptable by congressional Republicans,"

And not just a few Democrats either. Remember that. Party affiliation has no monopoly on stupidity or the principle source of campaign graft either.

Posted by: Bigsky on September 27, 2010 at 1:15 PM | PERMALINK

With all due respect to Krugman, there is still a structural, non-cyclical component to employment... founded upon the wage differential between the US and other "first-world" economies, and those of "developing" regions (India, China, etc.). Even if gov't were to enact a stimulus for consumer demand, and US companies felt the need to increase staff to meet that new demand, there's no reason to conclude that US companies will hire US employees in great numbers, because there are even greater numbers of motivated, educated, and much-cheaper-to-employ non-US workers. Pretty much any job a US worker can be retrained to do, a non-US worker can also be trained to do -- not only will the non-US worker be cheaper to hire, they'll be cheaper to train (and cheaper to let go if the economy falters again).

In their zeal to cut costs, US companies have chosen to forget what Henry Ford taught them: you have to pay your employees enough for them to be consumers of your products, if you want your market to grow. Companies today don't look at employees as assets, but as liabilities. And the decision-makers at those companies have gotten obscenely rich by following that strategy. They perceive no incentive to change.

Posted by: TG on September 27, 2010 at 1:43 PM | PERMALINK
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