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Unemployment-Jobs Deficit or Skills Deficit_

Unemployment-Jobs Deficit or Skills Deficit_ - Unemployment...

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Unemployment: A Jobs Deficit or a Skills Deficit? Dollars and Sense January 5, 2011 Politicians and economists are trying to reframe a severe jobs crunch as a problem of workers’ inadequate skills. By John Miller and Jeannette Wicks-Lim Millions of Americans remain unemployed nearly a year and a half after the official end- date of the Great Recession, and the nation’s official unemployment rate continues at nearly 10%. Why? We are being told that it is because—wait for it—workers are not qualified for the jobs that employers are offering. Yes, it’s true. In the aftermath of the deepest downturn since the Great Depression, some pundits and policymakers—and economists—have begun to pin persistently high unemployment on workers’ inadequate skills. The problem, in this view, is a mismatch between job openings and the skills of those looking for work. In economics jargon, this is termed a problem of “structural unemployment,” in contrast to the “cyclical unemployment” caused by a downturn in the business cycle. The skills-gap message is coming from many quarters. Policymaker-in-chief Obama told Congress in February 2009: “Right now, three-quarters of the fastest-growing occupations require more than a high school diploma. And yet, just over half of our citizens have that level of education.” His message: workers need to go back to school if they want a place in tomorrow’s job market. The last Democrat in the White House has caught the bug too. Bill Clinton explained in a September 2010 interview, “The last unemployment report said that for the first time in my lifetime, and I’m not young…we are coming out of a recession but job openings are going up twice as fast as new hires. And yet we can all cite cases that we know about where somebody opened a job and 400 people showed up. How could this be? Because people don’t have the job skills for the jobs that are open.” Economists and other “experts” are most likely the source of the skills-gap story. Last August, for instance, Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, wrote in a Fed newsletter: “How much of the current unemployment rate is really due to mismatch, as opposed to conditions that the Fed can readily ameliorate? The answer seems to be a lot.” Kocherlakota’s point was that the Fed’s monetary policy tools may be able to spur economic growth, but that won’t help if workers have few or the wrong skills. “The Fed does not have a means to transform construction workers into manufacturing workers,” he explained.
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Labor Market Musical Chairs To understand the data discussed here, try picturing the U.S. labor market as a game of musical chairs, with a few twists. At any time, chairs (job openings) can be added to the circle and players can sit down (get hired). When the music stops at the end of the month, not all the chairs are filled. Still, many people—far more people than the number of empty chairs—are left standing.
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