Mark Thoma leads us to new research from the San Francisco Fed showing that recent college graduates have experienced a large rise in unemployment and sharp fall in full-time employment, coupled with a decline in wages. Why is this significant?
The answer is that it’s one more nail in the coffin of the notion that employment is depressed because we have the wrong kind of workers, or maybe workers in the wrong place.
The right question to ask, with regard to all such arguments, is, where are the scarcities? If we have the wrong kind of workers, then the right kind of workers must be in high demand, and either be in short supply or have rapidly rising wages. So where are these people?
Now, not to diminish the fact that what most people refer to as “The Recession” was, in fact, the result of a demand deficiency (or more aptly, a large increase in the demand for money not accommodated by the Fed), I’d like to point to some anecdotal evidence that in reality there is a problem a skill mismatch and “recalculation” that is proving difficult to tract. To the extent that this is the problem, rather than a problem, I’m not quite sure. From David Andolfatto:
For the 15 million Americans who can’t find jobs, the labor market is like an awful game of musical chairs. There are many more players than there are available seats.
Yet at Extend Health, a Medicare health insurance exchange firm in Salt Lake City, Utah, the problem is just the opposite—a growing number of chairs to fill and not enough people with the skills to fit the jobs.
“It seems like an oxymoron in this environment that you can somehow be challenged to find great workers,” CEO Bryce Williams admits, almost sheepishly.
Extend Health’s call center workers help retirees navigate the process of signing up for commercial Medicare Advantage and drug coverage plans.
For this fall’s Medicare Enrollment season, the firm will need close to a thousand workers. The ideal candidate is over 40, with a background of financial services in order to qualify for insurance licensing.
“They need to be able to pass the state of Utah exam, which is not easy,” Williams explains. “They need to have a background in comparing the financial metrics of trying to help someone compare and analyze and give great advice.”
Andolfatto has a link to another story along the same lines regarding manufacturing workers (a field which has become highly specialized). There is also the two facts that college degrees are large fixed investments in skills that may be reduced in demand. This is something that I’m largely familiar with, as I was in school for a prized IT career before the tech bubble burst. As I know Mark Thoma has noted (though I can’t find the link), we have a disproportionately high amount of graduates in business and finance, which is probably still true, and a low proportion of graduates in applied sciences. This of course leads into the next issue: the squeezing of efficiency out of a smaller workforce. How does that relate to the degree profile of our college graduates? Because it is comparatively easy to squeeze extra efficiency out of people who work “in business”. Much easier than, say, squeezing extra efficiency out of an existing construction or manufacturing worker. So if more people are specialized in business or finance, areas that took a major hit, and also an area where substitution is comparatively easy, then there is likely a skills mismatch between there.
So yes, I believe that there is more than trivial problem of skills mismatch, which I think was nearly the whole story up until late 2008, when the large fall in expected NGDP caused various financial obligations to be much harder to service (that tends to pin people down, and reduce employment options). That is a demand story. However, as we slog out of this recession, real job growth may remain low even as we return to previous trend NGDP. We should be at least prepared to discuss the supply side when that happens.
P.S. If anyone was wondering, I’m starting to feel better, though I haven’t gotten a diagnosis as to what is wrong with me, still. Been keeping busy with confusing insurance statements, school, and work. I think I’m at the point where I can end my hiatus from blogging, and write a few things. Glad to be back =].
P.P.S. For a long time I’ve been trying to find oddball diagnoses that fit my symptoms. Doctors hate that, by the way…but I do it anyway. In any case, I’ve been stuck on Whipple’s Disease for a while. Symptoms fit like a glove.