Monday, July 11, 2011

The Lousy Job Market, Present and Future

I continue to disagree, to an extent, with Paul Krugman's assertions about the job market. Although I think he's technically correct, he's addressing a different issue than the one that concerns me:
Unemployment soared during the financial crisis and its aftermath. So it seems bizarre to argue that the real problem lies with the workers — that the millions of Americans who were working four years ago but aren’t working now somehow lack the skills the economy needs.

Yet that’s what you hear from many pundits these days: high unemployment is “structural,” they say, and requires long-term solutions (which means, in practice, doing nothing).

Well, if there really was a mismatch between the workers we have and the workers we need, workers who do have the right skills, and are therefore able to find jobs, should be getting big wage increases. They aren’t. In fact, average wages actually fell last month.
If you are working from the perspective that "a job is a job" and that the unemployment rate will fall probably to historically normal levels when the economy rebounds, I agree. But my problem is that I don't think "a job is a job" - I do see a structural issue with the job market, in that the number of well-paying jobs for people with less than a college education is dropping, and will continue to drop. And I believe that people who do not have a college education or whose skills have fallen out-of-date, once unemployed, are with each passing year less and less likely to achieve a similar level of income when they again find work.

Take a look at how the recession has affected unemployment rates, broken down by level of education. To the extent that Krugman is correcting those who argue that we need to get used to a 9+% unemployment rate, I agree with him - we do not. But it seems like we're going to have to get used to a shrinking middle class.

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