Unemployment Is a Labor Market Mismatch (Jobs exist, but firms are unable to find the right skills)

RCM ^ | 05/30/2012 | By Aparna Mathur

[SeekAndFind]

After an unexpected upswing at the beginning of this year, the labor market appears to be back in the doldrums again. The month-on-month employment increases of 200,000-240,000 workers in December, January and February created a sense of optimism in the minds of many economists, including this one, that the economic recovery had finally seeped through to the labor market. The subsequent drop in the employment numbers to slightly more than 100,000 has left us scrambling for an explanation.

In the absence of policy changes and initiatives, the most obvious explanation for the observed volatility in the jobs numbers is that the labor market is responding primarily to short-term stimulus, in the form of seasonal changes in demand and better weather conditions. These are hardly likely to spur the economy towards a sustained long-term recovery. So what are the best policy prescriptions for these times?

Identifying the problem is the first step. As traditional economic theory suggests, hiring is ultimately a matching game. Every month when the Bureau of Labor Statistics reports the unemployment rate, the underlying assumption in the minds of most consumers of the report, is that firms created fewer jobs and therefore hiring was low. Less well understood is the idea that while the jobs exist, firms may be unable to find workers to fill those positions.

What is needed for the employment numbers to rise is not only job or vacancy creation, but also an adequate supply of workers that the firm views as good, productive matches for the jobs created. This idea is neatly summarized in a theoretical construct titled the Beveridge Curve, after the economist William Henry Beveridge.

The Beveridge Curve shows the relationship between the jobs vacancy rate and the unemployment rate. The curve typically slopes downward since higher unemployment would be associated with fewer vacancies. However, if the curve moves outwards, away from the origin, this would suggest that a given level of vacancies is associated with a higher level of unemployment. This implies a less efficient labor market caused by mismatches between available jobs and the unemployed.

CLICK ABOVE LINK FOR THE REST...

[SeekAndFind]

The graph breaks down the available data into the recession years, as well as the intervening years. It also shows trends since the trough of the current recession in June 2009.

In the recent 2001 recession that lasted from March to November, the average job openings rate was 3.2 percent and the U-6 rate was 8 percent. In the intervening years between that recession and the current one, the job openings rate averaged 2.8 percent while the unemployment rate increased to 9.1 percent.
Hence there was a slight flattening of the curve during this period as we had fewer vacancies and higher unemployment. This trend became more pronounced in the current recession in which the job openings rate declined significantly to 2.3 percent, while the U-6 rate soared to 14.8 percent. Hence there has been a clear decline in the job creation rate in the current recession and a significant increase in the U-6 measure of unemployment.

[puppypusher]

Guess these businesses never heared of on the job training.Its cheaper to hire an illegal alian.

[Lazamataz]

I think the issue is on-the-job training doesn’t work for the increasingly-skilled jobs out there. I’m a web developer in robust B2B websites in .NET and SQL. You cannot be on-the-job trained for this. Same with lawyers, doctors, physicists, materials engineers, electronic engineers, package engineers.... the list goes on and on and on.

[vanilla swirl]

What about all the degrees out there with no job or part-time-flippin-burgers?

Corporations are pinched by government regulations, tax uncertainty, etc. Some corporations are doing well....if you tickle Obama’s hand. But even those that are doing well are forcing their employees to do more work for the same money. Outsourcing everything relieves companies from providing any benefits. Will there be gubmint run health care or not? The uncertainty of the future is keeping companies from hiring. Most corporations are in Survival Prepper mode just like many of us ;-)

[tbw2]

Or an HB1 visa.
I read a horrible article about all the Eastern Europeans that were being brought in on visas to work as life guards and amusement park operators. They said American kids didn’t want the seasonal work or had too many activities to do it.
But students out for the summer are able to work those jobs, because my husband and I did just 15 years ago out of school.
They’d rather have foreigners who don’t have options or take lower pay than Americans who’d recommend their friends to come by the park.

[9YearLurker]

There used to be longer training programs within companies when turnover was less. Always, there’s the opportunity for employers to hire smart people in lesser positions and pay for their schooling along the way, too.

I think what makes sense in this environment is for employers to offer substantial bonuses a few years after their training, so employees only get the additional compensation by sticking around.

Instead, this long period of underemployment has led employers to be pickier and pickier, looking to find just exactly whom they want and whom they think has already just the current skills they need.

There’s been a fair amount of research of late that is thought to apply from consumer purchasing to markets for marriage, whereby having too many good-enough choices leads to a lack of decision and choice altogether. That is, given enough good choices, someone becomes more likely to make no decision and by devault choose ‘none of the above’.

I think that applies in some ways to the current labor market.

[tbw2]

Many mismatches are due to immigration preferences. Many engineers and IT people would have jobs if the HB1 visa holders were sent home. Hiring Mexican ESL teachers is insane in Texas, given how many Hispanics are available - but the Dallas ISD preferred to import several Mexican ESL teachers instead of use bilingual individuals who earned alternative teaching certifications.

[Sooth2222]

According to BLS, unemployment in April was 4.0% among those with a "Bachelor's degree and higher".

Among Blacks or African-Americans, Both sexes, 16 to 19 years, April unemployment was 38.2%.

The Obamacare mandate amounts to a huge tax on employment and it represents a much larger proportion of the cost of employing and training new unskilled workers than hiring experienced or educated workers. The design jobs for iPads stay in the US but the manufacturing jobs move to China.

So how is that "Hope n' Change" thing working out?

[Lazamataz]

There’s been a fair amount of research of late that is thought to apply from consumer purchasing to markets for marriage, whereby having too many good-enough choices leads to a lack of decision and choice altogether.

Well, I do not have a surplus market in marriage. Of course, I'm kinda picky: 18-24, hot, rich, sexual, loving, devoted, intelligent, wise, eloquent, great dresser, humble, spiritual, not vain, honest, humorous, loves God, loves video games, great cook, excellent shot, good at cleaning, can haul logs on her back, knows electronics, part time surgeon, concert violinist, programs computers as a hobby, conservative, follows trends, entertaining, owns a Porsche, great with animals, loves kids, owns several farms, knows how to fly aircraft, scuba dives, has telepathy, can levitate, never angers, loyal to me, can throw fireballs out of her hands, never ages, wears stillettos, kinda kinky but only with me, plays piano, sings like an angel, composes music and poetry, owns Texas, perfect vision, perfect teeth, perfect health, never gets sick, is dedicated, and can shoot lasers out of her eyeballs.

[central_va]

I wish one political party would be against the H-1b visa program.

[jboot]

Agreed. But it’s an identical situation to illegal immigration-the power brokers in both parties benefit from current policies. So nothing will be done.

[EQAndyBuzz]

With no offense directed towards Human Resources personnel, the problem isn’t so much with not finding qualified people as it is with not knowing how to.

HR lost its way. They no longer use their common sense. They don’t read resumes anymore. They use some package that runs a sequel search on a candidate based on criterion, and select those that meet it. They are told to pick 5 out of the 1000, they schedule 5 phone interviews and from there pick 3 to come in and meet with 10 managers. If they are lucky, they get 1. It is no longer by feel or intuition.

If that one doesn’t work out, they start the process all over again.

I go to Chamber meetings and hear the managers bitch and moan about not finding the right candidate. At one meeting the IT Director was wondering why he couldn’t find an IT Manager with Project Management experience. I was out of work for three months at the time and I told him in front of a roomful of people, that I applied 5 times for 5 different positions in the complany. He asked me what I did. “I am an IT Manager with a PMP.” This is what he said, word for word.

“Please go online and fill out an application.” Told him I have and this is what he said, word for word. “I guess you don’t meet the qualifications for the position.”

And that’s the problem. When I was an IT manager looking for someone to fill a position, I told the HR person, give me the resumes that meet the criteria and also give me the resumes that miss by one or two items. I would close the door on a Friday afternoon and read them. 9 times out of 10, I selected the resumes of applicants who didn’t meet the criteria.

HR doesn’t understand that anyone can take a job description, match the keywords in their resume and get an interview. Doesn’t mean they know the job. And that is where the”unqualified” part comes to play.

[9YearLurker]

Ha! I guess there’s more than one way to pick and choose yourself out of a market!

[heartwood]

Hell. There’s a couple of hospitals here that are glad to join the “nursing shortage” cry of the industry. They recently spent hundreds of millions of dollars to move into brand new facilities and position themselves for a bigger market share of more affluent patients (i.e. with insurance) but guess what? They sadly, sadly, sadly, because of this horrible economy, have no money in the budget for training new nurses and are hiring only nurses with a minimum of one year experience, in some cases two years.

[dfwgator]

The HOUR Department is a dumping ground for Affirmative Action candidates to keep the government off of companies’ backs.

[Buckeye McFrog]

Businesses have fallen hook, line and sinker for 50 years of education industry propaganda that their students pop out of universities 100% trained and ready to be productive.

As a consequence, businesses are no longer willing to invest a second of their time or a dime of their own resources in training workers.

Plenty of people out there smart enough to be taught how to do these jobs, but industry wants to shove that cost on to somebody else.

[Lazamataz]

I forgot the language requirement: Fluent English, Russian, Chinese, French, Spanish, Italian, German, Portugese, Dutch, Tagalog, and Latin.

[9YearLurker]

But how would you know she wasn’t BSing you on her fluency in Tagalog?

[Lazamataz]

Ooo. Good point. Perhaps if I hired a Tagalog native to interview her to ascertain skills....

[Fee]

This is why in 2012 when polled, Americans hate their government and at the same time hate the businessmen. Before that Americans were split down the middle who they prefer gov vs private business. By 2008 both institutions screwed the American citizen. Both are hated, and if both do not change their abusive ways, Americans will string both up on a tree in a revolt.