Unemployment Paradox: Vacant Jobs Unfilled
Despite 9.5% unemployment, American firms are struggling to find qualified applicants for job openings.
WSJ reports on a strange phenomenon:
With a 9.5% jobless rate and some 15 million Americans looking for work, many employers are inundated with applicants. But a surprising number say they are getting an underwhelming response, and many are having trouble filling open positions.
“This is as bad now as at the height of business back in the 1990s,” says Dan Cunningham, chief executive of the Long-Stanton Manufacturing Co., a maker of stamped-metal parts in West Chester, Ohio, that has been struggling to hire a few toolmakers. “It’s bizarre. We are just not getting applicants.”
What’s causing the problem?
Employers and economists point to several explanations. Extending jobless benefits to 99 weeks gives the unemployed less incentive to search out new work. Millions of homeowners are unable to move for a job because the real-estate collapse leaves them owing more on their homes than they are worth.
The job market itself also has changed. During the crisis, companies slashed millions of middle-skill, middle-wage jobs. That has created a glut of people who can’t qualify for highly skilled jobs but have a hard time adjusting to low-pay, unskilled work like the food servers that Pilot Flying J seeks for its truck stops.
Matching people with available jobs is always difficult after a recession as the economy remakes itself. But Labor Department data suggest the disconnect is particularly acute this time around. Since the economy bottomed out in mid-2009, the number of job openings has risen more than twice as fast as actual hires, a gap that didn’t appear until much later in the last recovery. The disparity is most notable in manufacturing, which has had among the biggest increases in openings. But it is also appearing in other areas, such as business services, education and health care.
Longer-term trends are at play. For one, the U.S. education system hasn’t been producing enough people with the highly specialized skills that many companies, particularly in manufacturing, require to keep driving productivity gains. “There are a lot of people who are unemployed, but those aren’t necessarily the people employers are looking for,” says David Autor, an economist at the Massachusetts Institute of Technology.
We’ve been discussing these issues a lot on the blog and at OTB Radio. And our colleague Dave Schuler has done a whole series of posts on the demographic challenges at his own place.
As to the specific issue above, Dave observes:
When it comes to acquiring highly specialized skills, particularly those for which the total number of people who can be expected to use them or that are likely to change dramatically over time, acquiring the skills takes on an element of risk. Who bears the risk? Historically, employers have borne the risk of such training but global competition may have produced an environment in which employers would rather move their operations than teach the skill necessary to maintain them.
If employers are no longer able to bear the risk, can prospective employees? IMO it’s quite possible that some of the reason for the lingering high level of unemployment is that prospective employees aren’t willing or, possibly, aren’t able to bear the risks of acquiring specialized skills for which the likelihood of actually using it may be chancy. I recall the many stories of people who learned to be medical billing specialists only to discover later that jobs for medical billing specialists had gone to India.
Kevin Drum is somewhat dubious of the paradox’ existence:
Even if there’s a shortage of high-skill workers, that’s a long-term problem, not something caused by the recession. In fact, as the chart accompanying the story shows, the number of high-skill job openings has declined since 2008. At the very least, then, companies should be having an easier time — slightly easier, anyway — filling their open positions unless either (a) they’ve lowered their wages or (b) high-skill workers are literally retiring en masse. Whatever it is, something doesn’t quite add up here.
Yves Smith comes up with a sociological explanation:
A core issue is that the employer-employee relationship has broken down. Quaint as it may sound, there once was a tacit commitment: a worker who competent and dedicated could expect to spend a considerable amount of his career at with one firm (in the 1980s, job tenures of less than five years needed to be justified). But as cost cutting and short term earnings fixation became more pervasive, average time of employment shortened greatly. And with that came a major shift in behavior: it made less and less sense for employers to hire talented people with good general competence and character and train them. They’d be unlikely to recoup the cost of the investment. Instead, companies started more and more to seek staff, in that horrid corporate cliche, who could hit the ground running. For instance, headhunters would increasingly be tasked to find someone who was doing exactly the same job at a competitor firm. This tendency goes all the way down the food chain; for instance, I’m told it’s impossible to become a bartender in NYC unless you have at least two years of bartending experience.
Now what does this mean from a price standpoint? If you believe in the most basic construct in economics, the supply and demand curve, if you restrict supply (by requiring that workers have very particular skills), the result is a higher price. Yet some employers seem to think because the economy is in the crapper, they should be able to hire cheaply. But 16.5% unemployment nationally does not necessarily mean 16.5% unemployment in their geographic and skill niche.
It’s, of course, a two-way street. No firm wants to invest tons of money in training someone only to see him take the skills to a competitor. So it’s a Catch-22.