Morning Must Reads: Skill Mismatch Is Back And It Is Still Wrong

The view that people who lost a job due to the economy are lazy and shiftless dilettantes has spread from the editorial page of The Patriot-News to the newsroom with a particularly misleading story today.

The jobs are out there. Companies just can’t find the workers to fill them....Economists and business leaders point to a factor contributing to the pervasive disparity between available jobs and workers: attitude. Prospective work candidates simply want their cake — and on a silver platter. Some don’t want to commute, others want to work only the day shift, and others don’t want to take a job they feel is beneath them.

Dejesus gets creative with the presentation of facts, noting "3.2 million jobs remained vacant as of the end of July, even as 14 million Americans were jobless." How does the BLS report this number? "There were 3.2 million job openings on the last business day of July, the U.S. Bureau of Labor Statistics reported today." The reader of the Dejesus story is left with the impression that the problem is unfilled job openings.

Now for some math: divide 14 million unemployed workers by 3.2 million job openings and you get a ratio of 4.4 or a little over 4 unemployed workers for every job opening. Let's put that number in perspective by looking at it over time (figure below). When the job market is healthy, this ratio is well less than 2. The problem in the economy remains a shortage of job openings, not people unwilling to take those job openings.

Well perhaps there are lots of openings in manufacturing and no unemployed manufacturing workers? In the figure below, those little blue bars are number of job openings and the big red ones are unemployed workers.

Here is another misleading passage from the Dejesus story: 

Research shows the longer unemployment benefits are extended, the longer people rely on them. 'It used to be a social stigma,' [Penn State Harrisburg Management Professor Ray] Gibney said. 'Now with the economy the way it is, it’s not uncommon for people to be on unemployment benefits for a year.'

So you have a story, which stigmatizes thousands of unemployed Pennsylvanians and then quotes someone saying that there is no stigma to being unemployed? Is this satire?

Now, on to the research on unemployment benefits, which actually shows the effects of unemployment extensions on the amount of time people remain unemployed are very small (pdf). In fact, if you look across the states, the higher the unemployment rate in a state, the longer it takes people to find a job in that state. This is logic; the more people who are applying for each and every opening, the longer it will take them on average to find a new job.   

Now to be clear, it is not unusual, even in this economy, for some employers to have difficulty filling job openings. If the wages and working conditions being offered by a local employer are below what is on offer in the rest of the industry, workers with jobs are unlikely to leave their existing jobs to take those new openings. This limits the pool of available workers for new openings to new labor market entrants and the unemployed. And here you may see instances of skill mismatch with unemployed workers and new labor entrants lacking the skill necessary to fill the positions on offer. 

However, this is always the case, and there is NO rigorous evidence that this is a widespread problem in the economy. If the bulk of employers couldn't meet demand with their existing workers, they would begin competing for workers by bidding up wages. We are not seeing that.

Employers that proclaim to have persistent difficulty finding workers are likely either exceptionally bad problem solvers or not being forthright about the nature of their business model. An employer with high turnover that finds nobody wants to work for them signals more about the character of the employer than it does about the pool of available job applicants.

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