The problem with the labor market isn’t that the unemployed aren’t looking for work — it’s that employers aren’t looking very hard for workers.
Have you, or someone you know, had a great job interview and wound up wondering why, months and months later, there’s been no offer and the job remains open? The job opening is on the firm’s web page, you are perfect for the spot, but you aren’t getting any responses, either for an interview or for post-interview interest. I know many people this has happened to — so many that I’ve been wondering if it is quantifiable and generalizable.
We have a lot of ways to observe how the unemployed behave. We have detailed information on the duration of unemployment, lots of economists fretting over whether unemployment insurance keeps people from taking jobs, sophisticated models trying to understand their search behaviors, etc. But none of that mental framework exists for employers and job openings. (A cynic might note that economics, as practiced, is a machine for observing and disciplining labor.)
Luckily, a group of economists has put something together that adds significantly to the debates over structural unemployment. Jason Faberman and Bhash Mazumder at the Federal Reserve Bank of Chicago put out a report last month asking “Is There a Skills Mismatch in the Labor Market?“ Their answer: “we find limited evidence of skills mismatch.” In other words, not really.
An interesting economic report. And one that suggests that the unemployment problem is not only be structural in nature – people with the wrong skills to be employed – but also may be procedural – the Recession means that the businesses get hundreds of applications without really trying.
The reason businesses claim they cannot find employees is not strictly due to those employees not being there. The skilled labor is being swamped out by a huge number of unqualified applicants coupled with the companies not trying as hard as they did before to find qualified employees.
Most companies are still not trying very hard to fill a position, not like they did before the Recession. Before 2007 they had to work much harder to get skilled labor to apply. The HR departments had to earn their keep to get enough good candidates. Now they can put the offer up online and get hundreds. They can say ” we are getting lots of response” even though they are of low quality.
It is not that the people with the skills are not there. It is that they are swamped out by the ‘noise’ of desperate people trying to get anything. So it takes longer to find the needle in the haystack. And often, by that time, the skilled labor has found another job.
This making the company feel like there are no workers to fill its position. But there would be if it wotked as hard to find them as it did before.
But, in reality, if they worked as hard to find the skilled labor as before, they would probably also increase the number job applications they would have to go through. A nice Catch-22.
So, the data would indicate that the reason there are open jobs is not that there are not enough people with the skills, just that companies are not trying as hard to find them as before. And that the applications with the skills are being swamped out by a huge number of unskilled people looking for any kind of work.
Lowering the unemployment rate would help, by lowering the noise of unqualified laborers. But this will take time for the equilibrium to be restored as it affects all businesses (i.e. being swamped).
Another approach would be to decrease the noise by giving more people training. The businesses won;t do this so it falls to the government.
It would be a good thing, I think, for schools and community colleges to really work on teaching people technical skills – like welding. Those are skills that may always be useful, even if they become DEOs.