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The Changing Shape of Unemployment

by the Center for Geoeconomic Studies
June 27, 2011

Job Level Relative to Prior peak

The shape of U.S. labor market declines and recoveries—as measured by the current level of employment relative to the prior peak—has changed dramatically over the past two decades. From the 1940s through the 1970s, they exhibited a V-shape of sharp declines and rapid recoveries, as seen in the chart above. By the 1990s they took on a U-shape, signifying longer, persistent unemployment. “During times like the 1950s and 1960s, a rising level of educational attainment kept up with this rising demand for skill,” MIT economist David Autor writes, “but since the late 1970s and early 1980s, the rise in U.S. education levels has not kept up with the rising demand for skilled workers.” The labor demand differential is particularly stark today: unemployment among the college-educated stands at 4.5%, compared with 14.7% for those without high school degrees.  Unemployment compensation, the main tool in the U.S. arsenal to address joblessness, was created back in 1935 to buffer relatively short stints of unemployment, but the need today continuously to extend benefits is a sign that policy has got to address the skills mismatch far more effectively.

CGS Chart Book: Economic Recovery
CGS Chart Book: Economic Downturn
Working Paper: The Evolving Structure of the American Economy and the Employment Challenge
Spence and Hlatshwayo: Jobs and Structure in the Global Economy

Post a Comment 13 Comments

  • Posted by Mazid the Raider

    Interesting post! Perhaps one set of policy changes in answer to this situation would be to emphasize a class of jobs that could be performed with a high school education, make sure not to stigmatize the people who actually choose to those jobs that don’t require a college education, alter high school so as to meet the needs of those jobs, and stop reducing the standards of college so that everyone can make it in. Plus, it could be made more clear that people will be able to support themselves with a HS education, so hopefully we can make it seem more worth the time and effort of potential drop-outs to stick it out through 12th grade.

    I’m not sure how to do any of those, but it could be a direction in which policy could turn.

  • Posted by Ray

    Sorry to say this but a US high-school education will hardly prepare a job seeker for even the most basic of trade professions in the world economy. Not stigmatizing them will do nothing to enhance their job prospects.

    I worked in US manufacturing for 30 years. In the ’80′s my company went to Washington to plea for higher education standards. We simply could not find the levels of competency required for the most basic of computer controlled machinery. We finally did what everyone else was doing, moved jobs abroad. In the ’80′s, paying more but the skill sets were materially better. now industry can do the same for a lot less salary expense.

    My son went to high-school in Switzerland. His math and science skills can easily match or exceed a US college engineering major from one of the better universities.

    American families and kids have a choice to make. The parents can either continue to use schools as day care centers and take little to no interest in assisting their kids with lessons or they can regain control of their school systems and clean up what is a mess. The kids, need to understand what school is and why it’s important. Those that don’t sign up can go to MacDonald’s U and get out of the way of the others.

    Sorry, it takes hard work and government is not going to ever get it done. That’s the same group that managed to refocus schools on social issues at the expense of learning.

  • Posted by Bernardo

    I had this conversation a while back with a colleague regarding the disparity in educational attainment and education. He didn’t believe me. Americans think this problem can be solved by electing a new party. The reality is that the U.S. doesn’t have an unemployment problem. If you are well-prepared, then you probably have a good job. The U.S. has an education problem.

    You cannot reduce (“solve”) the unemployment rate via the measures that are being proposed in Congress, or by the prospective candidates. The key is education and investment in the future of our youth. Also, by making investments in retraining programs for mid-career or displaced employees.

    Ticket agents will never replace the electronic kiosks at the airport. Assemblers will never replace mechanized robots at the Ford plant. Those low-skilled jobs are never coming back.

  • Posted by mike flynn

    chinafication anyone?

  • Posted by Aaron

    The real unemployment rate in the US is 16%. I am confident the real UE rate for college grads is much higher than 4%. Not to mention the people who have college degrees but are in menial jobs.

    Our economy hasn’t produced any net jobs in the past 11 years so now it’s the fault of the skills of the workers. Nonsense, US workers have never been more productive, that’s why not as many are needed.

    The fact is US workers are being squeezed by competition from cheap labor in poor countries such as India and China.
    On top of it we have had mass immigration from unskilled pheasants coming from Mexico and huge numbers of H1-B workers primarily from India.

    This surplus of workers in a country that hasn’t produced jobs, unsurprisingly led to a massive unemployment problem.

  • Posted by Nathan

    Yes the quality and value of K-12 has declined dramatically, and the jobs (that are not sent to china) require more skills.

    So my question is: WHY are we importing Millions of Illiterate masses who cant even read and write in Spanish much less in English?

    If you really believe what you say, then bringing in millions of illegals to take the few remaining jobs that dont require a technical skill is foolish.

    I have to correct Ray above:

    There is no way that any high-school in Switzerland teaches the level of math required in Engineering school. No HS teaches transform theory, Laplace transforms, z transforms, or Fourier Transform theory in High School. You had a good point about the dismal state of education in the US but then undercut your argument with such a foolish comment.

  • Posted by Lloyd Cata

    There are many arguments for why unemployment rises and falls. Government policy being the ‘control mechanism’ that speeds national employment or supports outsourcing and capital flight.

    The disproportional policies of ‘capital formation, as ‘dictated’ by political gerrymandering and Federal Reserve policy, has distorted the ‘national’ interest in favor of globalization, which equates ‘all’ world-wide labor as the interest of capital formation versus national interests. Money has no allegiance, just allies, in the pursuit of more money. This is ‘exactly’ what the ‘independent’ Federal Reserve was created to address. Unemployment is one of the founding principles that the Fed was created to address; a profound failure of that institution. The Fed now is unarguably a wholesale ‘corporate-driven institution dedicated to capital formation above any other criteria for ‘national’ economic consideration. This distortion of ‘national economic policy’ allows the Fed the liberty to distribute the national wealth in favor of interests that have nothing to do with employment. A ‘profitable’ enterprise, with a productive workforce ‘must’ be responsible in ‘not only profiting’ from a skilled workforce, but insuring that its workforce remains the most productive, which is the measure of competitiveness in a global marketplace.

    So, opening the Federal Reserve window to ‘entities’ with no national interest, and no regard for the nationals workers, can only lead to distortions of the nations economy, employment, and security. “Money ‘given’ without responsibility is just as harmful as ‘entitlements’ without measurable results. Worse, in fact, because investing money to create larger piles of money is inherently counterproductive; which is ‘concretely verified by the present economic condition, as well as the present employment situation.

    Let there be no doubt about who is getting ‘something for nothing’, and it is not the unemployed “Americans” struggling to build a decent life under artificial constructs of boom and bust economic policies.

    The banks cry against the housing distortion of Fannie and Freddie, but it is the policies of the Federal Reserve that has handed Wall Street the credit card of the United States without any regard for creating jobs or educating their present and future workforce. The problem is not education, it is the unwillingess of business to ‘assist’ in creating an educated workforce, that is already the most productive in the world.

    Capitalism, without responsibility, is no more worthy of leadership than Communism…and that is why a Communist Chinese economy is outpacing and out-educating its American competitor …financed with American dollars.

    It is one thing to admire the Chinese economic expansion, as long as you remember that it is “sponsored by Wall Street, powered by Google, with Intel inside”.

    Thnnnnnnnn

  • Posted by Ray

    Good discussion. A few comments:

    Aaron: “Our economy hasn’t produced any net jobs in the past 11 years so now it’s the fault of the skills of the workers. Nonsense, US workers have never been more productive, that’s why not as many are needed.”

    Productivity and skills are not the same. As a former COO of a large multinational, I have moved probably about 30,000 jobs offshore. The results have always been far more highly skilled workers, who require far less oversight, produce far better quality and take pride in the work they perform, their professions and the company they work for. That’s experience in at least a dozen countries.

    Is it the fault of the workers? No. American management focuses on low cost to the detriment of quality. US management has underinvested in it’s businesses to such an extent I do not believe they could ever catch up. US management is far more interested in what they put in their pocket versus what’s right for the company as a whole. The overhead associated with Human Resources, Legal, Finance and “friends of the hairman”, along with all the associated consultants they bring in has an enormous cost and refocuses companies on non-core issues.

    No, it’s not the workers fault. But being productive has nothing to do with the skill sets required in current day manufacturing.

    Nathan:

    “I have to correct Ray above:

    There is no way that any high-school in Switzerland teaches the level of math required in Engineering school. No HS teaches transform theory, Laplace transforms, z transforms, or Fourier Transform theory in High School. You had a good point about the dismal state of education in the US but then undercut your argument with such a foolish comment.”

    Sorry but Laplace Transforms, as an example, were indeed part of his curriculum. This is not exactly rocket science as high schools and junior/community college’s in the US frequently offer this level of math. I’m an ME and I believe I’m on pretty safe ground with my “foolish comment”.

  • Posted by Bzz

    High school education is often more than adequate to prepare people for a technical entry level job, so long as tasks are explained clearly and simply.

    I fully believe that if the right words are used, a ten-year old could learn techniques of any trade, so long as they know how to read. Oh, is math involved? That’s what Excel is for, if they can’t do it in their heads!

    Just my two cents.

  • Posted by Diogenes

    The sad truth is except for a few elite, American parents don’t particularly care about education. Teachers, knowledge, education and schools are generally reviled in average American households. And yes, politicians would make you imagine that education is so coveted in America. Not really.

  • Posted by Nathan

    Ray: I have to call BS on your comment about transform theory math being taught in HS. I seriously doubt that it is even discussed from a high level much less taught. I went to Engineering school with many students who graduated from HS in Europe including Switzerland. Furthermore even though we have dismal k-12 in America we have the best Engineering and Medical schools in the world. Nice try, if you want to try to backup your comment then paste a link to his school.

  • Posted by Thomas Hughes

    Lloyd Cato hit the nail on the head when he focused on “Government Policy being to control mechanism that speeds employment or supports capital flight and outsourcing.”

    Having a number of times dumbfoundly watched C-Span cover Finance & Trade Policy committe hearings it has become abundantly clear to me that like American schools the quality and value of Congressional members has also declined dramatically over the past decades. I simply think they are led like lemmings by vested interests and have no clue as to the seeds of distruction that they have sown for America.

    Since it was nearly two decades ago that Tax & Tarriff changes were “liberalised” the cause and effect it has had on employment distruction was set so long ago that most members are simply unable to connect the dots. Perhaps the dilemma is that the education level of Congressional members too closely reflects the members of their districts. It seems far too many Congressional members are still trapped in the time warp of pre Asian goods invasion when America’s economic power was unquestioned. Prior to the mid 70′s imports and exports combined made up a mere 5% of GNP.

    While the seeds of distruction were sown in the 90′s its impact was not felt by the entire country till recent years( and certainly long after the textile workers of the Carolinas or the small applicance makers of Sunbeam).

    In the interim the policians witnessed the camouflaging boom of the late 90′s (Dot Com bubble) fueled by the massive technological innovations on a par with a similiar boom in the 1920′s. When that bubble burst 11 years ago it was quickly followed by the post 911 fix of imported cheap capital that flowed through Wall Street and and out to mortgage brokers all over the country creating the housing boom (and the Fed barely blinked an eye of concern).Finally when the collapse came in 2008 the mask came off what had been happening to the real productive core of American manufacturing and the country sits in a holed out ship taking on water.
    Congressional Policy enacted during the “Gay 90′s” is totally responsible but that is too many terms ago for the run of the mill Congressperson to “get it”.

    The last time the country had a serious debate about the merits of allowing American industry and Capital to get favoured tax and import duty treatment for outsourcing was during the 1992 presidential elections. Now that sucking sound from south of the border that Ross Perrot warned about has become a giant Tsunami washing in from Asia, but yet for the most part Congress is still no wiser to the fact that it was its actions that started the ball rolling.Creating “shovel ready” projects to juice the economy won’t cure a thing. Sadly until Trade Policy and Capital Flows are seriously debated and then reformed the country will be left flounderig where it is and the middle class that was the envy of the world will continue to suffer while Washington “fiddles”.

  • Posted by Leon Shivamber

    The simple reality is that job survival is no longer guaranteed: http://ow.ly/kIVBO The abundant supply of low cost labor and the competitive advantages of the Asian supply chain has caused a massive shift in employment: http://ow.ly/kIVQL around the world!

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