Thanks to those who sent me the DeLong post. Is DeLong's definition of "structural unemployment" the standard and/or the only way to define or describe it? I would call a situation where the number looking for work is chronically larger than jobs on offer a structural problem. Of course a neo-classical would assert that "if only the workers would lower their wage demands ... " but that seems untenable as an argument. But I don't know what the neo-classicals have defined as "structural."
Gene Coyle On Oct 25, 2010, at 3:07 PM, raghu wrote: > On Mon, Oct 25, 2010 at 4:40 PM, Eugene Coyle <[email protected]> wrote: >> How can a non-academic get to read this? >> Gene Coyle >> >> On Oct 25, 2010, at 2:00 PM, Anthony D'Costa wrote: >> >> http://www.bepress.com/ev/vol7/iss3/art6/?sending=11201 > > > > Here you go: > > -------------------------------------- > Is Today’s Unemployment Structural? > J. BRADFORD DELONG > > We hear from surprisingly many quarters these days that governments in > Europe and North America, and their central banks, should give up on > the expansionary policies they have pursued to try to create jobs. > Critics of government stimulus maintain that the high unemployment > currently afflicting the North Atlantic is not cyclical but > “structural,” and thus cannot be alleviated by policies that boost > aggregate demand. Let me be the first to say that structural > unemployment is a true and severe danger. > > When people who in other circumstances could be happy, healthy, and > productive members of the workforce but lack the skills, confidence, > social networks, and experience needed to find work worth paying for, > we obviously have a problem. And if unemployment in Europe and North > America stays elevated for two or three more years, it is highly > likely that we will have to face it. For nothing converts cyclical > unemployment into structural unemployment more certainly than > prolonged unemployment. > > But is that true today? Does it look right now as if the biggest > problem facing the economies of Europe and North America is structural > unemployment? It does not. > > Let us remember what structural unemployment looks like. The economy > is depressed and unemployment is high not because of slack aggregate > demand generated by a collapse in spending, but instead because > “structural” factors have produced a mismatch between the skills of > the labor force and the distribution of demand. The structure of > demand by consumers is different from the jobs that workers are > capable of filling. For example, suppose that you have many workers > qualified and skilled to work in construction, but households have > decided that their houses are more than large enough, and > wish to fill them with manufactured goods. This would produce > structural unemployment to the extent that the ex-construction workers > could not do things in manufacturing that would make it worthwhile for > manufacturing firms to hire them. > > In that case, we would expect to see construction depressed: firms > closed, capital goods idle, and workers unemployed. But we would also > expect to see manufacturing plants running at double shifts—the money > not spent on construction has to go somewhere, and, remember, the > problem is not a lack of aggregate demand. We would expect to see > manufacturers holding job fairs, and when not enough workers showed > up, we would expect to see manufacturers offering higher wages to > attract workers into their plants, and then raising prices to cover > their higher costs. > > The size and duration of the excess unemployment of ex-construction > workers might be substantial and long lasting. It might require > significant time to retrain construction workers and plug them into > social networks in which they become good manufacturing workers. We > might see prolonged and high unemployment in the construction sector, > and in regions that had seen the biggest previous construction booms. > > But depression in the construction sector and unemployment among its > ex-workers would be balanced by exuberance in the manufacturing > sector, rising prices for manufactured goods, and long hours and high > wages for manufacturing workers. > That is what “mismatch” structural unemployment looks like—and it is > not what we have today, at least not in Europe and North America. In > the past three years, employment in construction has shrunk, but so > has employment in manufacturing, wholesale trade, retail trade, > transportation and warehousing, information distribution and > communications, professional and business services, educational > services, leisure and hospitality, and in the public sector. > Employment is up in health care, Internet-related businesses, and > perhaps in logging and mining. > > In the United States, the past three years have seen employment fall > from 137.8 million people in July 2007 to slightly less than 130 > million in July 2010—a decline of 7.9 million during a period in which > the adult population grew by six million. What we have witnessed is > not a shift in demand into sectors lacking an adequate number of > qualified and productive workers, but rather a collapse in the level > of aggregate demand. > > This may well look like structural unemployment in three years. In > three years, we may well see labor shortages, rising wages, and > increasing prices in expanding sectors, accompanied by high > unemployment elsewhere in the economy. > But that is not our problem now. Sufficient unto the day is the evil thereof. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
