Structural Unemployment: When Will It End?

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Unemployment in the US remains a huge problem until now, four years into the recession that hit the country back in late 2007.  Official government statistics show that, as of August 2011, the unemployment rate remains at a high 9.1% and that there are 14 million unemployed Americans, almost double the number of unemployed when the recession started in December 2007. Moreover, there were only 3.1 million job openings as of August 2011, which, while higher compared to the same period a year or two ago, is still 30% below pre-recession levels.

So, how do we explain the continuing unemployment problem in the country? Will the rest of the year be characterized by the same grim economic outlook? What about the next year or so?

While the economic outlook is improving, and the number of job openings is increasing, the ranks of the unemployed have only been trimmed down a little. Why? The answer lies in structural unemployment.

According to Wikipedia, structural unemployment is:

“a form of unemployment resulting from a mismatch between demand in the labour market and the skills and locations of the workers seeking employment. Even though the number of vacancies may be equal to, or greater than, the number of the unemployed, the unemployed workers may lack the skills needed for the jobs; or they may not live in the part of the country or world where the jobs are available.”

Structural unemployment in the country is caused by:

An education system that focuses on useless and/or obsolete degrees.

In “The Connection between Education, Employment and Entrepreneurship,” Jon Bischke writes that:

“the vast majority of the unemployment we’re seeing, and will likely continue to see, is structural unemployment. We’re training people for jobs that don’t exist while at the same time we’re not training enough people for high-demand jobs.”

Not enough supply of science, technology, engineering and mathematics graduates.

In the same article cited above, Jon Bischke continues:

“Technology companies can’t hire fast enough. But step outside of technology and other tech-focused industries and it quickly becomes a wasteland. Compensation is rising for engineers, designers and pretty much anyone who is tech-savvy. But are we seeing an accompanying increase in demand for computer science degrees? No, actually it’s just the opposite.”

Lack of basic skills needed to pursue science, technology, engineering and mathematics  courses.

Bischke goes on to say that:

“people are simply preferring to not work in technology. But that doesn’t really make sense. After all, people are spending more and more time with technology (e.g., Facebook, gaming, etc.). Why wouldn’t they want to pursue careers in the space as well. Well one reason would be that our education system is not providing them with the foundational knowledge to go after more advanced careers in technology.”

Wrong perception of the job market, with people thinking that there are too few jobs in science, technology, engineering or math-related courses.

Andrew Nusca, in “DARPA: ‘Significant decline’ in U.S. science and tech degrees, ‘harming national security,’ says:

“Why the decline? DARPA concedes that public perception is partly to blame, and a high awareness of the “dot-com bust” and “international outsourcing”  trends have people thinking there are fewer computer science jobs. But it’s the complete opposite: “Computer Software Engineers, Applications” is the fourth fastest growing occupation in the country in November 2007, according to the U.S. Department of Labor.”

So, how do we solve the structural unemployment problem?

  1. Offer more relevant courses and encourage students to stay on track

We should redouble our efforts to keep these young people on track and finish their courses. Citing a Georgetown University study on the number of Americans enrolled in STEM courses, Motoko Rich, in The Rising Value of a Science Degree, writes:

“According to the study, people with talent in science, technology, engineering or math don’t often major in such disciplines during college in the first place. And even if they start out doing so, many switch majors. Of those graduating with such degrees, only 10 percent go into related fields such as engineering, physical science or architecture.”

  1. Reeducate existing workforce

In “Creating the Next Generation of US Employees. My Investment in Treehouse,” Mark Suster writes that:

“the goal for today’s business is to educate broad groups of people in the existing workforce to improve their skills, broaden their knowledge and get ahead.”

  1. Correct the wrong perception of the realities behind the current job market

We should do everything to correct the misperception that there is weak demand for technology workers. In The Rising Value of a Science Degree, Motoko Rich writes:

“While traditional fields like computer engineering and laboratory research make up about 5 percent of the work force, demand for science, technology, engineering and math skills is spreading far beyond, to occupations in manufacturing, utilities, transportation and mining, as well as to sales and management. As a result, the study… argues that there is a shortage of so-called STEM workers.”

A strong technology sector will help continue to boost the American economy in the years to come.  Writes Jon Bischke, in A Tale of Two Countries: The Growing Divide Between Silicon Valley and Unemployed America, :

“…a thriving tech sector is a beacon of hope for America and perhaps one of a shrinking number of things keeping the country from slipping from its perch as the world’s foremost economic superpower.”

Thus, it is imperative that we put all our efforts to stopping structural unemployment in its tracks. We can do this by bridging the gap between the demand for and supply of STEM workers.

  • George Demarse

    I agree that the main culprit is structural unemployment. But this article goes into the same mantra we have heard time and again: more math and science for the masses through better schools. This supposedly makes structural unemployment go away, like shooing a fly away from the breakfast table.  

    The article assumes that people attain an education for vocational reasons, i.e., to get a job. They don’t. Unless they are highly focused at age 18 or 19 into a particular career path (usually enforced by parents) students dabble in all kinds of academic options. Science and math courses generally don’t attract them, for as you say, science courses are hard and boring. You will blow your GPA. Further, most students aren’t prepared for college mathematics anyway. That much I’ll give you.

    The answer here is not “forcing” people into more formal math and science courses who don’t like it to begin with, and aren’t good at it anyway. Science and technology jobs should attract those who are interested in engineering and who excel at those skill sets, that is not most people.

    The answer lies in employers “loosening up” the rigid skill sets they expect from people. Yes, you may want an engineer or technical writer, but nothing says you can’t take a history/English/psychology major who has basic skills and give them technical training for other aspects of the job. Business and industry need to get back into the training mode and help end structural employment–not perpetuate it.

    George DeMarse
    U.S. Office of Personnel Management (Ret)            

  • CommonSensePatriot

    This comment article is right on target and the solution to the unemployment mess as well as the shrinking of the middle class. Manufacturing jobs allowed people to move into the Middle Class in the past and to educate their children to move into the upper income groups. But manufacturing has been outsourced and those jobs are never coming back. The only future for the U. S. and it’s citizens that is sustainable and that will enable us to carve out an economic future that is strong and competitive in a world economy is to become the most educated nation in the world. Our investment in K-12 education is sufficient but the money is being spent badly. Only charter schools have consistently shown excellent results, even in economically disadvantaged, high crime, high unemployment, drug ridden inner city neighborhoods. Fifty percent of high school graduates are functionally illiterate. But even if they weren’t, few can afford to go to college because it has become unaffordable. And not everyone needs to get a 4 year college degree. Community colleges need to be greatly expanded and work with employers to identify and educate students in the jobs that are needed. All of this needs to be affordable and much of it should be free, like K-12 education. Without that investment, we will continue to have long term structural unemployment. Public-private partnerships to train and re-train the unemployed are needed. The message needs to get out to high school students that if they want a good paying job, they need to major in Science, Technology, Engineering and Math (STEM) courses. The technology sector is the only sector where good paying jobs will exist for most people. As a country. ignoring this need will doom us to the status of a thrid world economy. No matter what else we do to try to stimulate the economy and create jobs, this is the only workable long term solution.

    • CommonSensePatriot,

      Yes, we should make college affordable and should create a vocational courses that leads to technology sector jobs. We have too many useless degrees right now that only leads to insurmountable student loans. 

      Thank you for visiting my blog.

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