May 05 2009

3 million job openings! Good news… or is it?

Help Wanted: Why That Sign’s Bad – BusinessWeek

This week’s cover story in Business Week magazine tells an interesting story about unemployment in America. Listen to the podcast or follow the link above to read more of this story:

Surprising statistic: In the midst of the worst recession in a generation or more, with 13 million people unemployed, there are approximately 3 million jobs that employers are actively recruiting for but so far have been unable to fill. That’s more job openings than the entire population of Mississippi.

Sound like good news? It’s not. Instead, it’s evidence of an emerging structural shift in the U.S. economy that has created serious mismatches between workers and employers. People thrown out of shrinking sectors such as construction, finance, and retail lack the skills and training for openings in growing fields including education, accounting, health care, and government. At the same time, the worst housing bust in decades has left the unemployed frozen in place. They can’t move to get work because they can’t sell their homes.

In IB and AP Economics we teach that there are three types of unemployment an economy may experience, ranked roughly in order from the least undesirable to the most undesirable (from a macroeconomic perspective):

  • Frictional unemployment: This accounts for people who are “in between jobs” or fresh out of college looking for their first jobs.
  • Structural unemployment: This is caused by the changing structure of an economy. As America’s manufacturing sector shrinks and its education and health care sectors grown, those whose skills lie in manufacturing become structurally unemployed.
  • Cyclical unemployment: This is also called “demand-deficient” unemployment because it is caused by a fall in aggregate demand or overall spending in the economy.

America today is clearly experiencing all three types, but due to the particular circumstances of the recession, the American worker is finding it it harder than ever to match his skills with an appropriate job. Below are some of the industries with the most and the fewest job openings today:

Most openings:

  • Education
  • Health care
  • Government
  • Energy (such as wind, oil, natural gas)
  • “Analytics” (i.e. business data analysis by firms such as IBM)

Fewest openings:

  • Construction
  • Manufacturing

Unfortunately for the large numbers of unemployed construction and factory workers, the kinds of skills required to work in the fields with the most job openings are prohibitively different from those learned in their previous industries. In addition to a mismatch of skills between the industries in which jobs are being lost and those in which labor is in demand, there is also a geographic mismatch in the labor market. Below are the states with the least and the most job openings:

Most job vacancies (states with large energy sectors: oil, natural gas and windmills)

  • North Dakota
  • Wyoming

Least job vacancies (states with large manufacturing and construction sectors)

  • North Carolina
  • California
  • Michigan

Historically, the geographic factor has not posed an issue to American workers, and when jobs opened up in one part of the country, Americans would pack up and move where necessary to find work. Today, however, with the collapse of house prices, more and more Americans find themselves stuck with a house they can’t sell in a part of the country where they can’t find a job.

To paraphrase the podcast above, “the US in danger of looking like Europe. The European job market has been described as ‘sclerotic’; people don’t respond to want ads because of the generous long-term unemployment benefits offered by European governments. Europeans have historically been geographically immobile due to nationalist ties to their home countries.” Today, the US job market reflects some of the same “sclerosis” as that of Europe.

America is facing the perfect storm of unemployment. At the same time that the economy is undergoing its most significant structural change since the Industrial Revolution brought millions of American workers from the farm fields into factories, it is facing the most significant decline in private sector spending (consumption, investment and exports) since the great depression. Put this together with the relative immobility of the American worker caused by the housing crisis, and unemployment has climbed to its highest level in three decades.

This interesting story ends with a glimmer of hope for the American worker:

To fight this sclerosis, the White House is using $3.5 billion of the stimulus for training, while boosting support for community colleges. Classes for factory workers seeking entry-level health-care careers have shown some success.

The truth is, displaced workers may have to move down a few rungs as they switch careers because their skills are irrelevant in their new roles… Many laid-off Wall Street financial engineers still haven’t absorbed that, says Fred Wilson, a partner in Union Square Ventures, a New York venture capital firm. “For them to take a job that pays a lot less, they have to make a meaningful change in their lifestyle. And that is an issue.”

Employers need to bend as well, recognizing that the candidates they’re seeking may not exist. Mark Mehler, co-founder of CareerXRoads, a staffing strategy consulting firm in Kendall Park, N.J., tells employers: “You’re hiring potential….You’ve got to train them.”

A mismatch of work and workers is never a good thing. But smart policy—combined with realism on the part of employers and job seekers—can minimize the disruption.

Discussion Questions:

  1. In what way may structural unemployment be a sign of a healthy economy, rather than a sick one?
  2. Part of the Obama stimulus package includes increased benefits for unemployed Americans. How may this pose an obstacle to reducing unemployment in America?
  3. Historically, the natural rate of unemployment in most European economies has been higher than that of the United States. Why is this?
  4. Do you think America’s NRU will return to its historic level (4-6%) when the economy eventually recovers from the current crisis? Why or why not?

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

38 responses so far

38 Responses to “3 million job openings! Good news… or is it?”

  1. Theresa Mehlon 05 May 2009 at 3:17 am

    1. Structural economy is a part of a healthy economy. It is a sign for economic growth and developement. As some skills might have been important 10 years ago like wood chopping, today high tech machines can take over this position, which creates structural unemployment. As the economy is developing more and more technology is being put in different sectors will therefore face structural unemployment.

    2. If unemployment people gain benefit there is no incentive to do something against it. The economy has to make sure unemployment remains a factor that is undesired and uncomfortable. A support of unemployment could lead to a growing unemployment since less people will desperately look for a job. This will hurt the economy.

    3.Americans are more flexible when considering jobs. They move around easily. Europeans are more settled. Also HIRE AND FIRE is a motto in america. There are more job gains and losses then in Europe. In europe it is not as easy to fier a worker.

    Also there are more minimal wage jobs in the US.

    4.Maybe, when the economy gains wealth again, the employment might go up, but not as much as before since like bevore explained structural unemployment is also a sign of developement at not just an economic crisis

  2. Nicholas Burnhamon 05 May 2009 at 3:21 am

    It's interesting to see a practical example of structural unemployment. I can understand how some workers might find it hard to understand that they won't get jobs that require their specific qualifications. It must be frustrating to find that the skills you have developed in order to get a job are no longer necessary. However, it is at least good that their are people looking for jobs. I agree when they say that they should lower the standards for entry level work requirements. This could get rid of a large portion of structurally unemployed potential workers because it takes away the only thing that's stopping them from being frictionally unemployed.

    On a macroeconomic scale, reducing unemployment is obviously quite a good thing, but keeping a small amount of unemployed people is also healthy. Since this plan might reduce unemployment to a degree and not completely, it is conceptually brilliant. There must of course be a balance, as the firms have to make do with less competent workers. Perhaps the government could fund basic training courses. It will be a form of government spending, so it could help against the recession, and it helps tackle unemployment as well.

  3. Dominic McNameeon 05 May 2009 at 3:43 am

    Structural unemployment might be good in general, but when the jobs cannot be filled due to practical restrains (such as being unable to move) then this is not a good thing.

    The increased benefits might help in humanitarian terms (and for getting votes) but in the long, economic term there can be problems where the NRU will rise, shrinking the GDP of the USA.

    The NRU is higher in Europe than in the United States because there are a lot more practical problems with moving. Moving from California to New York (if my geography isn't too bad thats about as far as you can go in the US) means that the people who move will have to put up with colder weather and different accents. Moving a similar distance in Europe, such as from Spain to Norway, will have much greater culture changes as well as forcing them to learn a new language. Which may not be to much work for a low paying job. Also, the unemployment benefits are high and last for a decent amount of time, meaning they are under less pressure to find a job.

  4. Maren Rackebrandton 05 May 2009 at 6:33 am

    Structural unemployment is a sign of a healthy economy, because as Theresa said it shows economic growth and development. New technology is found and therefore new jobs that need different skills than jobs before. Structural unemployment means that the economy improved and people need to learn new skills to work for this developed economy.

    If there are increased benefits for unemployed people in America it bears the risk that some people might be better off taking these benefits than going to work to get their own money, because they might earn less than they would get from the stimulus package.

    The natural rate of unemployment in most European economies was higher than the one from the United States because Europeans are not as willing to move for a job as Americans. Often people have to move for a job, but Europeans did not want that and stayed where they were, unemployed. Americans on the other hand were, up to this point, willing to move to whereever they find a job in the United States.

    I think Americans natural rate of unemployment could return to historic level due to the increase of jobs after the crisis. Also housing prices should go back to normal after the crisis and so the Americans would be more willing to move to whereever they find a job.

  5. Marc Lemannon 05 May 2009 at 2:45 pm

    Structural unemployment may be a sign of a healthy economy because it means the people will find jobs in another sector, and help the economy in that sector, instead of staying at their old jobs, where their jobs do not benefit the economy at its full potential. Basically, their service will soon be helping the economy in a newer sector, this also causes the economy to evolve from mainly primary sector jobs, to secondary sector jobs, and finally to the tertiary sector. An example of this are the car companies where machinery is taking over for the people, and where reducing costs can easily be done by cutting the unnecessary work force.

    Obama increasing benefits for the unemployed may pose an obstacle to reducing unemployment, because like in European countries where the unemployment benefits are good and for long time periods, for many it is fine if they are unemployed for a while, since they continue to receive the money they need to live comfortably from the government. Normally, the hurry to become employed and the short periods of natural unemployment, keep the unemployment lower.

    The natural rate of unemployment in Europe has been higher than the American’s, because it includes people looking for their first job and people transitioning to other jobs, and these are the ones that might take more time to look for a job, since they are getting paid by the government for being unemployed.

    Yes, it depends how much Obama’s stimulus package helps the unemployed, but the NRU will probably slowly fall to around 4-6% again, as many will learn new skills and go into these new areas where many jobs are available. House prices will also stabilize again and people will be able to move to other parts of the country to their new jobs. It will take a while, but all recessions end.

  6. Christian Evertzon 05 May 2009 at 5:24 pm

    1. Structural unemployment is typically a good sign as it indicates that an economy is transitioning to a more advanced economy in which some people's skills are not required anymore.

    2. Increased benefits for the unemployed may take away the incentive to work. Unemployed workers might just decide to stay at home and not work as they realize that they receive more benefits.

    3. This might be because there are more people in the U.S who are frictionally unemployed such as college graduates or people moving from one job to another.

    4. That depedens on how well the economy will recover. This also has to do with the role of the government and the measures it takes to bring the economy back on the right path. Concerning the stimulus package for example, some experts argue that it is not big enough to help the economy.

  7. Aleya Thakur-Weigoldon 06 May 2009 at 3:39 am

    1. Structural unemployment is a sign of a healthy economy, because it is evidence that the economy is growing because certain jobs are no longer necessary and replaced by advanced technology or other jobs.

    2. Increasing the benefits for the unemployed of a country could be an obstacle in reducing the rate of unemployment because higher benefits might decrease the incentive to start working again. Especially in a time of recession where the jobs might now pay as much.

    3. This could be because the unemployment benefits are higher in Europe than in the United States. In the U.S. there is a higher incentive to find a new job, once unemployed, because unemployment benefits expire after three months.

    4. If the economy recovers from this recession it is quite possible that the NRU of the U.S. will return back to 4-6%. This depends on, but not solely on, whether Obama's stimulus package is successful or not. It might take a while but the economy will eventually pick itself up again.

  8. Laura Perezon 06 May 2009 at 4:41 am

    Having structural unemployment means an economy is moving forward in terms of sectors. This specific one is moving from the primary and secondary sectors to tertiary and quaternary sectors. This supports one of the four macroeconomic goals; economic growth.

    Giving unemployed people benefits through this stimulus package can be dangerous and ineffective because you are taking away their incentives to look for a new job. This is similar to the situation we have discussed many times in class with France. Since unemployed french people are heavily supported by the government, they lack the incentive to seek new jobs and instead spend their time and money off somewhere on vacation.

    When it comes to moving from one country to another when there are job openings Europeans are in general more reluctant to do so than Americans. This creates higher national unemployment because they are more tied to their country and it is a greater change to move from one country to another than from state to state. This is what is called sclerosis and is what the American economy is starting to look like.

    I think that it will take a little longer because training people to be fit for new jobs is a long process before they can actually start working in the field. It also means that they will focus on younger people and it is likely that older people that were very good and comfortable in their original job will probably be rejected since they tend to be less open and less flexible. It means people do not have as much freedom to pursue the job they were interested and an overall more discontent public. However, people are very desperate for jobs so finding eager learners to teach and fill these job openings will not be too challenging.

  9. Rocio Perezon 06 May 2009 at 5:01 am

    Structural unemployment signals a changing and developing economy of a country. This could mean new technological advancements in a field that don't require workers to continue in that field as they have been replaced by advanced capital.

    Just like we've mentioned in class, a country that provides too many benefits for the unemployed could discourage them from finding a job quickly. Nevertheless, in my opinion the unemployed should have quite a few benefits, especially in times like today. It has become increasingly hard to find a job and many Americans are finding it incredibly hard to find new jobs without having been able to sell their low value house assets. Also, a person who has more time to find a job has higher chances of finding one that suits them best and in which they can apply their best skills.

    Europe has had a higher NRU because European governments tend to offer more benefits to people who are unemployed. Also, there is a nationalistic factor for Europeans that bind them more strongly to their country than Americans are bound to their states, thus they have had a higher tendency to work within their country even if there is job openings in other neighboring countries.

    I think that when America recovers from the economic crises it will be able to return to a fairly low unemployment rate. Although it might experience still a relatively high structural unemployment rate because the sectors that suffered due to the crisis (such as construction or financing) could very well go back into business as the Americans regain their confidence in investing and spending. Therefore, all those jobs that were avoided during the crisis might once again be needed in these fields.

  10. Gabrielon 06 May 2009 at 8:29 pm

    1. Structural unemployment is unemployment caused because of a change in demand for labour. Skills can become no longer wanted and therefore people are left without jobs. This can be a good sign because it shows that the economy is moving forward and starting to develop.

    2. Increased benefits post an obstacle because unemployed people will feel more comfortable and will not try and look for a job so quickly. If someone who is unemployed gets enough money to live a comfortable life without having to work, then there is no incentive to work.

    3. The unemplyment in Europe tends to be higher than in America because European governments tend to give higher benefits, removing the incentive to find work.

    4. When America gets through the recession it will probably regain the historic NRU because of the fact that most of the unemployment now is cyclical unemployment, meaning that it is caused by the recession. Once the recession is over people will once again spend and invest, this will lead to firms increasing supply and investement in new capital, therefore new job openings will arise.

  11. Daniel Edmondson 07 May 2009 at 5:09 am

    1) Structural unemployment is defined as a change in structure of demand of labor. A reason why structural unemployment is healthy as it could represent progress with new inventions. This is a sign of a developing economy. New inventions require new skills but make old skills unnecessary which then might lead to unemployment.

    2) If the benefits become too great and last too long a certain percentage of people might find it more advantageous not to work.

    3) The higher unemployment rate generally gets attributed to generous benefits for the unemployed, a lack of pressure to acquire new jobs, strong unions with poor coordination between union leaders and employers and maybe poor educational standards. However, Switzerland has one of the lowest unemployment rates with some of the best unemployment benefits which would question what I just wrote.

    4) I would imagine it to eventually recover to its historical level as long as people, having become unemployed due to structural unemployment, find new challenges/inventions/skills.

  12. Benji Rosenon 08 May 2009 at 1:25 am

    1.In what way may structural unemployment be a sign of a healthy economy, rather than a sick one?

    2.Part of the Obama stimulus package includes increased benefits for unemployed Americans. How may this pose an obstacle to reducing unemployment in America?

    3.Historically, the natural rate of unemployment in most European economies has been higher than that of the United States. Why is this?

    4.Do you think America’s NRU will return to its historic level (4-6%) when the economy eventually recovers from the current crisis? Why or why not?

    Structural unemployment is usually a good sign and is part of the natural rate of unemployment. However, in the short term the percent of americans out of a job because of it has increased to very worrying levels. As an economy develops into a tertiary sector based economy it leaves many people structurally unemployed since they lack the skills to be part of the service sector. These people must simply be re trained and forcing them to do so would be the most effitient allocation of the resource they present, for the american economy.

  13. Benji Rosenon 08 May 2009 at 1:26 am

    wow, it just posted that half way through me writing it, I'll finish my response here:

  14. Benji Rosenon 08 May 2009 at 1:33 am

    I give up, its just posting randomly

    I'll try a third time:

    The stimulous package could have bad reprocussions in that it takes away incentive to work. If people were starving and in homeless shelters because they are unemployed, they would be forced to seek work more actively then if they could live off benefit.

    The skills within the american economy are so varied, and moving in order to get a position in some other part of america is so easy, that their natural rate of unemployment has historically been very low. Lower then those of other countries for that reason, and also possibly due to america developing very quickly and having a very competent education system wihch opens enough doors in order to build up the service sector.

    As more students graduate looking for jobs, and the structuraly unemployed only begin to re attain their jobs, the levels will stay high even as the economy settles.

  15. Weng Chaoon 13 May 2009 at 11:09 am

    Work hard and try your best!

  16. ye seul, Brianon 13 May 2009 at 11:11 am

    1. It is a sign of a healthy economy because it shows that economy is fexible; it means that the economy is undergoing a change. In other words, it is developing further.

    2. The increased benefits for unemployment attracts people to be volunatrily unemployed. They would rather enjoy lesures.

    3. Europe has higher minimum wage and higher income taxes. The first one causes unemployment because the demand for labout decreases. The latter decreases the willingness of people to work. Also, in Euope, the labour union is relatively active and powerful; this causes the employers to reconsider highering a lot of workers. In addition, Europe also has better benefits for unemplyed than Amercica does.

    4. No. Obama is trying to give higher benefits for unemployed workers. This will ultimately cause people to be volunatrily unemployed. In long-term, it would be better if these government spending goes to education or development of technology to increase the supply of jobs. The structural change that America is undergoing is too large, so the workers will have hard time to catch up with new techniques required.

  17. Jihye LEE and Lian Yon 13 May 2009 at 11:19 am

    1. Structural unemployment is who doesn't have enough skills to work at the job. As the healthy economy gets better, people need more skills and high technology. Therefore, structural unemployment is a sign of a healthy economy.

    2.Obama stimulus package includes increased benefits for unemployed American but, in reducing the rate of unemployment because higher benefits might decrease the incentive to start working again. So, during a recession the payment could be too lower.

    3. This is because US has more frictionally unemployment than European. The natural rate of umemployment in most European economies has been higher than that of the US. So, US people get more benefits than Europeans.

    4. yes, I think it will return to its historic level because once the recession is over, people will once again spend and invest. This will lead to firms increasing supply and investement in new capital, therefore new job openings will arise. Hence, they have to improve their skills.

  18. Kennethon 13 May 2009 at 11:31 am

    1. Is "structural unemployment" healthy?

    Even though "structural unemployment" may seem like a negative phenomenon in the short run but in the long run it can be viewed as both a natural and healthy condition. Structural unemployment shows how the economy is exploring new sector and is a show of economic development. It can be compared to the dropping of an infant's first teeth. It may seem painful and inconvenient at first but it is paving the road for the development of stronger teeth. It is like how the present economy is developing into a new and stronger form.

    2. Why is Obama's stimulus package an obstacle?

    Stimulus packages often bring positive effects to an economy's aggregate demand, but this is only when it is used to do so. Obama's stimulus package increases the benefits for unemployed Americans. Even though this may seem fair for those who are involuntarily unemployed, it will also help those who are voluntarily unemployed. Giving more unemployment benefits will give motivation for people to become unemployed and give them no incentive to work. Not only will this not decrease the unemployment rates in America, it might even do the opposite and increase unemployment rates.

    3. Why do European economies have higher natural rates of unemployment than the US?

    As mentioned in the article, Europe has had "generous long-term unemployment benefits offered by European governments". This is an incentive for people to become unemployed and stay so. If the unemployment benefits exceed the benefits of working, then people will be motivated to remain unemployed as they can survive without working. The US however, does not have as much unemployment benefits and therefore, people will tend to work more than those in Europe.

    4. Will America's NRU return to its historic level?

    From my point of view, I do not feel that America's NRU will return to its level if Obama continues to use its stimulus package on unemployment benefits. As this will encourage people to become voluntarily unemployed, the economy should not show any recovery. If Obama however decides to turn its stimulus towards education or other more important sectors, America's NRU might show a recovery of some sort as more educated people means an increased working force that is actually willing to work.

  19. Melvinon 13 May 2009 at 10:08 pm

    1. Structural unemployment may be a sign of a healthy economy. It means that the economy is moving towards an evolution of jobs and thus economic growth. Since there is structural unemployment, it means that the current workers do not have enough skills / talent for being flexible and a 'chameleon', meaning that they are able to adapt to circumstances based on the current economy's state. For example, when a steel machine operator gets retrenched, he is able to move on towards another job, say, a mechanic. By having structural unemployment during this stage of the business cycle in the U.S., it gives the workers a 'wake up' call that they should be taking up courses and training to enrich themselves as well as gain more exposure regarding the other jobs that they are able to learn of and thus save themselves from being jobless when they have been laid-off by the company. This will then enable them to be more adaptable and resilient whenever the economy faces a crisis. Thus, a new generation of workers could be formed through this 'evolution'.

    2. The stimulus package could pose as a threat to reducing unemployment in America because, when unemployment benefits are increased, this means things, such as welfare will rise, thus giving the unemployed even more reasons to stay unemployed. This actually has its pros and cons. It is good, in a way that it helps to aid the workers who are unemployed to survive while they find a job. The disadvantage would be that it becomes an incentive for the unemployed to continue being unemployed, because they do not have to work to be able to survive and earn money.

    3. The unemployment rate of most European economies are higher than that of the United States because the unemployment benefits in European countries are much higher. The pensions they give as well as any other welfare aids that they give towards their citizens in European countries are high enough that the unemployed are able to live based on that amount of welfare that they give to the unemployed. This is proven based on the statement mentioned above; “The European job market has been described as sclerotic; people don’t respond to want ads because of the generous long-term unemployment benefits offered by European governments.”

    4. I personally think that America’s NRU will not return to its historic level of 4%-6% because the economy is moving towards a green-technology industry. Thus, the amount of people that have the skills required are scarce. Therefore, based on this, the unemployment rate could not recover back to 4%-6%. Furthermore, in the above article, it is also mentioned that there are 3 million jobs available for 13 million people, however they have been unable to fill in the 3 million spots. This shows that even though jobs are present, people are still unemployed due to the lack in skills for the jobs that are present. Imagine, only a handful out of 13 million could fill in some of the spots available out of the 3 million vacancies. This strengthens my conclusion that America is unable to return back to its historic unemployment level.

  20. jabbobbon 14 May 2009 at 4:25 am

    1. Structural unemployment is caused by the changing structure of a nations economy. In the case in the U.S. it is a good thing, because this shows that the economy is advancing. As economies move from agricultural over industrial to information technology industries, there will always be workers losing their jobs because they are replaced. This is bad for the individual but good for the economy as a piece.

    2. If people have the choice between lousy payment for the same amount of work they’ve always been doing, or free money from the government… obvious decision. This is a problem that Germany is facing too, there is no incentive to work when you can have the government pay for your life.

    3. Americans have a different attitude towards jobs. ‘Hire & Fire’ is a common course. If you lose a job you just go and get the next job. European countries have strikter policies about firing people. But once you’re fired, it is harder to be employed again. Also the NRU might be higher in Europe than in the U.S. because of the incentive to just pretend to be looking for work and have t he government pay you.

  21. Younes Huberon 14 May 2009 at 4:53 am

    1. In what way may structural unemployment be a sign of a healthy economy, rather than a sick one?

    Well, structural unemployment means that a certain type of worker is no longer needed, such as weavers for example. This does not necessarily mean the economy is sick, rather it is healthy because it has developed new means of replacing a weaver for example by machines. This is a sign that the economy is developing, advancing and growing.

    2. Part of the Obama stimulus package includes increased benefits for unemployed Americans. How may this pose an obstacle to reducing unemployment in America?

    Obama's increasing benefits for unemployed Americans is good in the way that the unemployed people dont have to live in total misery. However, this may encourage these Americans to remain unemployed for as long as possible insted of finding a minimum wage job for example. It is an obstacle in the way that it kills some of the incentive for those people to find a job

    3. Historically, the natural rate of unemployment in most European economies has been higher than that of the United States. Why is this?

    The unemployment benefits in Europe are better than those in the US and thus it kills most of the incentive to find a job.

    4. Do you think America’s NRU will return to its historic level (4-6%) when the economy eventually recovers from the current crisis? Why or why not?

    I think that in the long run the NRU may return to its historical level, yet I do not believe it will return to it after the current crisis. I think this is so because at the moment cyclical unemployment is increasing, this suggests that America is advancing technologically, meaning that cyclical unemployment may remain high for a while before returning to normal.

  22. Finlay Smallon 14 May 2009 at 5:27 am

    Structural unemployment is a sign of a healthy economy because it shows that the new skills are required for the economy indicating advancements in technology and overall a growing economy.

    People could argue that obama's stimulus package to include unemployment benefits is either good or bad. Most people would immediately say it is bad because there is no incentive for the people to go out to find jobs, but the problem at the moment is their aren't Jobs, so how will people be able consume and reboost the economy without an income. In the long run this is bad because their is a loss of incentive but in the short run and during the recession we are in it is good.

    It is good because occurding to keynesian in order to boost the economy the Government must start spending huge amounts of money (777 billion dollars) and thus the injection of 777 billion dollars should result in the multiplier effect and result in a total of nearly 1.6 trillion dollars GDP increase of national spending, and in theory fix the whole crisis. In order for this to happen the money must reach the people. If a certain amount of it is put into unemployment benefits this is what will happen. As people get money, and become more confident in the future and hopefully belive a job will be avaliable in 3-6 months time then they wont just save the money they get but rather spend it, and this in turn will boost the economy and hopefully get us out of the recession.

    But this should only be a short term increase in benefits, because their will be less of an incentive in the long run should the benefits stay as high as proposed.

  23. Helene Gleitzon 14 May 2009 at 6:43 am

    Structural unemployment in an economy means that it is healthy and has the ability to grow. It is a sign of development and growth, which are both important in a healthy economy. Jobs that were booming 20 years ago, such as textile workers, are not employed today because some of the factories have been moved to South East Asia for example. This means that workers will have to change jobs and be re-trained in order to continue working and have an income.

    It could cause a problem because it doesn’t give incentives to go back to work and find a job if you already get money from the government and are at the same time, able to stay home. A government has to make sure the minimum wages are enough to live for a short period of time, but still give the incentive to find a job and get more revenues.

    In most European countries, people have a tendency to stay put for a long period of time. They are less likely to move around to find jobs, sometimes due to the language barrier, but rather wish to stay in one place and wait for a job to open up in the area. In Europe, workers are usually more protected from getting fired right away while Americans, as Theresa previously stated, run on Hire and Fire. Another point is that minimum wages in Europe are much higher than in the United States. A French unemployed worker for instance will receive income from the government for about 2 years while an American worker will receive it for about 3 months. This doesn’t always give an incentive to go back to work right away.

    It all depends on how the economy recovers and how quickly. If the economy recovers, the NRU will most likely go back to 4-6%, but it depends on President Obama’s stimulus package and how effective it is on the recovery.

  24. Alex Hanon 14 May 2009 at 6:43 am

    1) You are structually unemployed when your specific expertise is no longer demanded by the market condition. So this may be a pain for you, but for the macroeconomy this may not be negative because it indicates advances and improvements in the economy. For instance farmers may lose their jobs because their labor can be replaced by more efficient and robust machinery.

    2) If unemployed people are treated too nicely by the government, they are disincentivized to work. So if the goal is to decrease unemployment, maybe the government should make being unemployed difficult and nasty so that people will be urged to start working.

    3) I suppose because Europe has had more public services for unemployed people; they were able to survive without working.

  25. Bastion 14 May 2009 at 9:34 pm

    Structural unemployment: the people that are unemployed aren’t skilled enough to keep up with the advancement in the economy. Frictional unemployment: people moving from job to job. If the government increases benefits, workers will have no incentive to work and they will rely on money from tax payers to survive.

  26. ask->meon 15 May 2009 at 4:16 am

    @ Mrs. Theresa Mehl dear,

    I'd say that your grammer is better than your logic. The economic crises is the result of 3 things:

    1-Policies that required banks to write mortgages to people who could never repay the money

    2-The Domino effect of being depend on America..if America gets hit, the whole european system will get in chaos, it's wrong that one country can appoint over the whole system and that will be a big problem for the next future.. depend on america is normal, but not as much as europe is now…

    3-Greed of corporate CEO's and Politicians

  27. Amit Zaidenbergon 15 May 2009 at 7:19 am

    Structural unemployment means people are switching between primary, secondary and tertiary sectors of the economy, usually going down the line into services is considered a healthy evolution and a sign of a healthy economy.

    Increased benefits for unemployed americans may pose an obstacle to reducing unemployment because it decreases the incentive of people to look for jobs and they might not take low paying jobs as a result even though this is whats needed to get out of a recession.

    The reason for natural rate of unemployment being higher in European economies is because often times european governments give much higher benefits lowering the incentives of people tp return to work and thus stay in the frictional unemployment phase for longer.

  28. Simon Strongon 16 May 2009 at 5:36 pm

    1. Structural unemployment could be a sign of a healthy and growing economy because it would mean that your skills are no longer needed, which would be bad for the person being laid-off, however it means for the economy that there are advancements in technology and capital to purchase the technology. Also it means that once you re-train you can work at a higher level, another indicator of economic growth.

    2. Increasing unemployment benefits may be an obstacle in the target for getting people back to work because on a personal level if that person is comfortable living off the benefits then he has no incentive to get back to work where he may be worse off with taxes, low wages etc.

    3. Europe tends to have a higher NRU because most of the European nations are more liberal than the American Government and give higher unemployment benefits, which, as said above, creates less incentives to go out and work.

    4. I think whether or not America's NRU will drop back to it's historical level is entirely dependent of whether the Government drops the levels of unemployment benefits to give more incentives to go out and work.

  29. kim + charlieon 18 May 2009 at 2:31 pm

    1) Structural unemployment may be a sign of strength in the economy because this form of unemployment is not related to the number of jobs or the willingness of people to work, it is merely that workers are lacking in more specific skills required for certain jobs. This issue may be resolved easier than others because once the workers are trained for the remaining jobs then the unemployment level will decrease.

    2) With the increased stimulus package being given to the unemployed Americans, more people will be satisfied with staying at home. This results in more voluntary unemployment in the economy. Because of this, people will stay at home instead of looking for a job which causes the unemployment level to stay the same.

    3) In Europe, there are benefits for being unemployed, their market was described as 'sclerotonic.' The benefits for being unemployed in the long term were more appealing than that of getting a job and recieving wages. Europe and America were different in another aspect; the Europeans were unable to move with job availability in different regions,whereas in America, the workers moved along with the job to get paid.

    4) I believe that America's NRU will slowly return to its historic level of between 4-6%. The speed of this recorvery depends on how well Obama's stimulus package works. The economy just needs to stabalize itself and then it will return to the normal rate of unemployment.

  30. Ungku Iskandaron 18 May 2009 at 2:33 pm

    1. The structural unemployment can be seen as a sign of a healthy economy because it shows that the economy is progressing. The reason why people are being laid off is due to the fact that their skills are no longer needed. This indicates that there is some sort of improvement in the economy such as for example technological advancement thus old skills are no longer needed. In addition to that, the people who are unemployed have a chance to train and get new jobs that is available in the market.

    2. This is because Obama's policy will create an opportunity cost for working. With high unemployment benefits, people can choose to stay at home and be idle rather than to find a new job that will require time and money to train. It does not give an incentive for people to work.

    3. This is because most European governments give high unemployments benefits due to high taxes payed by the working class. They are well taken care off without working thus they choose not to work and live off the welfare cheques.

    4. No. This is mainly dependent on Obama's policy on unemployment benefits. If there are high unemployment benefits being given out, people will still choose to stay and not work as there will be no incentive for them to do so.

  31. Jodyon 18 May 2009 at 2:43 pm

    1. Structural unemployment might be a sign of healthy economy since people might leave their job and being unemployed to get a better job, this shows the evolution of jobs and this might be the cause from economic growth. Structural unemployment means that the workers do not have the right or enough skills for being flexible and adaptable to any kind of circumstances or condition in different state of economics. Workers might be taking up trainings and courses for themselves to be more adaptable, flexible and have the ability to be able to work effectively and efficiently.

    2. By increasing the benefits for unemployed Americans, there will be more and more unemployed people in America that would like to stay unemployed and chooses to stay unemployed, since they are able to make a living with the benefits of unemployment that they get from the government. These unemployed people will have less incentive to work since they know that they will be able to live even if they do not work. This might be an obstacle to reduce the rate of unemployment in the US.

    3. This is because the unemployment benefits in Europe are much higher than they give in the US. This made unemployed people in the Europe decided to stay unemployed. Also the pension and other aid for people who are not working is higher in the Europe, this is the reason why the rate of natural unemployment in the Europe is higher than the natural rate of unemployment in the US.

    4. I don’t think that the NRU in America will return to 4-6% when the economy recovers. This is because now people are working towards better technology and environmentally friendly technology that will be used in the future. Therefore structural unemployment will be higher in the future, since these people doesn’t have the appropriate skills to work on this field. Some of these people will take courses to understand and learn the skills that they need, but not all of unemployed people are able to afford higher education. Therefore I think the NRU in America will not be able to return to 4-6% like it used to be.

  32. Daiki.Ton 18 May 2009 at 2:54 pm

    1) Since there will be more unemployed Americans, structural unemployment might seem a sick economy. However, in a long run, structural unemployment may be seen healthy economy because the economy shifts from manufacturing sectors to health care and education sectors. This shows economic development.

    2) Increasing the unemployment benefits will not be very effective because then unemployed American will choose to stay home and not work. It gives them less motivation and incetive to work.

    3) Natural rate of unemployment is higher in Europe then America because the European government tends to provide more unemployment benefits then American government does. Therefore, they have less incetive to work.

    4) Unless American government stop providing unemployment benefits, it is less likely for NRU to return to its historic level.

  33. Christian Clausenon 19 May 2009 at 5:56 pm

    1. In what way may structural unemployment be a sign of a healthy economy, rather than a sick one?

    Structural UE might indicate that the country is shifting from Tertiary sector to the Secondary sector. This means that the country is experiencing economic development and growth.

    2. Part of the Obama stimulus package includes increased benefits for unemployed Americans. How may this pose an obstacle to reducing unemployment in America?

    I might increase AD to some extent, as it will give them more disposal outcome and undergo the effect of the multiplier effect. But it will also give them an incentive to save as they will not have to look for a job to stay alive. If the welfare wage is larger than the lowest wage they can get at a job, then why work? This might even increase the UE rate.

    3. Historically, the natural rate of unemployment in most European economies has been higher than that of the United States. Why is this?

    Because it has many welfare states, like Scandinavia and France. It is still functioning, though, and by keeping the UE slightly higher it means that labor will be less scarce, making the workers accept lower wages.

    4. Do you think America’s NRU will return to its historic level (4-6%) when the economy eventually recovers from the current crisis? Why or why not?

    Possibly, maybe even lower than that, because in the process Obama has established many new jobs to keep the economy flowing. However it will most likely be balanced out by the likely collapse of the car manufacturers in Detroit.

  34. axelon 05 Nov 2009 at 5:28 am

    structural unemployment is a sign of a healthy economy because the technology is increasing and therefore the necessity for the jobs where technology has taken over is not necessary. This means as a society we are moving forward and can do other tings instead, this expands our Production Possibility.

    The increased benefits may make people not as motivated to get a new job because they are receiving extra bonuses.

    the rate of unemployment is usually higher because the unemployment bonuses are higher and the pensions are higher.

    I believe that there is a possibility that America’s NRU will return to its historic level (4-6%) because even if the economy is completely changing the percentage may still eventually end up to be the same or lower because people will get their jobs back after they have changed their profession from what is not necessary to the jobs that are offered.

  35. Yaelon 17 Nov 2009 at 10:04 pm

    Structural unemployment naturally has a negative effect on the worker who is being replaced. However, this replacement calls for better means of production and more efficiency, because when labor is replaced, for example by capital, the job gets done faster and better. Therefore, it is better for the nation; the one worker's loss certainly doesn't outweigh the accomplishments that the new machinery, for example, can offer. Also, the worker who is fired can now learn how to make the best of the situation, for example by learning how to control the machine that replaced his job, or learning how to make it in the first place.

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