The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

What ‘Structural’ Unemployment Means

Posted on | May 14, 2010 | 11 Comments

We have previously discussed the difference between “cyclical” unemployment — temporary job losses caused by a dip in the business cycle — and “structural” unemployment, which is a function of fundamental changes in the economy. That is to say, if you’re waiting for the buggy-whip industry to rebound, you’re going to be waiting a long time.

Joseph Lawler wrote a fine article on this subject, which is important to understanding the causes of long-term unemployment. A market economy must allocate workers to jobs where they are needed most, and layoffs are part of that process. Now, the mainstream media is starting to catch on to this basic concept:

Fewer construction workers will be needed. Don’t expect as many interior designers or advertising copywriters, either. Retailers will get by with leaner staffs.
The economy is strengthening. But millions of jobs lost in the recession could be gone for good.
And unlike in past recessions, jobs in the beleaguered manufacturing sector aren’t the only ones likely lost forever.
That helps explain why economists think it will take at least five years for the economy to regain the 8.2 million jobs wiped out by the recession — longer than in any other recovery since World War II. . . .
More than one-third of chief financial officers at 620 big companies surveyed in March by Duke University and CFO magazine said they didn’t expect to restore their payrolls to pre-recession levels for at least three years. . . .
“Companies have just figured out, ‘We didn’t want to fire people . . . but now that they’re gone, we’ve realized that we can get by without them,'” said John Graham, a Duke finance professor who directed the survey. . . .

The job you got laid off from? You weren’t needed. That’s not necessarily your fault. Don’t wait around for your old company to re-hire you, and don’t cling to the idea that because you were a service technician in your old job that your next job will be as a service technician. Go find a new job — any job, in whatever field is available, even if it means moving halfway across the world — and you’ll be better off.

Labor is just another product in the market. You are the supply, and your employer is the demand. Once you get that concept figured out, things make a lot more sense. For example, if you think you’re underpaid, quit your job. If you don’t immediately find a job somewhere else at higher pay, guess what? You weren’t underpaid.

Try that little thought-experiment next time you’re complaining about your job. In an economy with 10% unemployment, you can be replaced.

(Hat-tip: Instapundit.)

Category: Economics

Comments

11 Responses to “What ‘Structural’ Unemployment Means”

  1. Chris Mallory
    May 14th, 2010 @ 3:10 pm

    Makes sense to have a complete halt on immigration until we get the new economy straightened out. Take care of our own before inviting the world.

  2. Chris Mallory
    May 14th, 2010 @ 10:10 am

    Makes sense to have a complete halt on immigration until we get the new economy straightened out. Take care of our own before inviting the world.

  3. ak4mc
    May 14th, 2010 @ 3:11 pm

    …if you’re waiting for the buggy-whip industry to rebound, you’re going to be waiting a long time.

    Let Obama get control of Ford, and it may come sooner rather than later.

  4. ak4mc
    May 14th, 2010 @ 10:11 am

    …if you’re waiting for the buggy-whip industry to rebound, you’re going to be waiting a long time.

    Let Obama get control of Ford, and it may come sooner rather than later.

  5. Red
    May 14th, 2010 @ 3:52 pm

    “If you don’t immediately find a job somewhere else at higher pay, guess what? You weren’t underpaid.”
    Ahem. Let’s not generalize shall we. Some of us haven’t had a merit raise, cost of living raise or performance review in the last two years or more.
    Everyone can be replaced whether there’s a recession or not. The trick is to make it such that it would be a major hassle for your company to release or replace you. That ol’ job security tactic still works to a large degree. Believe that.

  6. Red
    May 14th, 2010 @ 10:52 am

    “If you don’t immediately find a job somewhere else at higher pay, guess what? You weren’t underpaid.”
    Ahem. Let’s not generalize shall we. Some of us haven’t had a merit raise, cost of living raise or performance review in the last two years or more.
    Everyone can be replaced whether there’s a recession or not. The trick is to make it such that it would be a major hassle for your company to release or replace you. That ol’ job security tactic still works to a large degree. Believe that.

  7. Red
    May 14th, 2010 @ 3:54 pm

    1) What Chris said and 2)No one needs a be grateful you’re still employed lecture.

  8. Red
    May 14th, 2010 @ 10:54 am

    1) What Chris said and 2)No one needs a be grateful you’re still employed lecture.

  9. What 'Structural' Unemployment Means : The Other McCain | Jobless Bloggers
    May 14th, 2010 @ 1:11 pm

    […] Read this article: What 'Structural' Unemployment Means : The Other McCain […]

  10. Estragon
    May 15th, 2010 @ 5:05 am

    The last few downturns have seen businesses survive by increasing productivity. It’s just part of the creative destruction process of capitalism.

    The less efficient means fall by the wayside. The workers shed in the process move into positions which more efficiently utilize their time and talents.

    It is over-generalization to say “the jobs won’t come back,” though. In the widget industry, when demand returns with recovery, the shut down assembly lines will start back up, and those jobs return. White collar work which is divided among remaining workers will stay there, and those jobs will never return.

    There are cases, like Michigan and California (where the costs of doing business has driven business out) where the jobs will return, but somewhere else.

    But no one is entitled to a job or a raise. You don’t have to be grateful, but don’t be whiny either if you lose out. No “merit raise”? Maybe it’s your lack of merit?

  11. Estragon
    May 15th, 2010 @ 12:05 am

    The last few downturns have seen businesses survive by increasing productivity. It’s just part of the creative destruction process of capitalism.

    The less efficient means fall by the wayside. The workers shed in the process move into positions which more efficiently utilize their time and talents.

    It is over-generalization to say “the jobs won’t come back,” though. In the widget industry, when demand returns with recovery, the shut down assembly lines will start back up, and those jobs return. White collar work which is divided among remaining workers will stay there, and those jobs will never return.

    There are cases, like Michigan and California (where the costs of doing business has driven business out) where the jobs will return, but somewhere else.

    But no one is entitled to a job or a raise. You don’t have to be grateful, but don’t be whiny either if you lose out. No “merit raise”? Maybe it’s your lack of merit?