Tornado Alley (PROG)

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The solution to unemployment isn’t better-trained workers: Or, Systemic problems have systemic solutions

Monday, December 2, 2013 — Adam Kotsko

Following Chomsky’s advice, I follow the business press to see what the ruling class thinks is going on in the world, and more specifically, I subscribe to Bloomberg Businessweek, which occasionally allows reality to creep in (global warming is real, deficits aren’t always bad) as opposed to the more nakedly ideological Economist. Recently, for instance, they ran a piece on the minimum wage .. http://www.businessweek.com/articles/2013-11-27/what-a-higher-minimum-wage-does-for-workers-and-the-economy .. which included the fact that raising the minimum wage does not actually decrease employment outside of the artificial environment of Econ 101. Yet it also included this little gem:

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“Raising the minimum wage is a short-term fix,” contends Wal-Mart’s [vice president for communications, David] Tovar. The long-term solution, he says, involves “expanding education, training, and workforce development.”
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This kind of nonsense drives me absolutely crazy. It makes no sense to assume that changes in the composition of the workforce will lead to significant increases in aggregate employment levels. (There are cases where new industries arise and the type of skills they need are relatively rare, but in a highly-developed economy like the U.S., such phenomena are always going to be small niches.) Indeed, we have a kind of “natural experiment” in my own chosen profession, academia, where there has been a systemic increase in the qualification levels of entry-level professors. Your average applicant for an assistant professor job has done more teaching, published more, and presented at more national conferences than ever before. Strangely, however, universities don’t react to this embarrassment of riches by increasing the number of job openings. Instead, they take advantage of the opportunity to get instantly tenurable professors for cheaper entry-level wages — or even visiting or adjunct wages.

This is where some Econ 101 would come in handy — increasing the supply of something (for instance, high-skilled workers) decreases its price, all things being equal. In the academic example, all things are indeed equal, because administrative cost-minimization priorities remain determinative of the number of job openings. There’s no reason to assume that the situation would be significantly different in other industries, because the reality of our system is that the employers’ priorities determine the number of jobs available. If the government provides job training — or worse, provides loans that allow people to take on the cost of their own job training — the result will be the same as in academia: employers will get highly-trained workers without having to invest in them (i.e., for free), with no appreciable effect on the number of job openings available.

This dynamic is not difficult to understand, but the stupid views I’m critiquing sound better to people because they don’t want to believe that there’s a fundamental mismatch between the interests of workers and businesses (which one might characterize as some type of “struggle” between different economic “classes”). For the sake of communicability, then, I’ll put it in more “neutral” economic terms. Let’s say that we call the number of job openings the “demand” for workers and call the workers themselves the “supply” of workers. High unemployment in a developed country like the U.S. is basically always going to be a demand-side phenomenon (maybe a rapidly expanding developing country could experience skills-deficits with significant system-wide effects, but we’re well past that point in the First World). Changing the skill levels in the work force is a supply-side solution. Obviously there’s a mismatch here — in fact, by changing the composition of the work force to be more in line with stated employer preferences, but with no cost to employers themselves, you’re only going to increase their ability to sustain a high-unemployment equilibrium.

We need demand-side solutions, and since unemployment is a systemic problem, the solutions have to be systemic. One popular systemic solution is to produce higher aggregate economic activity, but the only agent that can choose to do that — the federal government — is basically hamstrung right now. Another solution would be to change laws (which by definition are system-wide effects) such that employers are forced to hire more workers. One example might be to decrease the full-time work week to 30 hours rather than 40 (and ideally, employers would also be forced to keep overall wages the same). Another would be to stop allowing employers to brutally exploit workers who fall into the category of “salaried” rather than “hourly” — if you really need 80 hours worth of work out of all your current employees, then you’d better damn well hire twice as many if they’re limited to 40 hours each.

Here again, we have encouraging examples in the “natural experiment” of academia: clues that accreditators (who have system-wide powers) might start taking employment conditions into account have led some universities to shift over to full-time, one-year contracts rather than patchwork adjunct courses. It’s possible, too, that the Department of Ed could make a top-down decision that the adjunct category has been abused and should be reserved for genuinely supplemental offerings or else genuine short-term staffing shortages — this won’t happen, obviously, but a man can dream. The one thing that we know absolutely for sure, however, is that better training and qualifications for academics don’t lead to more academic job openings. They just mean that universities get the benefit of a whole lot of free labor and free professional development with the people they do decide to hire. It’s a fantasy to assume the result would be different in any other industry.

http://itself.wordpress.com/2013/12/02/the-solution-to-unemployment-isnt-better-trained-workers-or-systemic-problems-have-systemic-solutions/

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