Monday, February 21, 2011

Over-qualified for a job and structural unemployment theories

Every recession a story will sometimes appear in the media about how openings go unfilled even though applicants are more than qualified for the job. Here's one:

Vineland resident Joseph Sangataldo has applied for several jobs, not counting civil service positions, since his layoff last October. ... The 53-year-old college graduate has spent much of his adult life in the public sector in employment, public health and social services.

Naked Capitalism lays out some reasons why this might be the case (from an employer's perspective):

... as cost cutting and short term earnings fixation became more pervasive, average time of employment shortened greatly. And with that came a major shift in behavior: it made less and less sense for employers to hire talented people with good general competence and character and train them. They’d be unlikely to recoup the cost of the investment ...

Which seems to imply:
1. Even though the cost of training highly educated workers may be lower, they don't expect the worker to stay once the economy turns around.
2. Which in turn implies that they don't expect the recession long enough for them to break even on the cost of training and hiring.

But this recession seems different as pointed out in the NYT:

Don Carroll, a former financial analyst with a master’s degree in business administration from a top university, was clearly overqualified for the job running the claims department for Cartwright International, a small, family-owned moving company here south of Kansas City. ... Conventional wisdom warns against hiring overqualified candidates like Mr. Carroll, who often find themselves chafing at their new roles. ... A result is a new cadre of underemployed workers dotting American companies, occupying slots several rungs below where they are accustomed to working. These are not the more drastic examples of former professionals toiling away at “survival jobs” at Home Depot or Starbucks. They are the former chief financial officer working as comptroller, the onetime marketing director who is back to being an analyst, the former manager who is once again an “individual contributor.”

But some of the difficulties are adjustment of expectations on the part of the overqualified employee:

Mr. Carroll’s cubicle mate, Mindy William, a former graphic designer and single mother who had been working at Target before she was recently hired as a claims adjuster, said she had noticed that he seemed to talk about his old job a lot.

“I know it’s been an adjustment for him,” she said. “He’s just making the best of it like the rest of us are. We’re glad to have jobs in this recession.”

For his part, Mr. Carroll admitted that he had caught himself often trying to drop his credentials into conversations at his new workplace.

“Obviously that stems from maybe some embarrassment at the level that I’m at,” he said. “I do want people to know that, to some extent, this isn’t who I am.”

Is over-qualification or under-employment consistent with structural unemployment - this is the structural unemployment argument that equates skill with education level? It depends on the rate at which the over-qualified workers find jobs. The more of these under-employed workers there are means a strike against the structural unemployment argument. It also means that workers are flexible enough (in the classical economics sense) to accept lower wages at a different but perhaps related job. It may even argue for higher industrial and occupational mobility during recessions.

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