What does structural unemployment say about job openings and hires

Structural unemployment seems to imply that there are job openings that do not get filled. So why does JOLTS data (above) consistently show that hires are always higher than openings?

It's a compositional effect, see chart below which shows the same for durable goods manufacturing where openings are now running higher than hires:

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.

Do we know what we don't know

A few items over the course of the past few months gives pause to what we think we know or don't know.

1. Fluoride, we know has beneficial effects - but how much fluoride is better? This news item reverses what we thought we knew:

The U.S. Department of Health and Human Services announced plans Friday to lower the recommended level of fluoride in drinking water for the first time in nearly 50 years, based on a fresh review of the science.

The announcement is likely to renew the battle over fluoridation, even though the addition of fluoride to drinking water is considered one of the greatest public health successes of the 20th century. The U.S. prevalence of decay in at least one tooth among teens has declined from about 90 percent to 60 percent.

The government first began urging municipal water systems to add fluoride in the early 1950s. Since then, it has been put in toothpaste and mouthwash. It is also in a lot of bottled water and in soda. Some kids even take fluoride supplements. Now, young children may be getting too much. ...

One reason behind the change: About 2 out of 5 adolescents have tooth streaking or spottiness because of too much fluoride, a government study found recently. In extreme cases, teeth can be pitted by the mineral — though many cases are so mild only dentists notice it. The problem is generally considered cosmetic and not a reason for serious concern.

The splotchy tooth condition, fluorosis, is unexpectedly common in youngsters ages 12 through 15 and appears to have grown more common since the 1980s, according to the Centers for Disease Control and Prevention.

But there are also growing worries about more serious dangers from fluoride.

The Environmental Protection Agency released two new reviews of research on fluoride Friday. One of the studies found that prolonged, high intake of fluoride can increase the risk of brittle bones, fractures and crippling bone abnormalities.

Critics of fluoridated water seized on the proposed change Friday to renew their attacks on it — a battle that dates back to at least the Cold War 1950s, when it was denounced by some as a step toward Communism. Many activists nowadays don't think fluoride is essential, and they praised the government's new steps.

See also this SciAm article (subscribers only).

2. This SciAm (subscribers only) article on vitamin D was so convincing that not long after, I went out and got myself some vitamin D supplements. It is unusually convincing (to me) and it is hard to place a reason for this - especially since there are no randomized trials involved. Theoretical links between vitamin D and health were explored and found to be true. There were no size effects and least of all, very little on recommended dosage. Perhaps it was because both the authors were so convinced that they are now on vitamin D supplements as well (each of them on a different dose!).

Not long after reading that, Freakonomics reports on two apparently conflicting headlines on vitamin D by the NYT and WSJ. However, the headlines in these cases actually tell the same story:

A long-awaited report from the Institute of Medicine to be released Tuesday triples the recommended amount of vitamin D most Americans should take every day to 600 international units from 200 IUs set in 1997.

Given that the so-called 'hard' sciences are struggling with the dosage issue, it was refreshing that economists were able to say that they know what they don't know. Here is Mankiw on extending unemployment benefits:

So when I hear economists advocate the extension of UI to 99 weeks, I am tempted to ask, would you also favor a further extension to 199 weeks, or 299 weeks, or 1099 weeks? If 99 weeks is better than 26 weeks, but 199 is too much, how do you know?

It is plausible to me that UI benefits should last longer when the economy is weak. The need for increased aggregate demand is greater, and the impact on job search may be weaker. But this conclusion is hardly enough to tell us whether 99 weeks is too much, too little, or about right. It is also conceivable that the amount of UI offered in normal times is higher than optimal and that a further extension would move us farther from what is desirable.

Likewise, given what economists know, can policies that target inflation at 3 percent is better than one that targets inflation at 4 percent?

Firefox not warning when closing multiple tabs

I had this problem when I upgraded to Firefox 3.6 and there were all these discussions on changing the settings - none of which worked. After fiddling around I accidentally discovered that if I set my Privacy settings to "Never Remember History" it would always close multiple tabs without warning regardless of what other settings for tabs are set. I got around to changing my Privacy settings to clear history on close.

Finally, one aggravation solved.

Standards

When I think of standards, I don't usually think of this. I can't make my mind up about this - is it a misallocation of resources to set standards on fruits and vegetables? Is it necessary? I don't know what to think.

Structural unemployment - skills revisited again

Anecdotal stories such as this are important but at the same time can serve to undermine. The report:

Evidence of a skills mismatch became increasingly clear in Fresno after the housing bubble burst, causing joblessness to nearly triple. ... Unemployment hovers at 16.9 percent, but managers at the 7,000-employee Community Medical Centers say they cannot find enough qualified technicians, therapists, or even custodians willing and able to work with medical waste.

The situation is much the same at Jain Irrigation, which cannot find all the workers it wants for $15-an-hour jobs running expensive machinery that spins out precision irrigation tubing at 600 feet a minute, 24 hours a day, seven days a week.

"The job requires at least a high school education, and maybe some technical training, but we don't seem to be getting the right people applying," said Aric J. Olson, Jain's president.

Perhaps the it was the bubble that caused workers to reallocate their skills to flipping properties and hustling the unsuspecting public to apply for NINJA loans instead of accumulating skills? A comparison of whether it was difficult to fill positions before the recession would have been at least the minimum to allow a very tentative conclusion of skill-mismatched.

Yet the title of the article states the problem most succinctly: Why does Fresno have thousands of job openings - and high unemployment? And the answer seems to lie in the above quote - at least a high school graduation and some technical training. Perhaps the trend in HS graduation rate that was evident even before the recession is part of the answer. See Heckman and LaFontaine (2010) for evidence that HS graduation rates have been steadily declining, and this NCES report for evidence of the opposite.

As far as Fresno is concerned, the facts on the ground seem to indicate a lack of HS graduates and as argued previously, the lack of education is not the same as the lack of skills.

Stagnation in board games, computers, and toys

I've been making numerous trips to the toy store in search of gifts for the kids friends - birthday parties and such, and I have been depressed by the lack of interesting board games and toys.

In terms of board games, it is hard to find anything new at all that has new and successful since I was a kid. I still see Risk, Monopoly, and the Game of Life and the 'newer' stuff seems to be variations of the older games - Horseopoly, Dogopoly, Catopoly. Card games are all variations of some kind of gin rummy and other games are offshoots of dominoes or dice-throwing. In some ways it attests to the fact that these games are long-lived and hence a sign of success. In other ways it shows lack of imagination and innovation.

When I was a kid, a game we enjoyed was Mastermind which I did get but was extremely disappointed in the quality. The pegs didn't really fit and everything felt really cheap and plasticky - even though it was a fun game once, the cheapness of how it was made really took away all the pleasure.

And the poor quality isn't only reflected in toys. I recently bought a HP computer and was extremely disappointed in its cheap plastic casings and rickety feeling keyboard. Even though it has a fairly fast dual processor it was much louder than I expected. The last computer I bought was a Dell which was almost 6 years ago which was just as poor a quality and for that reason I avoided Dell altogether. I'll have to add HP to the list. While, it is true that computers have seen innovations, its design, appeal, and look-and-feel have stagnated and may have even taken a dive.

In many ways, I wonder if Tyler Cowen has understated the stagnation in our lives.