Posted on 08/08/2010 4:43:42 AM PDT by SeekAndFind
As I noted in a previous post, economists define three types of unemployment: frictional, structural, and cyclical:
Frictional unemployment is defined as the unemployment that occurs because of people moving or changing occupations. Demographic change can also play a role in this type of unemployment since young or first-time workers tend to have higher-than-normal turnover rates as they settle into a long-term occupation. An important distinguishing feature of this type of unemployment, unlike the two that follow it, is that it is voluntary on the part of the worker.
Structural unemployment is defined as unemployment arising from technical change such as automation, or from changes in the composition of output due to variations in the types of products people demand. For example, a decline in the demand for typewriters would lead to structurally unemployed workers in the typewriter industry.
Cyclical unemployment is defined as workers losing their jobs due to business cycle fluctuations in output, i.e. the normal up and down movements in the economy as it cycles through booms and recessions over time.
In a recession, frictional unemployment tends to drop since people become afraid of quitting the job they have due to the poor chances of finding another one. People that already have another job lined up will still be willing to change jobs, though there will be fewer of them since new jobs are harder to find. However, they aren’t counted as part of the unemployed. Thus, the fall in frictional unemployment is mainly due to a fall in people quitting voluntarily before they have another job lined up.
But the drop in frictional unemployment is relatively small and more than offset by increases in cyclical and structural unemployment. One of the big questions right now is whether the US economy is suffering, for the most part, from structural or cyclical unemployment. If it’s cyclical, then there’s a good chance that government intervention can help. If it’s structural, i.e. a decline in automobile production and manufacturing more generally, a decline in home construction, and a decline in the financial industry all of which free workers that need to be absorbed elsewhere in the economy, there’s less that can be done and some do not think that government can do much at all about this type of problem (though as I note below, I disagree). Thus, the debate is between those who say our current unemployment problem is largely cyclical and hence we need more government action, and those who say it’s structural and hence there’s very little that government can do. We will just have to wait for the structural changes to take place, and that takes time.
I don’t think this debate can be answered by moving close to the polar extremes and declaring it’s mainly a structural or cyclical problem. For me, it seems obvious that part of the problem is structural. The real question is how large the structural component is and what can be done about it. But no matter how large it is — take a very liberal estimate of the size — I don’t think there’s any way to deny that there is a substantial cyclical component on top of it that demands government action. It’s true that the size of the government action to offset the the cyclical downturn should be connected to the size of the cyclical unemployment problem, but the problem is big enough that politicians won’t come anywhere near to overdoing it. The most optimistic view of what Congress might do would still leave them short of what is needed. We don’t know the exact structural-cyclical breakdown, but the cyclical problem is certainly larger than any imaginable Congressional response. So the excuse for inaction based upon the “it’s all structural” claim isn’t persuasive.
What about the structural problem, does government have any role to play, or does it have to rely upon the private sector to solve this problem by itself? Several points on this. First, even if the problem is mostly structural, the government can still provide people with jobs to bridge the gap until the structural changes are complete. To me, this is better than simply extending unemployment compensation since it allows individuals to contribute something (e.g. work on a project the local community needs). And by giving people jobs, or at least government aid through unemployment compensation, we increase aggregate demand and the that helps firms to do better and speeds the transition.
Second, government can ease the structural problem by making it easier for businesses and individuals to relocate. People are understandably reluctant to leave the place they have lived for years and years, but government incentives to relocate (tax breaks, subsidies, etc.), can help. So can efforts to provide individuals in communities suffering from high unemployment with information about where job prospects are better, as can retraining programs (though these aren’t always as effective as hoped). In a deep, widespread recession places that need workers may be hard to find, but not always and knowing where there are better opportunities for employment can be helpful. Businesses can also be induced to relocate through tax and other incentives, though the tax competition that accomplishes this may strip local governments of needed tax revenue, so I’d prefer these programs originate at the federal level. And there can also be government encouragements to speed the investments that are needed to complete the transition.
But the main things I want to emphasize are that no matter how large the structural problem is, cyclical unemployment is also a big problem, so the claim that government is powerless because it’s all structural doesn’t hold. And the claim that the existence of a structural problem means there’s nothing the government can do is also incorrect. If nothing else, the government can help workers during the transition. In addition, though the opportunities here are more limited, there are also things the government can do to make the transition happen sooner rather than later.
Neither. The unemployment problem is 0bama.
This cycle of unemployment is INTENTIONAL
The unemployment problem is structural. Obama is an accelerant, just like gasoline is to a fire.
The problem is, we don’t export anything except ... American JOBS.
“Free trade” is what is destroying US jobs.
China doesn’t have an unemployment problem. They’re growing like crazy. Building and thriving.
Because we’ve sent so many, former American jobs and factories there.
All of our manufacturing is overseas. Almost all of our software development, engineering, help desk, and IT support is overseas or H1-B. Construction is in the hands of illegals or foreign born workers.
We are becoming a nation of nothing. We build nothing. We manufacture nothing. We produce nothing. Of course, this leads to no jobs to be had regardless of your motivation or qualifications.
The only safe fields of employment are medical, legal, and retail and only because they cannot be outsourced. If they could be shipped overseas, I am sure management would do it.
The end game has already been discussed in congress. The end game is a British style ‘dole’ or permanent unemployment or welfare or whatever you want to call it. Eventually people will be starving in the streets or America will have to pay people sustenance level income to allow them to survive.
This is the America that Bush, Clinton, Bush, Obama have built for us. This is the end result of the New World Order and spreading the wealth around. Like a drunken rock-star we have squander all of our once uncalcuable wealth.
Now we are broke. We have nothing left to give away and we have no jobs.
Thank you, to all of our leaders. Giving away all of our manufacturing and money to ‘help’ the third world grow has now left us a third world country. Good Job! Good going spreading the wealth around.
It is just unfortunate that part of that wealth was the lives and welfare of the American people.
yeah, but what exactly do we DO about global wage arbitration? There are only two answers: (1)Impose tariffs on imported good so prices are competitive for American manufacturers, or (2)deflate our own economy so Americans have the same wages and standards of living as overseas workers.
What if the problem is excessive debt? What if consumers pay off debt for the next 10 to 20 years instead of spending? What if government debt (and spending) is adding to the problem instead of helping? Where do these problems fit into the 3 categories?
We need to enact aggressive trade barriers, directly tied to reciprocal trade, on a bilateral basis.
Each and every country in the world, only allowed to sell to America and Americans, as much as they buy from America and Americans.
After which point, shut the door.
There is no other choice. The alternative, is our national collapse.
The sooner we take action, the more likely, we will survive.
This is a very serious crisis. As a nation, we are sleepwalking our way to doom.
It is not structural.
Should read, It is now structural.
sorry
Boy am I ever living proof of this. I had worked 20-something years in IT and got laid-off last year. Had no luck whatsoever finding more work in the field. So I retrained and just got a job as an EMT, as an entry point into healthcare.
So even though I'm about to drop off the unemployment rolls and will soon be counted in the "job creation" stats, I'm only making 1/5 of my formed 6-figure salary and I'll never again spend like I used to. Nor will the government enjoy the hefty revenues they used to skim off my former considerable salary.
The employment problem in this country is deeply structural, and it isn't coming back.
More IdiotNomics at work.
If any economist, by now, cannot figure out that the unemployemnt crisis is caused by the failure of Free Trade Globalism....they probably should just go back to flipping burgers.
If there is any field that the people in it have no clue about what is going on...its economists. Waiting for the idiot who spurts “we need Free Trade with Colombia” in 3...2...1
RE: China doesn’t have an unemployment problem. They’re growing like crazy. Building and thriving.
Many analysts believe the real China unemployment figure is much higher because many of the country’s more than 200 million rural migrant workers, who have flocked to the cities in recent years, are not registered. More than 20 million migrants who lost their jobs in the current crisis are still out of work.
The government estimates 24 million new urban jobs are needed every year, though there are only half that number available. Yet there is also a big problem with lack of skilled workers as China tries to move up the production value chain.
So, WHY IS THE CHINESE GOVERNMENT WORRIED?
In a word — stability. The Communists came to power in 1949 on the back of widespread corruption, out-of-control inflation and massive social upheaval. Those memories die hard.
The last thing Beijing wants to see now is more unrest in a country where graft has returned with a vengeance alongside a widening rich-poor gap, growing numbers of disputes over land, restless minorities in strategic border regions like Tibet and Xinjiang, and unemployed graduates.
So far protests have only been sporadic and no worse than unrest connected with more local disputes not directly related to the global economic slowdown.
Labour problems have been concentrated in export dependent and formerly booming coastal provinces, mainly in Guangdong, where hundreds of workers have rallied demanding unpaid wages from shuttered factories.
There have also been taxi strikes over high rental fees and competition from unlicensed cabs. In eastern Jiangsu province workers at a diesel plant blocked highways and surrounded government offices amid concerns over job security.
We might not be doing well on the jobs front, but I would be very wary relying on the job figures provided by China’s government for their country.
Smoke.
China is replacing America.
Yet the brainless “free trade” so called conservatives, cling to this failed idea that by demolishing American industry, we somehow gain.
Clearly “free trade” is terrible for our nation.
The sooner we end it, the better.
This afternoon, would be a good time.
Turn the container ships around. Just do it. Commence the trade war. Or America is finished.
We need to enact aggressive trade barriers, directly tied to reciprocal trade, on a bilateral basis.
Each and every country in the world, only allowed to sell to America and Americans, as much as they buy from America and Americans.
After which point, shut the door.
There is no other choice. The alternative, is our national collapse.
The sooner we take action, the more likely, we will survive.
This is a very serious crisis. As a nation, we are sleepwalking our way to doom.
I think eventually we will have to enact tariffs on those who are dumping artificially cheap products on the US....it will happen whether Free Trade Globalists like it or not
Let them whine.
Just do it. Enough is enough.
“Is the Unemployment Problem Cyclical or Structural? “
Neither. It’s Kenyan-caused.
“...debate is between those who say our current unemployment problem is largely cyclical and hence we need more government action, and those who say it’s structural and hence there’s very little that government can do.”
A stupid debate that’s just about providing an excuse for Obama.
It’s stupid to call it a ‘business’ cycle when the predominant force is instead government actions.
More apt debate is whether the feudal socialist policies that kill growth and opportunity are structural or cyclical.
If people don’t intervene the government will continue to absorb the private sector.
“Free trade” is what is destroying US jobs.
100% correct... it is a structural problem.
In his treatise on "comparative advantage", the free trade deity David Ricardo proved that the cost of labor is driven to the subsistence level....
IOW, the globalists are exporting American jobs and importing Third World living standards.
Yet, so many otherwise patriotic, sensible “conservatives”, are brainwashed into believing in the free trade sham.
Ignoring the reality, right in front of their eyes.
America is collapsing as a direct result of this “free trade” stupidity. Ignoring this very real crisis, is not “conservative”. It is irresponsible.
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