Saturday, January 15, 2011

Implications of Unemployment As a Long-Term Trend

The job market is getting more competitive, so you may have to study harder to be consistently employed.

That’s the capsule summary of a recent post by Hunter Richards, “Technology, Unemployment, and Our Children’s Future,” at the Software Advice blog.

The title is sure to raise some eyebrows — particularly the last part of it, about “our children’s future.” Any attempt to peer 30 years into our economic future is sure to be hampered by the cloudy glass in the crystal ball. Consider the advice, common in 1980, that everyone who wanted to get ahead should go into management, because “automation” would eventually replace all the “rank and file” jobs. In fact, it was the management jobs that all but disappeared over the next eight years. But this, in itself, raises an interesting point. Students have to predict the economy at least five years in advance to make good decisions about what to study. This kind of predicting is hard to do, especially right now. It perhaps represents an undue burden on students, when you stop to consider that those who guess wrong may be left with a lifetime of student loan debt that can never be paid back.

Richards’ post argues that there is a connection among a series of long-term trends having to do with information technology, productivity, employment, and income distribution. This part is purely speculative, as you can’t use long-term trend data to determine how one trend might cause another. However, there is an important point to notice in the employment data Richards shows: employment rates are consistently higher among more educated workers, and the employment gap tends to increase every time there is a recession. Part of what is going here, I believe, is that the job market gets more competitive in a recession, and workers who have advantages have a better chance of getting in the game.

Long-term high unemployment creates a gloomy picture of working life: not everyone can have a job, so you have to outrun all the other job seekers and hope that you are one of the lucky ones, with a job, at the end of the day. But there is an element of randomness, or luck, in the way the job market clears, so that no matter how many advantages you start with or how hard you work, there is no guarantee that you will ever have a job.

This, of course, upends the traditional view of the job market. In the traditional view, you work, and you get paid. In a more complete view of the current job market, you work for years and years just in the hope of one day having a job, so that you can start to get paid for your work. This is the side of the job market where workers’ investment and risk have to be considered, and I will take another look at this tomorrow.