Unemployment and the Skill Gap: Krugman Calls It Dead Reasoning

Source: Thinkstock

Source: Thinkstock

Unemployment in the United States has been seeing high levels for some time now, partly a result of economic recession and slow recovery, but also an issue that is being blamed on other factors as economists, politicians, and businessmen seek to understand and solve the international concern. One possible scapegoat — or job eating goat, depending on who you ask — is the so-called skill gap. The skill gap concept basically just refers to the fact that not all job hunting problems are because there aren’t enough jobs out there; some jobs are simply unattainable because employers are having trouble finding workers with the right skill sets. Those going to higher education are graduating without the skills that are desirable to potential employers — or so say the skill gap proponents.

Jamie Dimon, chair and CEO of JPMorgan Chase & Co. (NYSE:JPM), and Marlene Seltzer, president and CEO of Jobs for the Future, co-wrote an article on the issue for Politico Magazine — one that received harsh criticism, but we’ll get to that later. Today, nearly 11 million Americans are unemployed. Yet, at the same time, 4 million jobs sit unfilled,” the two wrote. The article discussed the rising demand for “middle-skill workers” such as technicians and healthcare practitioners, or machinists, while explaining that low-skill jobs are dying out.

This relates to a recent speech from Bill Gates, who spoke in Washington, D.C. last month on the changing job market as it relates to technology development. “Technology over time will reduce demand for jobs, particularly at the lower end of skill sets,” he said, according to Business Insider. “Twenty years from now, labor demand for lots of skill sets will be substantially lower. I don’t think people have that in their mental model.”

The solution, according to Seltzer and Dimon’s article, is to find the right jobs for the right locations. “The challenge is giving workers the chance to acquire the rights skills for the jobs in their communities. To achieve that goal, we must first have reliable local-level data to tell us exactly what jobs are available in which market and what specific skills are required to fill those jobs,” it read. JPMorgan Chase’s New Skills at Work program was given as an example of how this would work, as it begins “working closely with mayors, governors, local business owners, academics,” and so on, in order to organize grants and partnerships to find and make clear the skill gaps. It notes that this is not a problem specific to America, but one that extends to Europe and regions of Asia as well.

Months after Dimon and Seltzer’s article came out, Paul Krugman wrote a response in The New York Times, criticizing their theory and calling it a “zombie idea — an idea that should have been killed by evidence, but refuses to die.” According to Krugman, studies haven’t been backing up the claim that unemployment is explained by workers lacking necessary skills. Instead, he notes that the “current ratio of vacancies to unemployed workers is far below normal.”

He noted that, “The crucial point is that unemployment remains much higher among workers at all education levels than it was before the financial crisis … If employers are really crying out for certain skills, they should be willing to offer higher wages to attract workers with those skills.” Krugman believes the idea, perpetuated despite studies that show otherwise, is problematic, because it has an affect on policy, specifically claiming that policy makers “piously wring their hands about the failings of American workers,” while failing to consider the way that fiscal policy is not living up to what needs to happen. Basically, he believes the government is blaming the victims, and demands that we “stop making excuses for an economy that punishes workers.”

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