Structural vs cyclical

STRUCTURAL VS CYCLICAL…. There are different kinds of unemployment crises. You’ve probably heard about “structural” unemployment, which generally refers to an economy with specific kinds of jobs to fill, but workers untrained to fill them. There’s also “cyclical” unemployment, which tends to describe job losses that result from an economic downturn (fewer people with jobs means fewer people spending money means layoffs).

The good news is, cyclical unemployment can be addressed through government intervention — or at least could be if we had a functioning political system. In the meantime, those who oppose government intervention on ideological grounds keep pushing the notion of structural unemployment, because it becomes a convenient excuse for inaction.

Paul Krugman’s been blogging about this quite a bit lately, and it led to a helpful column today.

What can be done about mass unemployment? All the wise heads agree: there are no quick or easy answers. There is work to be done, but workers aren’t ready to do it — they’re in the wrong places, or they have the wrong skills. Our problems are “structural,” and will take many years to solve.

But don’t bother asking for evidence that justifies this bleak view. There isn’t any. On the contrary, all the facts suggest that high unemployment in America is the result of inadequate demand — full stop. Saying that there are no easy answers sounds wise, but it’s actually foolish: our unemployment crisis could be cured very quickly if we had the intellectual clarity and political will to act.

In other words, structural unemployment is a fake problem, which mainly serves as an excuse for not pursuing real solutions.

If structural unemployment were really the problem we’d see “major industries that are trying to expand but are having trouble hiring, major classes of workers who find their skills in great demand, major parts of the country with low unemployment even as the rest of the nation suffers. None of these things exist. Job openings have plunged in every major sector, while the number of workers forced into part-time employment in almost all industries has soared.”

To a certain extent, this should come as something of a relief. Structural unemployment is a far greater policy challenge, and it takes much longer to address. Cyclical unemployment can be addressed though additional stimulus and intervention from the Federal Reserve.

But additional investment in job creation has been deemed unacceptable by congressional Republicans, and the Fed wants to sit on its hands.

And so the jobs problem persists — and will intensify just as soon as the GOP is rewarded for failure in the midterms.