The New York Times points out the elephant in the room, that many of the jobs that have been lost since the start of the current recession in December of 2007 aren’t coming back:
There are multiple ways to explain why permanent job-losers represent a higher share of the unemployed this time around. Maybe, as others have suggested, many of the jobs gained in the boom years were built on phantom wealth. Or maybe the culprit is a corollary of Moore’s Law, the idea of exponential advances in technology over time. That might suggest that innovation and automation displace more and more workers by the time each recession rolls around.
Whatever the underlying cause, the result is disconcerting: compared with previous recessions, many more of the employment gains in this recovery will have to come from new jobs.
That is much easier said than done.
Workers whose entire occupations — not just the previous payroll positions they held — are disappearing (think: auto workers) will need to start over and find a new career path. But the new skills they will need take a long time to acquire.
Let’s quantify that “long time” a bit and compare apples to apples, considering jobs that have roughly the same annual incomes and in which there is some actual demand for the target job. How long would it take an auto worker making roughly $65,000 to become a registered nurse making roughly $65,000 (salary expectations here)?
The typical wait for a nursing program leading to an RN is something like 2-3 years. The duration of such programs varies from 2 years (for a nursing associates degree) to 4 years (for a bachelors in nursing). That means that, even if the layed-off auto worker could gain admission to a program it would take from four to seven years to get the credential. The cost would be anything from $10,000 to several hundred thousand dollars, depending on the program.
Frankly, I think this is far-fetched. Even assuming the ability and inclination seven years is a very long time for a forty or fifty year old with a family to support.
Not that I have an appealing solution to the problems that are facing us. However, that little back-of-the envelope calculation should go some way to explain the concern I’ve been expressing here about our economic situation for some time. I don’t think this is your ordinary cyclic downturn. I think that we’re paying the price for the confluence of bad policies over a period of 30 years and technological change. Arnold Kling has called it a “recalculation”. I’d call it a paradigm shift.
Whatever it is, if it’s accompanied by an unemployment rate around 10% and an underemployment rate around 20% over the long term, expect sweeping social and political changes (and I don’t mean that in a good way).
I had a conversation with my son (12) about his future educational goals. He stated his priorities as programming, business and design. (He wants to be Steve Jobs.) I said, look if you’re going to stay with computers it means a lifetime of learning, of always pushing to keep up and indeed stay ahead.
It occurred to me later that’s now true for just about everyone. It’s what’s wrong with the focus on credentialing. There’s no longer an end point to education, it’s become a perpetual state of being rather than a concrete achievement.
Re: technology. In my business I expect technology to permanently erase tens of thousands of jobs in bookstores, libraries, printing and publishing.
“It occurred to me later that’s now true for just about everyone. It’s what’s wrong with the focus on credentialing. There’s no longer an end point to education, it’s become a perpetual state of being rather than a concrete achievement.”
I just couldn’t agree with this more. I’m an engineer told he shouldn’t go to B-School because he was an engineer and factory rat………who was told upon leaving B-School he had no business getting into finance………….who was told later he had no business getting into PE because he was a lender……………
You get the point. Employees must constantly evolve. Its the “best available athlete” concept, to make a sports analogy.
I’m worried about this too, Dave, and particularly worried that it might represent a continuation of the disturbing trend that began after 2001 in unemployment. Unemployment growth stopped as economic growth returned in the growth period right up to the current downturn – but shrinkage in unemployment was anemic, meaning that job creation was weak. Then combine that with weak-to-nonexistent real income growth across almost the entire spectrum (except the very top, and in certain professions) of income.
I really, really hope that doesn’t continue or repeat itself as growth returns.
Indeed. The continental Western Europeans have managed to deal with 10% or higher unemployment, although it has caused grumbling and debate. But in the US, where safety nets are fragmented and weaker except for certain groups, and personal savings almost non-existent among much of the population? It’s a nightmare, and a recipe for social turbulence.
Can we say “unit root”? Sure we can. Just don’t tell Paul Krugman he’d have aneurysm….on second thought, please do tell him.
By the way Brett, you are lagging about 1 recession. The 1991/92 recession had the same pattern, just not as strong as the 2001 recession. Its why DeLong, Krugman, Team Obama, etc. were wrong with their economic growth assessments, IMO.