2011 March 13 Sunday
Unemployment Duration Same Across Education Levels
Unemployment rate is strongly inversely correlated with level of education. That's not new news. But here's what's weird: Once unemployed the average duration of unemployment is the same regardless of level of education. Why is that? You will see at that link the commenters do not know either. The lengthening time for unemployment benefit eligibility is offered as an explanation. But why wouldn't smarter and higher paid people want to get back into higher paid jobs as rapidly as possible?
Also, the average duration of unemployment has skyrocketed in the latest recession up to nearly 40 weeks. In the 2001-2002 period it was below 20 weeks. The average duration of unemployment grew sharply coming out of that recession peaking in 2004, dropped a bit, and then started back up again. The rate if layoffs is very low. But so is the rate of hiring. The job market is becoming highly segregated between those who have jobs and those who don't.
A related phenomenon: Some employers are averse to hiring the unemployed. Among employer motives for this preference:
- Faster ramp-ups: the already employed are expected to come up to speed more quickly.
- Employers retain the more talented during a layoff (on average). Those who did not get laid off are seen as more talented on average as compared to those who got laid off. Of course, if a whole site shuts down or a division gets axed then that rule doesn't work. Also, managers can lay off people talented enough to replace them.
- Job switchers are more attached to new jobs. If someone leaves one job for another they are more likely to see the new job as a better job. Whereas an unemployed person who takes just any job they can find is less likely to feel their job that allows them to escape unemployment is satisfactory for the long term. So they are more likely to keep an eye out for a better job.
None of these items explain why the average duration of unemployment is the same across employment levels. Any ideas why?
Why? Who knows? Perhaps employers regard the unemployed as somehow "tainted." And with long-term unemployed making up about 46% of the total unemployment pool, this isn't likely to get better.
The HuffPo article you cite has several valuable links. Here's one:
Congressman John Dingell (D-Mich.), whose home state of Michigan has a 14 percent unemployment rate, was particularly disappointed to hear about the ads.
"While I appreciate that many employers are facing unprecedented competition for job openings, to close the door on such a large population of potential employees is shortsighted," he said. "Being unemployed is not a choice many workers choose to make. I would hope that companies that are discriminating against the unemployed will take into consideration that this choice is only further contributing to long-term unemployment in our country."
Mr. Dingell, a Detroit-area Democrat, is the longest-serving member of Congress, having first taken office in 1955! His perspective is interesting - companies should take into account the national unemployment picture when they make their hiring decisions.
Here's another gem from the HuffPo link:
Companies using criminal records or bad credit reports to screen out job applicants might run afoul of anti-discrimination laws as the government steps up scrutiny of hiring policies that can hurt blacks and Hispanics.
A blanket refusal to hire workers based on criminal records or credit problems can be illegal if it has a disparate impact on racial minorities, according to the Equal Employment Opportunity Commission. The agency enforces the nation's employment discrimination laws.... Just ask Adrienne Hudson, a single mother who says she was fired from her new job as a bus driver at First Transit in Oakland, Calif., when the company found out she had been convicted seven years earlier for welfare fraud.
Hudson, 44, is fighting back with a lawsuit alleging the company's hiring practice discriminates against black and Latino job seekers, who have arrest and conviction rates far greater than whites. A spokesman for First Transit said the company does not comment on pending litigation.
"People make mistakes," said Hudson, who is black, "but when they correct their mistake, they should not be punished again outside of the court system."
Justice Department statistics show that 38 percent of the U.S. prison population is black, compared with about 12 percent of the general population. In 2008, African-Americans were about six times more likely to be incarcerated than whites. The incarceration rate for Latinos was 2.3 times higher than whites.
If criminal histories are taken into account, the EEOC says employers must also consider the nature of the job, the seriousness of the offense and how long ago it occurred. For example, it may make sense to disqualify a bank employee with a past conviction for embezzlement, but not necessarily for a DUI.
This is a priceless look about how the inside-the-Beltway types view unemployment. It's major causes are evil employers who want to discriminate or ignore national unemployment trends. What insight!
By the way, Michigan is losing a congressional seat as a result of the last census, so there's a good chance that the state legislature, controlled by wicked Republicans, will deprive Mr. Dingell of his safe seat by forcing him to run for reelection against another incumbent Democrat. Pity that.
I doubt that anyone in Washington has noted, but the once-vaunted US private sector job creation machine, which was running at a 2-3% clip from the late 1960's until 2000, has since then run out of steam and dropped to just about zero (http://www.ritholtz.com/blog/2009/08/zero-10-year-us-job-creation/). But not to worry - Washington has the answer. All we need to do is encourage employers to act in terms of the national interest rather than their own self-interest and threaten them with discrimination lawsuits if they don't. That'll fix the problem quick!
' The rate if layoffs is very low.'
Hard to say, actually. The stats for unemployment filings seem to suggest otherwise, see for example:
Without digging into the methodology of those who compiled the stats you linked to, it's hard to say what would account for the discrepancy. Certainly survivorship bias is one possibility if they're calling up companies and doing surveys to see who has laid off employees.
As for the duration being the same across education levels, I'd point out that
- those who previously were paid more will get more unemployment benefits and therefore be less interested in lower-paying jobs
- likewise they may have higher expectations even if they aren't collecting more
- finally, given that the highly educated unemployed represent a smaller segment of their education-level cohort than the low-education unemployed, we could also assume that they are somehow a poorer selection of their group (relatively) than the low-education unemployed.
"Unemployment rate is strongly inversely correlated with level of education"
This is an overgeneralization. It all depends on the field of work. Brilliant high-tech engineers are as employable as illegal immigrants out in the Californian fields. So, as the post perhaps implies, level of education is not determinant, but only demand of a certain product or service.
I'll take a shot...
Usually no matter who you are if you set your expectations low enough you can find SOME job even if you have to move to do it. I would bet that people who are unemployed usually end up in jobs that pay less than their previous position. So it takes just as long for the laid off 45YO software engineer to accept a help desk position as it would for the 13$/hour former delivery driver to accept a $9/hour line cook position. Just a question of at what point do people get desperate.
The present unemployment crisis is wholly and solely caused by the collapse in the money supply (ie the actual amount of cash circulating in the system).
Therefore there is less economic activity (which is determined by the amount of money in the economy), and therefore less employment (which is a function of economic activity).
Basically we are living in deflationary times.
Now, an actual decrease in economic activity affects *all* sectors, since, propotionally, they all are interlinked by the spending and earning power in the economy, if a manual laborer has fewer dollars in his pocket, then he cannot afford to go the dentist as much as he would like, for example, thus cutting demand for dentists.
'...there is less economic activity (which is determined by the amount of money in the economy)...'
I recommend re-taking economics 101. According to this lemma Zimbabwe would have had a booming economy as they were inflating... instead the shelves were bare. Further most economists would argue that it is the expectation of future deflation that leads to hoarding of cash, and that it is this reduction of the velocity of money (not the reduction in the money supply itself) that leads to reduced economic activity.
In any case, your explanation does nothing to address the epiphenomenon under discussion: the highly educated have far less unemployment overall, yet the duration of their unemployment is the same. A simple 'falling tide lowers all boats' argument, which is more or less what you've offered, does not explain the discrepancy.