Unemployment stats have made headlines in recent months. Many think that the unemployment rate is one of the best measures of the current state of the economy. When there’s money floating around, and people are using that money to buy more things, companies make and market more things, creating jobs. That is not the case right now. In April, according to the Bureau of Labor statistics employers took 2,712 mass layoff actions, laying off 271,226 workers. It’s a problem that gets a lot of press.
What doesn’t get a lot of press are the many workers who still have jobs, but aren’t working nearly as much. How many people out there have had their hours cut back? How many people don’t get the shifts they need to make ends meet? How many have been asked to take a pay cut? Or have duties added in order to keep their job? How many people out there are working more for the same or less pay? This is an issue that doesn’t show up in the statistics, but damages the economy just the same. Like unemployed workers, these workers are bringing in less money, giving them less money to spend at other businesses that employ people, which in turn creates jobs and stimulates the economy.
There’s another, less obvious type of unemployment going on as well. Lots of people out there have skills that aren’t being utilized. That is, you have lawyers, computer science degrees and MBAs waiting tables, walking dogs and delivering pizzas. This isn’t necessarily wrong. If there was sufficient demand for more people to do the jobs that these people would do in their specialty areas – they would be able to get jobs in their field. This creates other problems though. A lawyer, straight out of law school has knowledge and skills that aren’t being acquired. They also tend to have debt. MBAs are the same way. Their mistake was going into fields that had a surplus and inadequate demand. Both degrees provide knowledge that is very practical and useful. Using lawyers as an example, there are 553,690 lawyers employed in the US. That number doesn’t include lawyers doing something else (and there are lots).
The point is, based purely on perception, people have pursued careers that the market lacked sufficient demand to support. By the time applicants realize this, it’s too late, and there are too many of a particular thing. Of course, the correction will work the same way. A shortage of lawyers (or whatever) will creep up on us, and before we know it, the 300,000 people practicing law will be raking it in, it will gain a reputation for being the place to be again, and people will rush out and take the LSAT, eager to fulfill their dream of becoming a lawyer. Of course, it may never swing this much. This is just an example for the sake of the example. Because so many have pursued degrees and training that isn’t in adequate demand, underemployment occurs, and the economy suffers. Thanks for reading.
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Underemployment (or rather overeducation) is a chronic problem in Europe, leading many to leave and find their fortunes elsewhere. America is a great beneficiary of these expats. Those who are underemployed, and yet still ambitious, always have the choice to try their luck elsewhere — or to create their own opportunities by starting their own businesses.
“Because so many have pursued degrees and training that isn’t in adequate demand, underemployment occurs, and the economy suffers.”
If all that was happening was a shift in normal supply and demand in the labor market, it WOULD be that simple. Unfortunately, it’s not. Corporate America has for years artificially manipulated the labor market in white collar specialties by heavy utilization of guest worker programs, which drive wages down and enables companies to hire workers who legally cannot leave their employ without endangering their visas. People who are thus tightly tethered to a particular job/employer become virtual indentured servants, forced to accept whatever pay and working conditions are offered, and so they become the favored labor source by employers. (Not just my opinion — see Norman S. Matloff’s (statistics professor at UC Davis) work on the impact of guest worker programs on labor “shortages” in the software industry.)