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Missing: A Massive “Skills Gap“

Researchers at the Federal Reserve Bank of Cleveland have found that the supposed shift in the Beveridge curve has vanished.

Claims that there is a huge “skills gap” in the United States – that much of our unemployment is structural, reflecting an inadequately prepared work force or something like that – generally rest on claims that there is an unusual situation in which many jobs are vacant even as many workers remain unemployed.

For example, at the beginning of this year Jamie Dimon, the chief executive of JPMorgan Chase, wrote an article in Politico with Marlene Seltzer about the alleged skills gap that began, “today, nearly 11 million Americans are unemployed. Yet, at the same time, 4 million jobs sit unfilled. This is the ‘skills gap’ – the gulf between the skills job seekers currently have and the skills employers need to fill their open positions.”

Of course, there are always both unfilled job openings and unemployed workers. Claims of an exceptional skills gap would only have some justification if the trade-off between unemployment and vacancies – the so-called “Beveridge curve” – had worsened substantially. And for a while there were many claims that this had, in fact, happened.

But some analysts argued that this was a misreading of the data – the Beveridge curve always looks worse during a recession and the early stages of recovery, then returns to normal as the recovery proceeds. And sure enough, researchers at the Federal Reserve Bank of Cleveland have found that the supposed shift in the Beveridge curve has vanished.

And, refreshingly, they even indulged in a bit of discreet and forgivable snark in their report: “Observers have followed the Beveridge curve during the recession and the recovery to glean some insight into potential structural changes in the labor market,” the researchers wrote.

“Whether or not a shift implies an actual structural change – specifically, a decline in the matching efficiency of the labor market – is still debatable. However, one thing is clear: There is no shift to begin with.”

Simply Unacceptable

The economics commentator Chris Dillow made a good point on his blog recently about economics and maybe public affairs in general: There is often a tendency to believe in simple stories that aren’t true. As H.L. Mencken said, “For every complex problem there is an answer that is clear, simple and wrong.”

But it also often happens that the answer is simple, but people refuse to accept that simple answer. That is, the reverse of Mr. Mencken’s proposition also applies: For every simple problem there is an answer that is murky, complex and wrong.

In his post, Mr. Dillow used stock-picking as an example; I find myself thinking (surprise) about macroeconomics. Why is output so low and jobs so scarce? The simple answer is inadequate demand – and every piece of evidence we have is consistent with that answer. But Very Serious People pretty much refuse to accept that simple answer: It must be a work force with the wrong skills (so where are the premium wages for workers with the right skills?); geographic mismatch (where are the states with booming wages?); and so on.

It must, the Very Serious People insist, be a difficult problem with no easy answers – when everything says that “spend more” is the answer, full stop.

A lot of this is political – demand-side stories are inconvenient for those who want to use the slump as an excuse to dismantle social protections. But I don’t think that’s all of it. There is a deep desire on the part of people who want to sound serious to believe that big problems must have deep roots, and require many hours of solemn deliberation by bipartisan panels.

So how do you know whether public discourse on an issue is ignoring the complexities or introducing gratuitous complexity? Do your homework! It’s really that simple.

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