Discusses structural unemployment as a result of insufficient aggregate demand rather than a reflection on employee skills.

In this issue brief, the author uses Bureau of Labor Statistics data, including unemployment rates for college-educated workers and workers with just high school degrees, real hourly wages for workers with college degrees, unemployment rate for select sectors, average hourly earnings of employees in select sectors, and average weekly hours of employees in select sectors, to argue that unemployment in the United States, especially since the financial crisis of 2009, is the result of insufficient aggregate demand rather than the result of a jobs or skills gap. The authors argue that measures that focus on improving skills will have little effect on overall employment. (Abstractor: Website Staff)

Major Findings & Recommendations

"The argument that unemployment is due to a skills mismatch leads to very different conclusions about economic policy than the view that the main cause of unemployment is insufficient demand. The former sees the problem as being with workers while the latter view focuses on the need for economic policy to increase demand. While many people in national policy debates have been anxious to put forward the skills mismatch argument, it is difficult to find evidence that supports this position. The evidence is overwhelmingly consistent with the simple view that the collapse of the housing bubble has led to a large shortfall in demand. In this context, measures that focus on improving skills will have little effect on overall employment" (p.6). (Abstractor: Author)