Michael Hicks: Labor market outcomes and education
Thursday, April 21, 2016 9:37 AM
MUNCIE – Labor markets across the United States, including here in Indiana are edging ever closer to full employment, the happy condition in which there is at least one job opening for every person who wishes to be employed. That, of course, ain’t what you hear from presidential candidates, especially Mr. Trump, who claims the unemployment rate is maybe eight times higher. That claim is an astonishing fabrication, but fact checking Mr. Trump is like slicing Jello. It can be done, but why bother?
So, today there are about 159.3 million folks in the labor force, about 63 percent of men and women aged 18 through 65. This is more Americans now working than ever before, with about 7.9 million unemployed. Advertised jobs run at more than 5.5 million and monthly job turnover in the last three months averaged about 9.0 percent of jobs, or roughly 1.44 million workers each month.
The upshot of all these data is that there are roughly as many job openings as there are unemployed workers. However, the location, skills and compensation of jobs and the pool of available workers don’t necessarily match. The simple reality is that labor markets work much like other markets, in that the demand for workers in each time and place has to be equal to the supply of those workers. Any mis-match leaves both businesses and workers unsatisfied.
The national unemployment rate for college graduates is 2.6 percent. This is so low that businesses are now finding that they need to bid up wages and benefits to fill their open positions. So, if you are a college graduate, the current labor market is one ripe with opportunity and an increasing likelihood of compensation growth.
Workers with only a high school degree face an unemployment rate of 7.4 percent. At that level, there are far more workers than jobs, and firms face no pressure to raise wages or benefits. This market outcome makes the gulf between labor markets even more painful. My student workers, who are mostly college juniors and seniors, are heavily wooed by employers. These jobs have all kinds of perks from fitness centers to tuition reimbursements and nifty lunchrooms, expansive health plans and great retirement perks.
In contrast, workers with a high school degree are a commodity and are frequently treated as such. There’s little market incentive for businesses to train these workers, offer any job perks or frankly do much to keep them. Exacerbating this are self-inflicted employment barriers. Workers of all ages with only a high school degree are more likely to smoke and suffer other costly health problems. In a world of mandatory health benefits, that is a real barrier to employment.
The continuing unease about job security and wages in the U.S. isn’t because labor markets don’t work well. Though imperfect, the larger restlessness felt across the nation and here in Indiana is that labor markets do a good job of sorting workers. The remedies for these outcomes don’t lie in federal policy peddled by misanthropic liars. The only good fix is in our homes and schools.
Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University.