June 11, 2015
The man who said he endorses any trade deal that has the words “free trade,” and said that the Germans would insist Greeks work shorter hours as a condition of a bailout is talking about economics again.
Citing a McKinsey study, Friedman tells readers:
“Millions of people can’t find work, ‘yet sectors from technology to health care cannot find people to fill open positions. Many who do work feel overqualified or underutilized.'”
The situation where workers can’t find work or take jobs for which they are overqualified is what would be expected in an economy that is suffering from a lack of demand. The best remedy for a lack of demand is to generate more demand (i.e. spend money). The government can do this by running larger budget deficits. We can also generate more demand by reducing the size of the trade deficit through a lower valued dollar. We can also create demand for more workers by creating incentives for reducing the average number of hours that each worker works in a year, as Germany has done. All of these are fairly simple stories that don’t require using big data or the new complex matching programs that Friedman is touting.
What about the sectors that cannot find people to fill positions? Well skepticism is in order here. Where do we see rapidly rising wages? The answer is pretty much nowhere. This suggests that sectors are not really having trouble filling positions. Higher pay is how employers ordinarily attract more workers, if employers aren’t raising wages then we can reasonably assume they don’t think they have trouble getting the workers they need. That doesn’t mean employers don’t complain. They are always looking for handouts from the government and complaining is the best way to get them.
Of course, it is possible that we have a serious skills gap, as Friedman tells us in the very next sentence in his piece. However it is among corporate managers who don’t understand how labor markets work. They apparently don’t understand that if they can’t get the workers they need then they have to offer higher pay. Maybe a two week training course for top managers could do the trick?
Note: This is slightly revised from a version earlier this morning.
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