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The Mismatch between Job Openings and Job Seekers

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Letter Writer:

Jim Morgan, professor of economics, emeritus, University of Michigan, Ann Arbor

Date Posted:

Aug. 12, 2011


Your excellent July issue of The Regional Economist concludes that mismatch (structural unemployment) only accounts for a small part of the problem. I would urge you to check the influence of massive and growing inequality of income, wealth and opportunity might be a major cause. The latest New Yorker, in discussing a spectacularly successful hedge fund, suggests that the rapid growth of corporate salaries may have been accelerated by the competition with hedge fund salaries. If we had the data, I think we could find that prior to each major recession was a rapid increase in income inequality. The few very large incomes drain a lot of purchasing power and leave corporations with piled up cash and no good markets for new investments.

With this "demand side" analysis, much of the current panic response to growing federal debt is cutting jobs, particularly at the state level. Tax cuts for the affluent never trickled down, but more income at the bottom would surely rapidly move up.