The New York Times Article, "Structural Humbug Revisted," by Paul Krugman addresses the potential cause and explanation of unemployment in relation to the low unemployment rate today. Krugman references the speculation and consensus formed to explain the Great Recession, "a large part of the rise in unemployment was “structural,” and could not be reversed simply by a recovery in demand." However, despite this claim that workers just didn't have the right skills, Krugman asks the evident question of, "where was the growth in occupations where they did possess adequate skills?" Many supposedly share this opinion but were proved wrong with World War II, and the doctrine that skills were the issue became significantly stronger opposed to its counterpart that there wasn't enough spending. Krugman claims that the notion of unemployment being a result of primarily a structural problem eventually became fact. My immediate reaction to the article was a confusion of how economists could claim that unemployment – as severe as it was during the Great Depression – was in effect because, "workers just didn't have the right skills." I was also wondering as to how the structural issue of unemployment would be tackled or fought against without more spending. Would we wait around for workers to simply arrive or cultivate the "right skills?" For me the article was fairly vague, Krugman acknowledges that the rise in unemployment was "structural," but what does that mean exactly from an everyday perspective?
The New York Times Article, "Structural Humbug Revisted," by Paul Krugman addresses the potential cause and explanation of unemployment in relation to the low unemployment rate today. Krugman references the speculation and consensus formed to explain the Great Recession, "a large part of the rise in unemployment was “structural,” and could not be reversed simply by a recovery in demand." However, despite this claim that workers just didn't have the right skills, Krugman asks the evident question of, "where was the growth in occupations where they did possess adequate skills?" Many supposedly share this opinion but were proved wrong with World War II, and the doctrine that skills were the issue became significantly stronger opposed to its counterpart that there wasn't enough spending. Krugman claims that the notion of unemployment being a result of primarily a structural problem eventually became fact. My immediate reaction to the article was a confusion of how economists could claim that unemployment – as severe as it was during the Great Depression – was in effect exclusively because, "workers just didn't have the right skills." I was also wondering as to how the structural issue of unemployment would be tackled or fought against without more spending. Would we wait around for workers to simply arrive or cultivate the "right skills?" For me the article was fairly vague, Krugman acknowledges that the rise in unemployment was in part "structural." I'd assume he's just claiming that there are more people seeking jobs than there are jobs available. However, structural unemployment is not a cause of unemployment but a type of unemployment. I'm still wondering what the actual causes of unemployment were and how it relates to the low unemployment rate today.
This article and the conversation we had today regarding structural and cyclical argument is fascinating. More than anything, I am most interested in the arguments made to contradict Krugman’s assertions, both in their logic as well as in the passionate and almost personal attacks on Krugman. At the time that I read this piece, there were 155 user comments on the article, and while some supported and some opposed, they all shared an incredibly strong, unwavering passion for the side they picked.
The basic rules of the scientific method dictate that observations must be made before a hypothesis is formed. It appears that so often with any issue related to politics or government policy, an individual forms an opinion, and then seeks to disprove any information to the contrary of that opinion. This method is flawed in that the individual playing the role of “scientist,” to follow the analogy aforementioned, is rooting for one side before the observations have even begun, and the conversation with anyone who disagrees is combative rather than collaborative.
The tone in the article almost invites this kind of conversation. By stating in the lede that he won a bet over the unemployment rate, the importance is placed on this competition. It is my opinion that he is right in the argument over structural versus cyclical unemployment regarding the Great Recession, but the long process of finding the truth and convincing the public of that truth is made only longer by fostering the contest mentality that is so encouraged by politically charged debate.
I never thought the cause for such high unemployment during the Great Recession was a matter of structural or cyclical effect. I thought people were out of jobs because firms couldn't afford to hold onto as many employees as they once were. My thought was firms are so intertwined with the market that win the housing bubble burst, it sent tons of firms into free fall and they had to make cuts. A structural argument for unemployment does not make any sense even if you do not look at the wage rate at the time. I would be interested to read the cyclical arguments for high unemployment during the Great Recession. Also, I'd like to know if I am thinking about this too simply.
After discussing this event in class, it is clear how the unemployment resulting from the 2008 Great Recession was not cyclical but rather structural. Krugman addresses the fact that the scenario wasn't one where workers were out of a job because the economy was simply rising or falling. Yes the economy was in poor shape, but it was only partially due to the economy crashing. Otherwise, unemployment during the great recession was structural. The demand for certain jobs was simply falling and the size of the labor force remained the same. In a way, there was a perfect storm. The economy faced challenges with the burst of the housing bubble that certainly could inspire difficulties, but there was certainly also an amount of structural unemployment. As with anything in economics, the answer is not straight forward, and there are many factors at play especially in a situation as complicated as the great recession.
In “Structural Humbug Revisited”, Paul Krugman reassessed the unemployment spike of the late 2000s. He describes how the spike was quickly branded as structural despite the efforts of economists to declare otherwise. He is correct in asserting that the rapid rise of unemployment was a different type of unemployment. With the collapse of the housing bubble and other economic events of 2008, the demand curve for labor rapidly shifted left, as Krugman states. If the unemployment were Structural, then we would also see a leftward shift in the supply curve as there would be an inefficient number or workers trained to perform the jobs needed. This phenomenon would result in an increased equilibrium wage. As we did not see this, and we know the unemployment was not frictional, we must conclude that the unemployment of the great recession was largely cyclical. Structural unemployment is hard to influence by public policy, but law makers could have done more in the 2000s to prevent and counteract the cyclical unemployment of the era if they had listened to economists.
I think Krugman really sheds light upon how someone can have an idea and be too stubborn to change it when they are presented with facts that disprove it. We then see this "elite opinion" as Krugman calls it, and then it is taken as the truth by many people. The facts of the Great Recession are that although there was a large drop in unemployment, it couldn't be structural because there was no change in the wages in job markets. If this were to be structural there would be a hike in prices, as they try to find more qualified workers for the positions. This is the basis for Krugman's argument, since there wasn't a change in wages it must not have been a problem with the skills of the workers demand, therefore it must be a cyclical.
I found it interesting how Krugman criticized those who blindly followed the "elite opinion" without looking at the facts. If there is a chance to further dive into more deeply why people do this in class it would be great.
In Paul Krugman's article, he criticizes the notion that the Great Recession's rise in unemployment was structural. A large portion of the population assumed that as the economy was changing, workers simply lacked the skills capable of fulfilling the new jobs. However, this argument lacks evidence, for if skills were the problem, the wages of more skillful occupations would rapidly rise to compensate for the lack of supply of skilled workers. Krugman refers to how many people believed unemployment was structural during the Great Depression as well, but that this idea was disproved due to the stimulation that World War II provided. The evidence shows that the cause of high levels of unemployment during the Great Recession was cyclical instead, meaning unemployment is directly related to the fluctuations in growth and production that occur in the business cycle. The number of unemployed workers exceeds the number of jobs available, resulting in many economists believing that government intervention is a viable solution. Such methods involve deficit spending or certain tactics dealing with monetary policy. Nevertheless, elite circles continue to promote the idea of structural unemployment as a simple fact despite the fact that this is not the case.
In class we argued and attempted to determine whether the doubling of the unemployment rate during the Great Depression was a form of structural or cyclical unemployment? In order to discuss this complicated question, we discussed the differences between the two different types. Structural unemployment is caused when a change occurs such as a shift from a labor intensive economy to a technology intensive economy. Firms require a certain human capital to match the transition from labor to technology. The shift of human capital however requires time to catch up in order to adapt to the transition. This period of time leads to structural unemployment and an increase in wages for skilled workers. Krugman argues however that this is not the case. He claims that according to structural unemployment there should a shift in the supply curve to match the shift in the demand curve. A shift in the supply curve is not referred to once in the article. A leftward supply shift represents the decreased supply of qualified workers. Without a dramatic wage increase for the skilled workers and a supply curve shift there has to be a different cause for the unemployment.
Krugman backs up his hypothesis of cyclical unemployment when he attacks the ignorant beliefs of the rising elite circles. Economics is not an exact science, and as we have said numerous times in class a lot of the time “it depends.” To go out on a whim and claim the fact that structural unemployment occurred during the Great Depression instead of cyclical unemployment is invalid. This argument is extremely fascinating and as always it is very common in economics that the answer is wavering and should be taken with a grain of salt. I would appreciate the ability to continue comparing the differences among structural and cyclical unemployment and their tradeoffs.
In this article Paul Krugman addresses the miraculously continued debate between whether the unemployment following the great recession was structural or cyclical. Obviously, as discussed in class the unemployment is not frictional. It would be unprecedented for unemployment to double solely because people are taking twice as long to switch careers/ find a new firm. Like we discussed in class, for the unemployment to be structural the skills of the labor force must be concentrated in certain fields and lacking in other fields. This would lead to unemployment and low wages in some fields and full employment and high wages in the other. As discussed in class, this is not the case, wages and employment fell across the board. This obviously displays that the rise in unemployment must be predominately or entirely cyclical. This lends itself as support for government lead increase in demand.
"Structural Humbug Revisited" is a brief commentary by our textbook's author, Paul Krugman, defending his (appropriately justified) dissent that the cause for high unemployment during the Great Recession was cyclical rather than structural.
Krugman's defense for this lies in the unavoidable fact that during the Great Recession, there was no rise in higher paying jobs accompanying the so-called structural shift in employment. As a result, it is very unlikely that the majority of jobless individuals found themselves in that situation as a result of a lack of skills for more specialized jobs. Rather, it is likely that the demand for labor from firms was reduced as a result of the contemporary economy.
It seems a logical perspective that one of the deepest recessions in recent memory would be the cause of unemployment derived from a multitude of issues with the economy. However the adamancy that structural unemployment was to blame primarily for the peak during that particular era seems blindly misguided. I would be interested to see an argument in favor of this idea, considering Krugman mainly sticks to his case, pointing out the reasons illustrating his point.
I did find this study: https://www.imf.org/external/pubs/ft/wp/2011/wp11105.pdf
which suggested that skill mismatches did, in fact, increase unusually during the Great Recession period, they estimate though, that there was less than 2% increase in the rate of structural unemployment due to these factors. This fully explaining the peak unemployment rate of 10.1% seems unlikely
After our discussion on Thursday, Paul Krugman’s article “Structural Humbug Revisited” makes a great deal of sense. I have heard many versions of the structural argument about there being a dearth of skilled workers in the tech industry, but I never thought that it added up. As Krugman points out and we discussed in class, a supply side movement to the left would result in higher salaries for the smaller number of qualified workers. This is not the effect that we saw in the Great Recession, and it is not an effect we see now. Ceteris paribus, if the rise of unemployment seen in the Great Recession were truly structural, wages would have risen in the sectors purportedly experiencing a shortage of skilled workers.
The best explanation that I can arrive at to explain why the unemployment was described as structural for so long is that it supported ideology favoring less government intervention. If the sharp increase in unemployment were truly structural, then there would have been little place for government macroeconomic intervention. Those who dislike strong government macroeconomic policy likely supported the theory that the unemployment was structural, and perpetuated the myth.
Krugman’s article, “Structural Humbug Revisited,” demonstrates how it easy to ignore all the evidence. In our book, structural unemployment is defined as “unemployment that results when there are more people seeking jobs in the labor market than there are jobs available at the current wage rate” (208). Structural employment indicates that firms cannot find workers. Certain workers do not have the necessary skills demanded by employers, and therefore, the wages of these positions would increase in order to find workers with these skills. When it comes to structural employment, there doesn’t seem to be a lot that the government can do… However, cyclical unemployment is related to the business cycle. The government can do something to address this kind of employment by encouraging spending in some way. As Krugman argues, we did not see a rises in certain wages; therefore, unemployment during the Great Recession must be cyclical, not structural. While I understand this logic, I do wish Krugman had gone into a little bit more detail in this article as to why the employment must be structural then.
Additionally, as we discussed in class, I can see how this “strange consensus [developed] into elite opinion.” I think it’s a rather common phenomenon for people to let their biases and opinion cloud or morph actual evidence. For example, in research, it can be easy to declare certain data or results as significant, to show a correlation, or to demonstrate a cause-effect relationship. It is easy to fall into the trap of bias. When we want to see something, we can usually find a way to make the data show it. I think the most critical takeaway of this article is the importance of looking at the evidence first before making up our minds with opinions.
In class, we discussed the three main types of unemployment and what type of unemployment there was during and following the Great Recession of 2008 and its doubled unemployment rate. Krugman discusses this in his article “Structural Humbug Revisited”. Krugman talks about the type of unemployment that occurred during that timeframe and how it was not truly debated by people and just accepted as structural, although many economists disagreed. He relates it to the Great Depression and how there was a similar view to it being structural, but the economic advancement caused by the financial stimulus that was World War II. Krugman views the Great Recession as a cyclical version of unemployment. There is a main difference between the two, as structural results in more people searching for jobs than there are available, while cyclical refers to the deviation between the actual and natural unemployment rates. Since there was no wage changes for skilled vs non-skilled workers and the fact that there was an overall fall in employment, the unemployment of the Great Depression could not be structural, but must be cyclical. It was also interesting to see Krugman’s opinions of those who called the unemployment structural, as he refers to them as “elite”.
In this article, Krugman argues against the idea that the root cause of unemployment during the Great Depression was due to structural unemployment. Though he does not mention it directly, Krugman eludes to the fact that unemployment during the Great Depression was caused by cyclical unemployment. According to this argument, unemployment during the Great Depression was caused by the recession and decrease in production, not a mismatch in skills and jobs.
Structural unemployment occurs when the skills of workers in the economy are incompatible with the jobs provided in the economy. If this were the case in the Great Depression, there would be a decrease in demand for low-skilled jobs, causing a decrease in wages for low-skilled jobs. On the other hand, there would be a corresponding increase in demand for higher-skilled jobs, causing an increase in wages for higher-skilled jobs. The corresponding increase in wages for higher-skilled jobs did not occur during the Great Depression, so therefore, it is unlikely structural unemployment occurred.
Krugman uses evidence from World War II to provide a reason as to why unemployment during the Great Depression was cyclical, not structural. At the end of World War II, a fiscal stimulus helped the unemployment rate to decrease with a corresponding increase in GDP. This leads Krugman to believe that the unemployment was related to the business cycle, not the types of jobs and workers in the economy.
Paul Krugman’s commentary on an increasing unemployment rate points to an extremely troubling reality that theories might be trusted and adopted without the public and perceived “experts” demanding any concrete evidence. It also may not be that these individuals did not want or seek evidence. Perhaps they did not know what they were looking for or were lacking a clear understanding of the issue at hand. Whatever the case, Krugman’s article demonstrated what Professor Casey described on the first day of class: politicians and others will propose ideas and policies without truly understanding the economic implications. Many of them lack a nuanced conceptualization of economic principles.
Additionally, it is interesting that there might be so much ambiguity in what seems very cut and dry: the cause of rising unemployment. This article showed that what might seem obvious or clear might actually be more complicated. It is one thing to recognize a trend; it is another to identify its cause.
In his article, Krugman discusses the source of unemployment. Krugman brings up two different ideas that we discussed in class: structural and cyclical unemployment. Structural unemployment is caused by workers' failure to provide the necessary skills demanded by employers, the skills gap. Cyclical unemployment, on the other hand,is tried to the cyclical nature of the growth and production within the business cycle.
According to Krugman, the argument that a rise in unemployment was structural in nature is nonsense. Instead, Krugman argues that history continues to show that unemployment is largely cyclical, and that increased spending (like World War II after the Great Depression) is the most effective manner to combat it.
I believe the reason why the idea of structural unemployment is so popular among 'the elite' is because it is easy to blame the workers. Like Krugman says, if there was truly such a lack of skill in the workforce, where are the increasingly well-paid jobs? The unemployed workforce have the skills but there is a lack of demand.
I found our discussion in class on this topic to be very interesting becuase I had never heard of the cause of the great recession to be structural unemployment. It just does not make sense that so many people would be structurally employed at one time such as the Great Recession. In past Econ classes, I had been taught that the level of structural unemployment is generally fairly constant and really only fluctuates when there are sudden, rapid economic advances. I was also taught that cyclical unemployment was, by definition, a cause of recessions because it is unemployment associated with the general rise and fall of the economy. I think it is fairly common, on both sides, for certain politicians to attempt to twist economic information in order to better support their stance, thus the reason it is important to understand economics so you can determine the validity of economic arguments on your own. Finally, it was also very interesting to hear Stephen Moore at Mock Con talk about how he destroyed Paul Krugman in a debate.
The New York Times Article, "Structural Humbug Revisted," by Paul Krugman addresses the potential cause and explanation of unemployment in relation to the low unemployment rate today. Krugman references the speculation and consensus formed to explain the Great Recession, "a large part of the rise in unemployment was “structural,” and could not be reversed simply by a recovery in demand." However, despite this claim that workers just didn't have the right skills, Krugman asks the evident question of, "where was the growth in occupations where they did possess adequate skills?" Many supposedly share this opinion but were proved wrong with World War II, and the doctrine that skills were the issue became significantly stronger opposed to its counterpart that there wasn't enough spending. Krugman claims that the notion of unemployment being a result of primarily a structural problem eventually became fact. My immediate reaction to the article was a confusion of how economists could claim that unemployment – as severe as it was during the Great Depression – was in effect because, "workers just didn't have the right skills." I was also wondering as to how the structural issue of unemployment would be tackled or fought against without more spending. Would we wait around for workers to simply arrive or cultivate the "right skills?" For me the article was fairly vague, Krugman acknowledges that the rise in unemployment was "structural," but what does that mean exactly from an everyday perspective?
Posted by: Yo Han(John) Ahn | 02/10/2016 at 10:45 PM
The New York Times Article, "Structural Humbug Revisted," by Paul Krugman addresses the potential cause and explanation of unemployment in relation to the low unemployment rate today. Krugman references the speculation and consensus formed to explain the Great Recession, "a large part of the rise in unemployment was “structural,” and could not be reversed simply by a recovery in demand." However, despite this claim that workers just didn't have the right skills, Krugman asks the evident question of, "where was the growth in occupations where they did possess adequate skills?" Many supposedly share this opinion but were proved wrong with World War II, and the doctrine that skills were the issue became significantly stronger opposed to its counterpart that there wasn't enough spending. Krugman claims that the notion of unemployment being a result of primarily a structural problem eventually became fact. My immediate reaction to the article was a confusion of how economists could claim that unemployment – as severe as it was during the Great Depression – was in effect exclusively because, "workers just didn't have the right skills." I was also wondering as to how the structural issue of unemployment would be tackled or fought against without more spending. Would we wait around for workers to simply arrive or cultivate the "right skills?" For me the article was fairly vague, Krugman acknowledges that the rise in unemployment was in part "structural." I'd assume he's just claiming that there are more people seeking jobs than there are jobs available. However, structural unemployment is not a cause of unemployment but a type of unemployment. I'm still wondering what the actual causes of unemployment were and how it relates to the low unemployment rate today.
Posted by: Yo Han(John) Ahn | 02/10/2016 at 11:25 PM
This article and the conversation we had today regarding structural and cyclical argument is fascinating. More than anything, I am most interested in the arguments made to contradict Krugman’s assertions, both in their logic as well as in the passionate and almost personal attacks on Krugman. At the time that I read this piece, there were 155 user comments on the article, and while some supported and some opposed, they all shared an incredibly strong, unwavering passion for the side they picked.
The basic rules of the scientific method dictate that observations must be made before a hypothesis is formed. It appears that so often with any issue related to politics or government policy, an individual forms an opinion, and then seeks to disprove any information to the contrary of that opinion. This method is flawed in that the individual playing the role of “scientist,” to follow the analogy aforementioned, is rooting for one side before the observations have even begun, and the conversation with anyone who disagrees is combative rather than collaborative.
The tone in the article almost invites this kind of conversation. By stating in the lede that he won a bet over the unemployment rate, the importance is placed on this competition. It is my opinion that he is right in the argument over structural versus cyclical unemployment regarding the Great Recession, but the long process of finding the truth and convincing the public of that truth is made only longer by fostering the contest mentality that is so encouraged by politically charged debate.
Posted by: Caleigh Wells | 02/11/2016 at 12:12 PM
I never thought the cause for such high unemployment during the Great Recession was a matter of structural or cyclical effect. I thought people were out of jobs because firms couldn't afford to hold onto as many employees as they once were. My thought was firms are so intertwined with the market that win the housing bubble burst, it sent tons of firms into free fall and they had to make cuts. A structural argument for unemployment does not make any sense even if you do not look at the wage rate at the time. I would be interested to read the cyclical arguments for high unemployment during the Great Recession. Also, I'd like to know if I am thinking about this too simply.
Posted by: Devin Kearns | 02/11/2016 at 10:00 PM
After discussing this event in class, it is clear how the unemployment resulting from the 2008 Great Recession was not cyclical but rather structural. Krugman addresses the fact that the scenario wasn't one where workers were out of a job because the economy was simply rising or falling. Yes the economy was in poor shape, but it was only partially due to the economy crashing. Otherwise, unemployment during the great recession was structural. The demand for certain jobs was simply falling and the size of the labor force remained the same. In a way, there was a perfect storm. The economy faced challenges with the burst of the housing bubble that certainly could inspire difficulties, but there was certainly also an amount of structural unemployment. As with anything in economics, the answer is not straight forward, and there are many factors at play especially in a situation as complicated as the great recession.
Posted by: Ian Gipson | 02/14/2016 at 01:13 AM
The whole point of our conversation on Thursday was to show it was CYCLICAL!
Posted by: Caseyj | 02/14/2016 at 09:42 AM
In “Structural Humbug Revisited”, Paul Krugman reassessed the unemployment spike of the late 2000s. He describes how the spike was quickly branded as structural despite the efforts of economists to declare otherwise. He is correct in asserting that the rapid rise of unemployment was a different type of unemployment. With the collapse of the housing bubble and other economic events of 2008, the demand curve for labor rapidly shifted left, as Krugman states. If the unemployment were Structural, then we would also see a leftward shift in the supply curve as there would be an inefficient number or workers trained to perform the jobs needed. This phenomenon would result in an increased equilibrium wage. As we did not see this, and we know the unemployment was not frictional, we must conclude that the unemployment of the great recession was largely cyclical. Structural unemployment is hard to influence by public policy, but law makers could have done more in the 2000s to prevent and counteract the cyclical unemployment of the era if they had listened to economists.
Posted by: Katherine Dau | 02/14/2016 at 10:09 AM
I think Krugman really sheds light upon how someone can have an idea and be too stubborn to change it when they are presented with facts that disprove it. We then see this "elite opinion" as Krugman calls it, and then it is taken as the truth by many people. The facts of the Great Recession are that although there was a large drop in unemployment, it couldn't be structural because there was no change in the wages in job markets. If this were to be structural there would be a hike in prices, as they try to find more qualified workers for the positions. This is the basis for Krugman's argument, since there wasn't a change in wages it must not have been a problem with the skills of the workers demand, therefore it must be a cyclical.
I found it interesting how Krugman criticized those who blindly followed the "elite opinion" without looking at the facts. If there is a chance to further dive into more deeply why people do this in class it would be great.
Posted by: John Broderick | 02/14/2016 at 12:47 PM
In Paul Krugman's article, he criticizes the notion that the Great Recession's rise in unemployment was structural. A large portion of the population assumed that as the economy was changing, workers simply lacked the skills capable of fulfilling the new jobs. However, this argument lacks evidence, for if skills were the problem, the wages of more skillful occupations would rapidly rise to compensate for the lack of supply of skilled workers. Krugman refers to how many people believed unemployment was structural during the Great Depression as well, but that this idea was disproved due to the stimulation that World War II provided. The evidence shows that the cause of high levels of unemployment during the Great Recession was cyclical instead, meaning unemployment is directly related to the fluctuations in growth and production that occur in the business cycle. The number of unemployed workers exceeds the number of jobs available, resulting in many economists believing that government intervention is a viable solution. Such methods involve deficit spending or certain tactics dealing with monetary policy. Nevertheless, elite circles continue to promote the idea of structural unemployment as a simple fact despite the fact that this is not the case.
Posted by: Danielle Spickard | 02/14/2016 at 03:43 PM
In class we argued and attempted to determine whether the doubling of the unemployment rate during the Great Depression was a form of structural or cyclical unemployment? In order to discuss this complicated question, we discussed the differences between the two different types. Structural unemployment is caused when a change occurs such as a shift from a labor intensive economy to a technology intensive economy. Firms require a certain human capital to match the transition from labor to technology. The shift of human capital however requires time to catch up in order to adapt to the transition. This period of time leads to structural unemployment and an increase in wages for skilled workers. Krugman argues however that this is not the case. He claims that according to structural unemployment there should a shift in the supply curve to match the shift in the demand curve. A shift in the supply curve is not referred to once in the article. A leftward supply shift represents the decreased supply of qualified workers. Without a dramatic wage increase for the skilled workers and a supply curve shift there has to be a different cause for the unemployment.
Krugman backs up his hypothesis of cyclical unemployment when he attacks the ignorant beliefs of the rising elite circles. Economics is not an exact science, and as we have said numerous times in class a lot of the time “it depends.” To go out on a whim and claim the fact that structural unemployment occurred during the Great Depression instead of cyclical unemployment is invalid. This argument is extremely fascinating and as always it is very common in economics that the answer is wavering and should be taken with a grain of salt. I would appreciate the ability to continue comparing the differences among structural and cyclical unemployment and their tradeoffs.
Posted by: James Brady | 02/14/2016 at 04:08 PM
In this article Paul Krugman addresses the miraculously continued debate between whether the unemployment following the great recession was structural or cyclical. Obviously, as discussed in class the unemployment is not frictional. It would be unprecedented for unemployment to double solely because people are taking twice as long to switch careers/ find a new firm. Like we discussed in class, for the unemployment to be structural the skills of the labor force must be concentrated in certain fields and lacking in other fields. This would lead to unemployment and low wages in some fields and full employment and high wages in the other. As discussed in class, this is not the case, wages and employment fell across the board. This obviously displays that the rise in unemployment must be predominately or entirely cyclical. This lends itself as support for government lead increase in demand.
Posted by: Davis Alliger | 02/14/2016 at 05:09 PM
"Structural Humbug Revisited" is a brief commentary by our textbook's author, Paul Krugman, defending his (appropriately justified) dissent that the cause for high unemployment during the Great Recession was cyclical rather than structural.
Krugman's defense for this lies in the unavoidable fact that during the Great Recession, there was no rise in higher paying jobs accompanying the so-called structural shift in employment. As a result, it is very unlikely that the majority of jobless individuals found themselves in that situation as a result of a lack of skills for more specialized jobs. Rather, it is likely that the demand for labor from firms was reduced as a result of the contemporary economy.
It seems a logical perspective that one of the deepest recessions in recent memory would be the cause of unemployment derived from a multitude of issues with the economy. However the adamancy that structural unemployment was to blame primarily for the peak during that particular era seems blindly misguided. I would be interested to see an argument in favor of this idea, considering Krugman mainly sticks to his case, pointing out the reasons illustrating his point.
I did find this study: https://www.imf.org/external/pubs/ft/wp/2011/wp11105.pdf
which suggested that skill mismatches did, in fact, increase unusually during the Great Recession period, they estimate though, that there was less than 2% increase in the rate of structural unemployment due to these factors. This fully explaining the peak unemployment rate of 10.1% seems unlikely
Posted by: Elliotemadian | 02/14/2016 at 05:11 PM
After our discussion on Thursday, Paul Krugman’s article “Structural Humbug Revisited” makes a great deal of sense. I have heard many versions of the structural argument about there being a dearth of skilled workers in the tech industry, but I never thought that it added up. As Krugman points out and we discussed in class, a supply side movement to the left would result in higher salaries for the smaller number of qualified workers. This is not the effect that we saw in the Great Recession, and it is not an effect we see now. Ceteris paribus, if the rise of unemployment seen in the Great Recession were truly structural, wages would have risen in the sectors purportedly experiencing a shortage of skilled workers.
The best explanation that I can arrive at to explain why the unemployment was described as structural for so long is that it supported ideology favoring less government intervention. If the sharp increase in unemployment were truly structural, then there would have been little place for government macroeconomic intervention. Those who dislike strong government macroeconomic policy likely supported the theory that the unemployment was structural, and perpetuated the myth.
Posted by: Mary Hampton McNeal | 02/14/2016 at 05:14 PM
Krugman’s article, “Structural Humbug Revisited,” demonstrates how it easy to ignore all the evidence. In our book, structural unemployment is defined as “unemployment that results when there are more people seeking jobs in the labor market than there are jobs available at the current wage rate” (208). Structural employment indicates that firms cannot find workers. Certain workers do not have the necessary skills demanded by employers, and therefore, the wages of these positions would increase in order to find workers with these skills. When it comes to structural employment, there doesn’t seem to be a lot that the government can do… However, cyclical unemployment is related to the business cycle. The government can do something to address this kind of employment by encouraging spending in some way. As Krugman argues, we did not see a rises in certain wages; therefore, unemployment during the Great Recession must be cyclical, not structural. While I understand this logic, I do wish Krugman had gone into a little bit more detail in this article as to why the employment must be structural then.
Additionally, as we discussed in class, I can see how this “strange consensus [developed] into elite opinion.” I think it’s a rather common phenomenon for people to let their biases and opinion cloud or morph actual evidence. For example, in research, it can be easy to declare certain data or results as significant, to show a correlation, or to demonstrate a cause-effect relationship. It is easy to fall into the trap of bias. When we want to see something, we can usually find a way to make the data show it. I think the most critical takeaway of this article is the importance of looking at the evidence first before making up our minds with opinions.
Posted by: Julia Wilson | 02/14/2016 at 06:16 PM
In class, we discussed the three main types of unemployment and what type of unemployment there was during and following the Great Recession of 2008 and its doubled unemployment rate. Krugman discusses this in his article “Structural Humbug Revisited”. Krugman talks about the type of unemployment that occurred during that timeframe and how it was not truly debated by people and just accepted as structural, although many economists disagreed. He relates it to the Great Depression and how there was a similar view to it being structural, but the economic advancement caused by the financial stimulus that was World War II. Krugman views the Great Recession as a cyclical version of unemployment. There is a main difference between the two, as structural results in more people searching for jobs than there are available, while cyclical refers to the deviation between the actual and natural unemployment rates. Since there was no wage changes for skilled vs non-skilled workers and the fact that there was an overall fall in employment, the unemployment of the Great Depression could not be structural, but must be cyclical. It was also interesting to see Krugman’s opinions of those who called the unemployment structural, as he refers to them as “elite”.
Posted by: Jack Boyce | 02/14/2016 at 07:17 PM
In this article, Krugman argues against the idea that the root cause of unemployment during the Great Depression was due to structural unemployment. Though he does not mention it directly, Krugman eludes to the fact that unemployment during the Great Depression was caused by cyclical unemployment. According to this argument, unemployment during the Great Depression was caused by the recession and decrease in production, not a mismatch in skills and jobs.
Structural unemployment occurs when the skills of workers in the economy are incompatible with the jobs provided in the economy. If this were the case in the Great Depression, there would be a decrease in demand for low-skilled jobs, causing a decrease in wages for low-skilled jobs. On the other hand, there would be a corresponding increase in demand for higher-skilled jobs, causing an increase in wages for higher-skilled jobs. The corresponding increase in wages for higher-skilled jobs did not occur during the Great Depression, so therefore, it is unlikely structural unemployment occurred.
Krugman uses evidence from World War II to provide a reason as to why unemployment during the Great Depression was cyclical, not structural. At the end of World War II, a fiscal stimulus helped the unemployment rate to decrease with a corresponding increase in GDP. This leads Krugman to believe that the unemployment was related to the business cycle, not the types of jobs and workers in the economy.
Posted by: Jane Chiavelli | 02/14/2016 at 10:14 PM
Paul Krugman’s commentary on an increasing unemployment rate points to an extremely troubling reality that theories might be trusted and adopted without the public and perceived “experts” demanding any concrete evidence. It also may not be that these individuals did not want or seek evidence. Perhaps they did not know what they were looking for or were lacking a clear understanding of the issue at hand. Whatever the case, Krugman’s article demonstrated what Professor Casey described on the first day of class: politicians and others will propose ideas and policies without truly understanding the economic implications. Many of them lack a nuanced conceptualization of economic principles.
Additionally, it is interesting that there might be so much ambiguity in what seems very cut and dry: the cause of rising unemployment. This article showed that what might seem obvious or clear might actually be more complicated. It is one thing to recognize a trend; it is another to identify its cause.
Posted by: Caroline Birdrow | 02/14/2016 at 11:34 PM
In his article, Krugman discusses the source of unemployment. Krugman brings up two different ideas that we discussed in class: structural and cyclical unemployment. Structural unemployment is caused by workers' failure to provide the necessary skills demanded by employers, the skills gap. Cyclical unemployment, on the other hand,is tried to the cyclical nature of the growth and production within the business cycle.
According to Krugman, the argument that a rise in unemployment was structural in nature is nonsense. Instead, Krugman argues that history continues to show that unemployment is largely cyclical, and that increased spending (like World War II after the Great Depression) is the most effective manner to combat it.
I believe the reason why the idea of structural unemployment is so popular among 'the elite' is because it is easy to blame the workers. Like Krugman says, if there was truly such a lack of skill in the workforce, where are the increasingly well-paid jobs? The unemployed workforce have the skills but there is a lack of demand.
Posted by: Tony Du | 02/15/2016 at 06:45 PM
I found our discussion in class on this topic to be very interesting becuase I had never heard of the cause of the great recession to be structural unemployment. It just does not make sense that so many people would be structurally employed at one time such as the Great Recession. In past Econ classes, I had been taught that the level of structural unemployment is generally fairly constant and really only fluctuates when there are sudden, rapid economic advances. I was also taught that cyclical unemployment was, by definition, a cause of recessions because it is unemployment associated with the general rise and fall of the economy. I think it is fairly common, on both sides, for certain politicians to attempt to twist economic information in order to better support their stance, thus the reason it is important to understand economics so you can determine the validity of economic arguments on your own. Finally, it was also very interesting to hear Stephen Moore at Mock Con talk about how he destroyed Paul Krugman in a debate.
Posted by: Alex Shields | 02/15/2016 at 08:09 PM