Are there jobs out there for the unemployed? If every available vacant job, no matter how unattractive, were taken by an unemployed person, what would happen to our nation's unemployment rate?
President Reagan and his advisers seem to believe that a very large fraction of the unemployed could find work if only they were more willing and able. The president has commented on more than one occasion that the newspapers he reads contain many pages of help-wanted advertising. The message seems to be that something other than a shortage of employment opportunities is the real culprit in our current unemployment situation. Does this belief square with the facts?
The first type of information needed to answer this question is data on unemployment. The unemployment rate is defined by the Bureau of Labor Statistics as the percentage of those in the labor force who are without a job but are available and looking for work. Since May 1980, the (seasonally adjusted) unemployment rate has not fallen below 7.2 percent; it climbed to 9.0 percent in March, a high reached only once before since World War II. The BLS estimates that there were 9.9 million people looking for jobs in March; this figure represents a new postwar peak.
To resolve the question of how the number of available jobs compares with the number of persons seeking work, we also need information on job vacancies. No current national statistics are available. But I have recently completed an intensive study of what job vacancy statistics there are. A substantial part of my research was directed toward adjusting the raw data to produce more accurate figures. For example, I corrected for the fact that hard-to-fill positions for which employers had given up active recruiting were probably not reported on the survey forms. What do the available job vacancy numbers, generously inflated to compensate for any possible downward bias, imply about our nation's unemployment situation?
During the last half of the 1960s, when the unemployment rate hovered within the 3.5 percent to 4.0 percent range, the number of job openings probably came close to equaling the number of unemployed persons. Labor markets have been less tight during the 1970s than during the latter part of the 1960s. Between 1970 and 1980, a period that included three recessions and produced an average unemployment rate above 6.0 percent, there were probably an average of four or five unemployed persons per vacant job.
Today, with the unemployment rate at 9.0 percent, the number of unemployed persons almost certainly far exceeds the number of open slots. A reasonable estimate, based on the historical relationship between the unemployment rate and the job vacancy rate, is that there are currently no more than 1 million jobs vacant in all sectors of our economy; that is, the number of unemployed persons most likely exceeds the number of vacant jobs by a factor of 10 or more. Even if every available vacant job could be filled instantaneously by an unemployed person, we would have achieved only a relatively small reduction in our unemployment count.
The implication of these numbers for policymakers seems clear. The current situation cannot be blamed on the unemployed lacking interest in work. Gutting our social insurance programs will not lead to significant reductions in the unemployment rate. Nor is the central problem that the unemployed lack the skills required to fill available jobs, though this may explain the particular difficulties faced by certain groups. Training programs for the hard-core unemployed may be a good idea for other reasons, but we cannot hope for them to have any substantial effect on the aggregate unemployment rate.
The real problem we face today is that there simple are not enough jobs to go around. Any policy package designed to lower the unemployment rate must recognize this important fact.