A mismatch between jobs and skills

Recessions are obviously tough in many ways. Losing a job is demoralizing, and not being able to pay the bills is one of the most stressful experiences a family can have. But there's also an insidious, long-lasting woe that crops up because of the labor market's stickiness -- a broad mismatch between jobs and skills.

When economists refer to the labor market as "sticky," they mean that it is hard to move people and price points. While capital flows relatively freely between investments, always seeking out the highest return, people are not interchangeable. People also have a bias against change. So it takes a lot of effort to switch jobs or to hire someone. There is inadequate information -- people don't always know about jobs. The right job may not be open when someone is looking. It also takes a lot of effort to move to a different location, particularly if there are kids involved.

The result is that as the unemployment rate rises, people seek out whatever relatively local jobs they can find that will pay the bills. And so there is a broader mismatch between jobs and skills in a slack labor market. Over the past few weeks, over coffee in the morning, I've been reading several stories in the Wall Street Journal highlighting this reality. On June 2, the WSJ profiled Carlos Araya, a former trader on the New York Mercantile Exchange who is now working as a host at the Palm Restaurant in Tribeca. This morning, the WSJ got a little more creative, finding Tim Ryan, a former construction worker now working as a "wolfman" at Clark's Trading Post, a tourist attraction in New Hampshire. He leaps out of the woods at tourists to add a little element of fright to their visits.

Both men have relatively specialized skills, which their new jobs are not using (though Ryan does seem to have a bit of a "wolfman" appearance -- a talent he didn't know he had). The jobs also pay a lot less than they were earning before. Multiply this by millions of people, and you have an economy that's going to take a while to grow out of its trough.

But the interesting thing is, while Araya and Ryan took their jobs to stave off catastrophe, many people inflict similar woes on themselves even during good times by not using the tighter labor market to seek out their "dream" jobs -- that is, jobs that utilize their core competencies, and challenge them at close to the extent of their abilities.

I'm arguing in 168 Hours that "following your passion" is not just a nice phrase for commencement speeches. There is a business case for being in the right job. Happier people are more productive and creative. They take risks and try new things. They spend time solving problems related to their jobs, rather than coming home and watching TV (unhappy people watch about 20% more TV than happy people). And they perform better. Ocean explorer Sylvia Earle (who I also interviewed for the book) put it best:  "If you do what you love, you're likely to do that thing the best of all the things you can do, because you'll do it with passion."

As usual, her advice was pretty blunt (I've interviewed her several times; she's a bit brusque!). "We live in a country that has latitude to follow your dreams...if you don't love what you're doing you should do something else. No one's forcing you to do it. But people do somehow let themselves get boxed in sometimes for whatever reason."

Currently, that reason is more compelling than usual -- 3.9 million people have been out of work for 27 weeks or more, and have depleted whatever savings they had and possibly their unemployment checks, too. The danger is that the labor market's stickiness means people will stay longer in these jobs than they should-- which will slow the recovery. Solving this problem is one that economists have been trying to figure out for a long time.

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One Response to A mismatch between jobs and skills


  1. Taia says:

    You are overlooking the importance of family and community in making career decisions. How would your life be different if you had chosen to remain in your Indiana hometown? Many people want their children to see their grandparents frequently and to have lifelong friends and they are willing to sacrifice having a career in order to do so.

    Is it wise? It depends on what your goals are. I was recently laid off from Hewlett Packard R&D after getting a graduate degree in a specialized field. I live in rural Oregon, where my husband’s job is. As my mentor pointed out, the job doesn’t love you back.

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