Unemployment and vacancies

14/08/2012 § 4 Comments

Andrew Whiteford at Infometrics contributed the weekly Dominion Post column in the weekend paper. They’ve also posted it on their website. He looks at the relations between unemployment and vacancies, and is concerned:

Our labour market is not working as well as it used to. The match between the type of skills employers require and those possessed by job seekers has deteriorated. This is bad news as it means that higher levels of unemployment will persist for longer.

He suggests that we are not producing enough of the right kinds of employees — particularly not engineering, professional, and IT workers — nor are we importing enough.

I used this as a chance to do something I’ve been meaning to do, plot a Beveridge curve for New Zealand. This curve shows the relationship between unemployment and vacancies. Here you go:

I haven’t figured out how to get the data labels in correctly, but that’s alright for the moment. The unemployment rate is on the x-axis, and the vacancy rate (seasonally adjusted index) is on the y-axis. Both are quarterly from May 2007 when the Department of Labour Jobs Online data series started.

Ideally, the curve should slope downward, fewer vacancies going hand-in-hand with higher unemployment. What Whiteford discussed was the right-hand upward squiggle — the vacancies are going up but unemployment is stuck.

Why?

The education explanation doesn’t do it for me. I can understand over a longer period (10 years?) that a lack of the right education might push us to a different equilibrium. The problem — and I had a project on this earlier in the year — is that education is partially a signalling good and partially a consumption good. Those functions don’t much change regardless of what you study. It is only a fraction of the education you receive that gives you the specific job skills you’ll use.

I can’t speak to the immigration explanation; it’s not something I’ve looked at.

Another possibility is that employers are testing the waters. They may be advertising positions to see what kind of people are around and might be enticed to move jobs. That is, the increase in the index is less about a change in actual vacancies so much as a change in employer strategy.

Employers generally feel short of good candidates. That was an interesting finding from this paper (pdf) based on work I did for the Ministry of Economic Development. We interviewed senior people at a number of businesses in 2009, and most said they had trouble finding staff. Some even said they had positions unfilled for years.

So, maybe enterprising employers are trying to locate the people they think they will need in the future, while the job market is soft and employees are relatively more abundant.

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§ 4 Responses to Unemployment and vacancies

  • wellygnome says:

    There has to be an aggravation factor from HR nonsense including asking for certifications that are out of date, experience that would be impossible (I saw a web development job asking for 4+ years experience with HTML5!) and invading personal privacy.
    Employers are more to blame than employees – they want cookie cutter skillsets but are reluctant to set up training schemes…while simultaneously complaining about a “lack of skills”.

    • Bill says:

      No doubt that the hiring process could be better. MED found that management practices in NZ were somewhat lacking overall, although some companies are amongst the world’s best. The problem isn’t so much that employers want cookie-cutter employees — standardised output from TEOs would be relatively easy. What they tend to want is employees who fit like a glove — who exactly match the particular open slot. When they can’t find that, they have to make a call about how much risk they want to bear for not having the perfect employee.
      The training aspect is interesting. If I remember from the BOS, lots of companies do training, but only a little bit. So then there’s a perception mismatch — employers are doing training, but employees don’t necessarily see it as valuable.

  • detmackey says:

    The Reserve Bank gave a presentation on this a couple of months ago. Really interesting stuff. Worth looking up.

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