Day: 2010/09/02

Structural Unemployment Plagues U.S. Legal Sector

It's like the love child between a house and a jack-o-lantern.

Two recent articles taught me economists’ vocabulary for what I was already thinking.

These articles distinguish between two types of unemployment: cyclical and structural:

  • Cyclical: Unemployment caused by collapse in aggregate demand (people stop spending money)
  • Structural: Unemployment caused by a “mismatch” between workers’ skills and available jobs (worker oversupply in a specific labor market)

More so than Ledbetter, DeLong believes current unemployment is largely cyclical.  Paraphrasing from one of DeLong’s examples on the structurally unemployed:

The size and duration of the excess unemployment…might be substantial and long lasting. It might require significant time to retrain workers and plug them into social networks in which they become good workers. We might see prolonged and high unemployment in [the sector they’re trained in], and in regions that had seen the biggest previous [] booms [in that sector].

How does this apply to the legal sector?  We’ve seen these concepts before, just with different terminology.  Cyclical is to Bottleneck as Structural is to Bubble. (Okay, we’d actually expect workers to realize that paying for training in a structurally failing sector is a waste of money, leading to drops in education costs, but the analogy is close enough for me because workers haven’t realized law is structurally failing yet.)  Now you ask, is the crushing job loss in legal services due to an aggregate demand shortage (no one can afford legal services), or is it due to an oversupply of labor in a sector whose workers would better serve the economy in other industries?  I agree with DeLong over Ledbetter: because there is no evidence of any single expanding sector in the overall economy, what we’re seeing right now is largely cyclical unemployment.

So now you think I’m a bottlenecker, right?

(more…)