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Unemployment, Inc.: Six reasons why America can't create jobs

UPDATE: No net growth in new jobs in August kept the US unemployment rate at 9.1 percent. Six reasons the country is struggling to put people to work – and why it may not last.

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To give just one example, Mark Hanawalt in Waverly, Iowa, says he's looking for people with technical skills, such as engineering and running computer-controlled tools, for the manufacturing firm he co-owns, United Equipment Accessories. He describes people with those abilities as "highly competitive" and not easy to draw to small-town Iowa. The skills (and in this case geography) gap could become an even bigger problem if the economy shows gradual improvement and more firms want to hire.

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The issue goes beyond software engineers and manufacturing to a range of fields, including nutritionists and welders. In some cases, it is a matter of people lacking the know-how. In others, it is simply that they don't know the jobs exist. "There's a clear lack of information getting down to students" as well as the middle-aged jobless about what skills are in most demand, says Dr. Lund.

A skills "mismatch" between job seekers and employment opportunities isn't new. What's different now may be the scale of the problem. Job losses in this recession were deeper. And unlike what happened during business cycles half a century ago, many of the jobs won't be coming back as the US shifts from an industrial economy to one driven by knowledge, new services, and innovation.

While some economists see the skills mismatch as a minor issue, a recent analysis by economists at Wells Fargo & Company argued that it's significant enough to push up the economy's "natural" rate of unemployment – the base level of joblessness that's likely to persist even in a good economy. By their estimate, this natural rate has risen from 5 percent to 7.1 percent, with the skills issue a central cause.

The talent gap is one reason some policymakers are calling for, and some students are responding to, a ramped-up effort by community colleges and vocational schools to train people for tomorrow's jobs. Lund points to an advanced manufacturing credential, supported by the National Association of Manufacturers and available through vocational schools, as one model of how to match know-how and shop-floor need.

3 Rise of the 'plutonomy'

The income gap between the richest Americans and those in the middle- or lower-income groups is large, compared with other advanced nations, and it has been widening for several decades. This may be dampening job growth in the current recovery.

The wealthy are less likely than others to spend each new dollar of income – and at a time like this more consumer spending is one of the most reliable ways to boost the economy and produce jobs, explains Peter Cappelli, a labor economist at the University of Pennsylvania's Wharton School in Philadelphia.

Talking about the rise of a so-called plutonomy, a coinage suggesting an economy dominated by wealthy plutocrats, angers many conservatives, who dismiss it as a form of "class warfare." But it's a force worth paying attention to because the economic implications may persist for years. Indeed, one reason for the gap – growing opportunities for a "superstar" or talent elite in a knowledge economy – shows no signs of easing.

There's nothing wrong with rising global wealth, but if it's concentrated too narrowly it could pose a test of social cohesion in places accustomed to broadly rising living standards. In a book published just before the recession, Benjamin Friedman, an economist at Harvard University in Cambridge, Mass., detailed the case that societies benefit from widely shared growth and suffer when their economies stagnate or when gains flow into a few hands.


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