Friday, 11 July 2014
Computers improve job search efficiency.
John Quiggin wonders why, given that computers have HUGELY improved the efficiency with which job seekers can be matched with vacancies, unemployment has not come down dramatically.
He partially answers the question himself when he points to the fact that even given perfect matching, unemployment will not decline unless the wages in each profession respond to supply and demand for relevant skills. As he puts it, “Why doesn’t competition between unemployed and employed workers work quickly to reduce wages to the point where demand equals supply?”
Well that’s easily answered. In fact it was answered by Keynes nearly a century ago: wages tend to be sticky downwards. At least they’re nowhere near as flexible as share prices on the stock exchange, or the price of grain, iron ore, etc.
There is however a solution to that lack of flexibility, and that’s to hire out the unemployed for free or at a subsidised rate (with the unemployed still getting their benefit money) as I explained here.