by Jerry O’Driscoll
In the September 4th issue of the Wall Street Journal, Jon Hilsenrath chronicles the debate over the reasons for persistently high unemployment. What is being described is the problem of heterogeneous labor.
Labor, like capital goods, is specialized and specific to certain occupations. When those occupations disappear in recession, the next best alternative immediately available locally may pay considerably lower wages. Workers may “know” they have better alternatives, but their knowledge capital has also depreciated with the crisis and downturn. They must search for employment opportunities. Continue reading