Economic Report of the President 1994 - The American Presidency ...

Chart 3-8 Ratio of White-Collar to Blue-Collar Unemployment RatesThe ratio of white-collar to blue-collar unemployment rates has been risingbut is still below historical highs.0.32 -0.30 -0.28 -0.26 -0.241968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992Note: Data after 1981 are not strictly comparable with earlier years because of changes in occupational definitions.Source: Department of Labor.are linked to equally disturbing changes in the distribution of incomeand job security, discussed later in this chapter. The secondconcern is the long-term increase in the average level of unemployment.The third concern is that recent high levels of long-term unemploymentsuggest that we may be seeing an increase in theshare of unemployment caused by mismatches between workers'skills and job demands. If this is the case, it is argued, it may bedifficult to lower the unemployment rate much further withoutcausing labor market bottlenecks. As we will see below, little evidencecan be found that skill mismatches have contributed muchto recent increases in unemployment, but they do seem to havebeen a major cause of growing income inequality.IS THE NATURAL RATE OF UNEMPLOYMENTINCREASING?How would we know if there had been an increase in what economistscall the natural rate of unemployment? A sustained increasein long-term unemployment might be one indication, an increase inthe number of people who have given up looking for work mightbe another, and an increase in the fraction of job losers among the109