As I was brushing up on my economic for the quarter, I realized something. According to Keynesian economic theory, employment is a function of change. Workers change jobs, consumers change preferences, employers change workers. In all, there is a certain amount of change that is going to happen in the given economic area and that is what is called full employment or the natural rate of unemployment. As workers find new jobs, the unemployment rate goes down. A recession is when employment falls below the full employment rate.

Now, one of the assumptions many economists make is that as employers require workers with a higher quality, they are willing to pay a premium for the right workers in order to accomplish higher levels of tasks. The reason they do this is because there is a cost associated with the training of a new worker. Turnover costs make up a large part of the reason why some workers are paid more for their work than others. So, as a result workers with more valuable skills experience greater lengths of unemployment because their jobs are more scarce than unskilled workers and the turnover rate at those jobs is much lower due to high turnover costs.

Therefore, for an economy such as the United States, which has experienced the greatest increase in college graduates in generations, does it not also make sense that the full employment rate for a highly skilled workforce would be higher than it were a generation ago when many of the jobs were not as highly skilled as jobs in the modern world are? And if the rate of full employment increases due to the fact of a highly skilled workforce, what happens to those workers who are only receiving a length of time for unemployment benefits that makes sense in a lower-skilled workforce? Hypothetically, for instance, at full employment a generation ago 5 out of 100 people might be looking for work compared with 95 out of 100 who are employed. However a generation later, at full employment 10 people out of 100 might be looking for work compared with 90 out of a 100 who are employed. The difference is generational, by which I mean to say that a more highly skilled workforce, which I think few would argue has arisen in the past generation, will experience a higher rate of natural unemployment compared to the generation previous.

So, what does all this mean for our nation right now? Well, for one thing, the length of unemployment benefits may require retooling. As Congress approves yet another round of unemployment benefit extensions, this is one of the debates that has gone seriously lacking for the past few years since the recession started. A generational shift has occurred and the current level of unemployment benefits is left wanting. Currently, the states are individually responsible for administrating unemployment benefits and some benefits are subsidized by the Federal government. They range generally from six months to one year. This is inadequate and should be looked at.