As the labor market numbers have continued to be underwhelming and pundits have offered multiple theories as to why, one potential hurdle to a labor market recovery may be due to the fact that the U.S. labor market is not as flexible as many economists believe. Many on the right will point to the explosion of labor regulations to explain this, and certainly this is likely part of the story. However, another reason may be that the nature of work has changed over the decades leading to reduced flexibility, with the result that those who lose work have trouble finding new jobs and exit the labor force. At the same time, many companies are trying to find workers and can’t. In short, something strange appears to be happening.

Over the last 60-70 years, and accelerating over the last 2 or 3 decades, work has become increasingly complex. Two or three generations ago, a person with a high school diploma (or less) could go from a farm, to a factory, to a construction site, with minimal additional training. Sure, the worker might need to learn how a specific assembly line operated, but mostly the jobs required brawn and grit and also didn’t change too much.

Today, many jobs are much more highly specialized, even at what would be considered to be the lower end of the labor spectrum. For example, take a person sitting in a call center for Company A that produces and sells widgets to retail customers. The call center employee needs to have some knowledge of the business, the types of widgets that the company makes, what they do, what they can be used for, etc., to either answer the customer’s question, or to be able to direct them to the person who can answer the question. Furthermore, over time, the company may make changes to the widgets or certain regulations regarding the widgets may change, all of which the call center employee will need to be familiar with to continue to be a productive worker.

Now, suppose that the call center employee leaves after 10 years and tries to find work in another call center in a completely different industry, say a beauty products supply company. Their skills and knowledge that they obtained with the widget company (apart from working in a call center environment) are of no value to the beauty supply company. In short, this fictional person has been in a career field for 10 years, and going to a similar job in another industry means that he/she is essentially starting another career. Contrast this with a factory worker who, union rules notwithstanding, should be able to go from a car factory to a soup factory to a detergent factory with minimal additional training. In fact, one of the reasons that unions were formed was to protect incumbent workers from competition as the jobs were such a commodity that anybody with minimal training could do them.

Apart from the complexity of many seemingly simple jobs, another item that has reduced flexibility in the labor market has been the internet. With job boards like Monster.com and Careerbuilder, employers have been able to narrow in on exactly the job skills that they are seeking, rather than take on someone who has similar skills and train them in the additional skills that the employer needs. What I mean is that in the old days, the employer would put an ad in the local paper, receive a few resumes, interview a few people who kinda-sorta fit what the employer was looking for, choose one and move on with life. If you had say 3 of the 5 skills that the employer was looking for, you would probably land an interview. Today, you have to have all 5 skills just as a starting point, and even then you might not get an interview. The internet has reduced the cost of looking for an employee and so no matter what odd and unlikely combination of skills an employer may need (Master’s Degree in Economics, lived overseas, worked in the transportation industry and has agriculture experience), the employer can find someone who has it. What this does is lock people into a specific career path and makes them unsuited to any job outside of a very narrow range; in short, less flexibility. If somebody works for years in a specific career path and is let go, in many cases they are going to have to effectively start over somewhere else. This lack of flexibility means that a productive worker is likely to end up in a much less productive job, or as is becoming increasingly the case, end up being locked out of the labor force altogether.

Whatever is happening to the labor force that is causing the anemic employment numbers, part of the answer lies in a labor market that seems to be less flexible than it was. While the internet has changed the world, much as the internal combustion engine did, it is also causing massive economic disruption. While increasing economic complexity has coincided in the U.S. with increasing living standards, it appears to also have led to less labor market flexibility. It remains to be seen how this impacts the social fabric of the U.S., but the impact is not likely to be miniscule.