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The Self-Perpetuating Problem of Long-Term Unemployment The Self-Perpetuating Problem of Long-Term Unemployment

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The Self-Perpetuating Problem of Long-Term Unemployment

As the Hill debates its emergency benefits policy, millions struggle to find work.


The Federal Reserve has pledged to use its monetary-policy tools to fight unemployment.(Alex Wong/Getty Images)

Agwu Onwuka has been out of work for well over six months. He initially started looking for jobs like his last one, counseling people with disabilities. But as the months dragged on, he started submitting applications for retail jobs, cold-calling at office buildings, and visiting local nonprofit LIFT-DC for résumé help.

"It's so frustrating, because I used to get up in the morning to go to work, and now I just wish I would be able to get something," said Onwuka, 51, who lives in D.C. To keep his spirits up, he says "I just pray, I just pray and try to remember that."


Long-term unemployment has been a defining characteristic of the financial crisis and its aftermath. And while Congress is once again debating whether to extend federal emergency unemployment benefits, the longtime out-of-work remain stuck in a very difficult, self-perpetuating situation: The longer a person has been unemployed, the more difficult it is to get hired.

Unemployment fell to 7 percent in November as the economy added 203,000 jobs, the Bureau of Labor Statistics said Friday. But roughly 4.1 million Americans were out of work for 27 weeks or more—a number basically unchanged from the previous month. One in three unemployed Americans fall into the long-term category.

Even though that number has been slowly inching down as the economy recovers, the share of the workforce that is unemployed for long periods of time remains above anything the country has ever seen.


The stigma

Try applying for a job with a stale résumé, and you're going to have a very tough go of it.

That's what Rand Ghayad, an MIT researcher and doctoral candidate at Northeastern University, set out to test. He sent out 4,800 fake résumés that varied in their industry experience and how long the "applicants" had been unemployed. He found that applicants who had been unemployed for more than six months hardly ever got a call back. The Federal Reserve Bank of Boston published his results.

Even being more skilled doesn't necessarily help you, Ghayad found. Say he had worked for a bank before a six-month or longer stint without a job. "Even if I apply for the same position, you are going to prefer someone who is short-term unemployed with no experience," he said.

That suggests that even additional skills training won't necessarily be the key for the long-term unemployed climbing out of their predicament.


"There's nothing they can do to improve their chances. There's nothing they can do to overcome this stigma," Ghayad said.

The overall picture

The long-term unemployed have more company than ever before. Before the financial crisis, the highest share of the labor force it had ever been was 2.6 percent in 1983. While the United States broke that record during the downturn as it climbed to 4 percent, it has since steadily fallen. Now, four and a half years after the recession ended, it's 2.6 percent again. There's still a long way to go.

Researchers say the precise impact of being unemployed for long periods of time is hard to tease out, since the country is in uncharted territory. But economists warn that its effects can be detrimental, personally and nationally.

"Longer spells of unemployment raise the risk of homelessness and have been a factor contributing to the foreclosure crisis," Janet Yellen, who is likely to be confirmed as the next Fed chairwoman this month, said earlier this year. "When you're unemployed for six months or a year, it is hard to qualify for a lease, so even the option of relocating to find a job is often off the table. The toll is simply terrible on the mental and physical health of workers, on their marriages, and on their children."


Right now, lawmakers are considering whether to extend federal emergency unemployment insurance, benefits that kick in after individuals exhaust state aid, which typically runs six months. On Dec. 28, 1.3 million people will be kicked off the program.

Democrats have made it a priority to pass an extension, arguing that out-of-work Americans need the security while they look for jobs, particularly given that long-term unemployment remains a persistent problem. Republicans want to see the program expire, arguing it costs money, is unnecessary with dropping employment numbers, and doesn't actually solve the jobs problem.

Congress first approved the program in 2008 in the midst of the Great Recession and have managed to renew it every year since. It's unclear what its future will be on Capitol Hill.

But aside from the benefit, economists are divided on how to solve the problem of long-term unemployment and whether the benefits of unemployment insurance—to compensation, well-being, and more—outweigh the fiscal costs, and the slight increase in joblessness that some economists say extending unemployment insurance may cause.

"There's no policy lever to really say, 'All of you long-term unemployed people whose industries have shut down, we're going to find you a new job that's just as good as the job you lost,' " said Austin Nichols, a senior research associate at the Urban Institute. He sees government-subsidized jobs as one good remedy. Short-term compensation is another way to tackle the problem; it would provide partial unemployment-insurance benefits to workers on partial work schedules.

Others have recommended laws banning discrimination against the long-term unemployed; a handful of states and localities have done so, but it's unclear how effective they are.

Broadly, the Federal Reserve has pledged to use its monetary-policy tools to fight unemployment and meet its congressional mandate of ensuring "maximum employment." Yellen, the likely incoming Fed chief, said earlier this year, "These are not just statistics to me" and pledged to work to reduce long-term unemployment.

Still, finding policy solutions is especially difficult now given the lack of experience in this area, said Douglas Holtz-Eakin, Congressional Budget Office director under George W. Bush.

"We haven't, as a profession, provided much of a solution. This has been bothering me for quite awhile, actually," Holtz-Eakin said. "We need to grow more rapidly. All of these problems get so much easier in an environment with rapid growth, that's why it's so important."

That's also what Ghayad suggested. If the economy is growing, even if the short-term unemployed are hired more quickly, the long-term unemployed will still be able to pick up jobs as the hiring queue churns forward.

Friday's report suggested the labor market continues to strengthen. But it also revealed just how far from full strength it remains. As lawmakers and policy experts explore long-term unemployment solutions in Washington, so will unemployed people like Onwuka continue submitting résumés, hoping for a call back.

Unemployment Benefits Spark Political Debate

This article appears in the December 9, 2013 edition of NJ Daily.

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