The Self-Perpetuating Problem of Long-Term Unemployment

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

National Journal
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Catherine Hollander and Elahe Izadi
Dec. 8, 2013, 7:20 a.m.

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.”

Solu­tions

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.

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.”

Solu­tions

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.

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