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The long-term unemployed and implications for the future

Unemployment Line
Unemployment Line

Princeton University economists Alan B. Krueger, Judd Cramer, and David Cho released a study last week comparing the short and long-term unemployed in the labor market post the Great Recession of 2008.

Using the Phillips and Beveridge Curves to analyze U.S. unemployment data from 2008-2012, the economists conclude that the long-term unemployed were increasingly marginalized from the labor market, less likely to apply for a job or get hired. As a result, the long-term unemployed skew the overall unemployment rate of 6.7 percent, while the short term unemployment rates are at similar levels to the last recovery.

Among workers who had been long-term unemployed (without a job for 27 weeks or more), 64 percent were still unemployed 15 months later. Of the 36 percent who were reemployed, only 11 percent had been working full-time for at least 4 months.

Comparing the short and long-term unemployed, the authors find similar educational backgrounds across industries and occupations in both rural and urban areas, with a larger proportion of the long-term unemployed older (over age 50) and more likely to be single. For the year 2012, the long-term unemployed were 55 percent male and 45 percent female, with 51 percent Caucasian, 22 percent African American, and 19 percent Hispanic.

This study proves that the longer workers are unemployed, the less they are tied to the labor market from both a supply and demand side. They search less intensively for a job and as a result apply to fewer jobs. Congruently, employers are less likely to hire the long-term unemployed, thinking they will be less productive in the workplace.

This study suggests that individuals who are long-term unemployed grow discouraged the longer they are without work. Their continuing unemployment becomes a self-fulfilling prophecy – the longer they don’t have a job, the less vigorously they search, and the less likely they are to obtain a job in the future.

In order to lower our employment rate and fully bounce back as an economy, we have to address the long-term unemployed and reintegrate them back into the labor market. The authors offer little by way of concrete monetary or fiscal policies to ameliorate this problem, simply suggesting, “The most important policy challenges involve designing effective interventions to prevent the long-term unemployed from receding into the margins of the labor market or withdrawing from the labor force altogether, and supporting those who have left the labor force to engage in productive activities.”

From the supply side, if workers do find themselves unemployed, this study suggests the importance of becoming employed quickly after losing a job. If workers do find themselves long-term unemployed, they should try to remain productive during their unemployment, actively searching for positions, going on informational interviews, pursuing an internship or volunteering, or embarking on another personal enrichment activities.

When applying for jobs, the candidate should address sizable gaps in their work experience. Maybe the job seeker took off work for perfectly understandable reasons, such as raising children, taking additional courses, receiving a training certification, or pursuing freelance work. Perhaps they traveled extensively, went on a wilderness excursion, or suffered a loss or illness, all which could prove adaptability, strength, and resilience. If you are a worker that has been unemployed long-term, think of how you have improved in the time since your job. Whatever the reason for your unemployment, proving you have grown and are ready to reenter the labor market is important for successful rehiring.

From the demand side, if you are a business or employer, do not unfairly reject candidates due to resume gaps. Address their respite during the interview, focusing not on why they weren’t able to find a job but how they grew or learned during their time off work.

Additionally, the government must make addressing the long-term unemployed a priority for the economy. A July 2013 paper by Gregory Acs of the Urban Institute offers solutions to the long-term unemployed. Acs writes that workforce development programs are the most direct way to address the long-term unemployed. These programs train the workers in skills that are directly transferable to the job market in the workers' location.

Secondly, Acs writes that public works programs, such as post-Great Depression schemes like the Works Projects Administration and Civilian Conservation Corps, create jobs for the unemployed. While there are potential downsides to this option, such as taking jobs from the private sector, these programs create jobs in industries where there are gaps in the private sector market. Finally, policymakers could make incentives for businesses to hire the long-term unemployed, such as a payroll tax credit, or offer reemployment bonuses to job seekers who find a job quickly.

As Krueger, Cramer, Cho, and Acs write, one approach or policy implementation will not re-employ the long-term unemployed. Instead, the problem will require coordinated action between employers, job seekers, policymakers, and communities to ensure that the long-term unemployed once again become productive, active members of the labor market.

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