Monday, May 13, 2013

Long-Term Unemployment: Then, Now, and into the Future

40 years ago the United States had 100 million less people than it does today. Since then, outsourcing has escalated; and now the labor force precipitation rate is at it lowest since 1979. The Wall Street Journal completely ignores "outsourcing" as one possibility for high unemployment, and says, "Some economists believe workers are being knocked out of the labor force due to incompatible skills and the stigma some suffer from extended spells of unemployment. That suggests a structural problem for labor markets." But from everything I've read, most economists (of both political persuasions) seem to disagree with this general assessment.

40 years from now it's predicted that the United States will have another 100 million people, meaning, we will need an average of AT LEAST 2.5 million jobs a year to break even by that time. Just this year alone we will have 3.4 million more high school graduates (within the next month or so) --- and that doesn't even include college graduates.

If one were unlucky enough to have been laid off during the Great Recession, and if they are one of more that 3 million Americans (that are still counted) who have now been unemployed for one year or longer (especially if they are over 50 years old), chances are, they will never work again. The long-term unemployed are most likely permanently unemployed, but no one in the government will ever admit to this.

Much has been written over the last several years (since the Great Recession) about the long-term unemployed. While although there have been varying opinions as to the cause and potential solutions, there does appear to be an overall consensus as to the current situation and the overall effect that long-term unemployment is having on the long-term jobless in America --- and the country as a whole.

I've gathered a collection of highlights from various sources that I have excerpted and edited from a few recent articles on the long-term unemployed. Some redundant information wasn't included in this post; but I would suggest that you read through all the links if you want a better understanding (A few of the articles also have charts and links to other sources. The "Beveridge-Curve" is also mentioned in a few of these articles).

What most notably stands out, and what most economists seem to agree on, is this: 1) The long-term unemployed aren't being hired, despite their job skills. 2) Older workers aren't being hired near as often as younger applicants. 3) Most new jobs are low-paying and/or temporary (and/or part-time). 4) The long-term unemployed are experiencing many negative life-altering affects. 5) Neither the Democrats nor Republicans seem very concerned and/or they don't have very many solutions (and when they do have an idea, they can't get any plan implemented because of political partisanship). 6) It doesn't appear that the situation for long-term unemployment will get any better, but more than likely, will only get much worse in the years ahead.

The Boston Globe: For the millions of Americans who have been unemployed for many months or even years, help is not on the way. The economy has been improving, the stock market rising, and overall unemployment declining, but the number of long-term unemployed remains near record levels. Many age 45 and older — often struggle in isolation to find jobs while exhausting their unemployment benefits.

PBS: Treasury Secretary Jack Lew says, "We see a long-term unemployment rate that's too high, and it's not OK. It's something that we have to be vigilant about addressing. We have got to have economic growth creating enough jobs so that we cannot just deal with the new entries into the labor force, and people who are in jobs and changing jobs, but creating enough jobs so that people who've been out of the labor force can get back in."

New York Times: There are still 4.4 million workers who have been unemployed for at least six months, and that number does not include people who have given up looking for work. According to the Bureau of Labor Statistics, of those 4.4 million long-term unemployed Americans, 3.2 million have been unemployed for a year or longer. (EDITOR'S NOTE: I've been unemployed for over 4 years. Take my poll at the end of this post if you are unemployed.)

U.S. News: As large as the long-term unemployment numbers are, they dramatically underestimate the long-term jobless problem. Millions of people that have struggled to find work have stopped looking altogether, and this disengagement from the labor force has driven down the unemployment rate without reducing joblessness. Millions of people have dropped from the labor force over the past five years, who perhaps, should still be counted as long-term unemployed.

San Francisco Chronicle: 12.2 million Americans are classified as "not in the labor force" by the Bureau of Labor Statistics, because even if they have been looking for a job for more than a year (but not in the past four weeks), they're considered "discouraged workers".

The Atlantic: "The Terrifying Reality of Long-Term Unemployment" - There are two labor markets nowadays. There's the market for people who have been out of work for less than six months, and the market for people who have been out of work for longer than six months (the long term unemployed).

Yahoo News: It is indeed the long-term unemployed who are the reason why the unemployment rate overall isn't coming down as fast as it should be. And more importantly, there's a quiet humanitarian disaster happening right under our noses. Short of death or a debilitating terminal disease, long-term unemployment is about the worst thing that can happen to you in the modern world. It's economically awful, socially terrible, and a horrifying blow to your self-esteem and happiness. It cuts you off from the mass of your peers and puts stress on your family, making it likely that further awful things, like divorce or suicide, will be in your near future.

Bloomberg: Long-term unemployment is one of the most vexing problems the U.S. faces. Numerous studies show that beyond a sharp drop in income, long-term unemployment is associated with higher rates of suicide, cancer (especially among men) and divorce. Economists agree that the stigma of long-term joblessness is, by itself, causing persistent joblessness. Researchers discovered that the length of time candidates had been out of work mattered more to employers than their job experience. So much for the skills gap. The U.S. is in dire danger of having a permanent class of long-term unemployed.

The Huffington Post: There's been an alarming rise in the suicide rate for middle-aged Americans. According to the Center for Disease Control, the increase coincides with a decrease in financial standing for a lot of families.

Paul Krugman: "Our worst fears about the damage from long-term unemployment are being confirmed. We are indeed creating a permanent class of jobless Americans."

The Wall Street Journal: Federal Reserve Chairman Ben Bernanke feared that many long-term unemployed workers would become permanently unemployable, creating a "structural" unemployment problem akin to what Europe suffered in the 1980s. The long-term unemployed still face grim odds of finding work. About 10% of long-term job seekers found work last month, compared to more recently laid-off workers. The ranks of the short-term jobless are more quickly refreshed by newly laid-off workers. And when the long-term unemployed do find work, their new jobs generally pay less than their old ones—often much less.

The Huffington Post: Economists Edward Lazear and James Spletzer notes, "There are no structural changes that can explain movements in unemployment rates over recent years. Neither industrial nor demographic shifts, nor a mismatch of skills with job vacancies, is behind the increased rates of unemployment."

The Atlantic: Congress can barely be bothered to even talk about it as only four lawmakers showed up for the Congressional hearing on long-term unemployment...and three of them got there late.

CNN Money: Many employers aren't keen on hiring people who have been out of work for a long time, and the jobs that are out there are often in low-paying fields, such as retail or food service, or are temporary spots.

MSN Money: The U.S. economy has recovered 5.7 million of the 8.7 million jobs shed during the recession [but doesn't account for all the new high school graduates during that same period of time]. The National Employment Law Project says nearly 60% of all jobs lost during the downturn paid middle-income wages or better, but roughly 65% of the regained jobs are low-wage.

The Hamilton Project: The country needs to add about 10.0 million jobs to return to pre-recession employment levels. While the private sector has added jobs to the economy in every month since March 2010, for a total increase of approximately 6.8 million jobs, the public sector has contracted.

New York Times: Economists Dena Baker and Kevin Hassett reported that "a worker between ages 50 and 61 who has been unemployed for 17 months has only about a 9 percent chance of ever finding a new job...and a worker who is 62 or older has only about a 6 percent chance". And as unemployment increases in duration, these chances only become dismally worse. (Millions have now been unemployed for 3 to 6 years.)

PBS: We have millions out of work and they are being denied jobs, not because of the skill set, but because the younger hiring managers won't hire them or pay them. A blatant question about blatant age discrimination deserves a blatant response.

The Dallas Examiner: A great majority of the long-term unemployed have almost no chance of finding another job.

Slate: Suppose you had to hire one of two candidates for a job, and you had to base the decision solely on a resume. No interview allowed. The resumes are identical, but one person lost her job in a mass layoff event last week, while the other lost her job in a mass layoff event a year ago. Who are you going to hire? If you're smart, you hire the woman who lost her job last week. Most likely this woman has interviewed for several jobs since being laid off. If she's still unemployed, there's probably something wrong with her.

The Guardian: School leavers and the long-term unemployed are the hardest hit by the jobs scrum as many employers overwhelmed with applications say they will not even consider candidates from those two groups.

Fox Business: The stigma of long-term unemployment can make it increasingly more challenging to find work. After a couple of years the people themselves begin to believe they don’t have any value, that it’s over for them. We don’t see bread lines, but the despair is’s just behind closed doors. Employers looking to hire can legally discriminate against the long-term unemployed.

BusinessWeek: It’s not illegal in most states for companies to factor in an applicant’s job status when filling a position. It would have been under President Obama’s American Jobs Act, which was introduced in 2011 but has been blocked by Republican opposition.

The Huffington Post: Who's to blame for America's long-term unemployment problem? Beginning with the Reagan administration, Republicans were guided by three malignant notions: helping the rich get richer would inevitably help everyone else; markets were inherently self correcting and therefore there was no need for government regulation; and the U.S. did not need an economic strategy because the free market would fix our problems. This ideology led the Bush administration to ignore the housing bubble and Wall Street malfeasance and caused the great recession of 2008.

Unfortunately, Republicans can't admit their philosophy was wrong. They cling to Reaganomics and contend that government is the problem. Even worse, Republicans have no sympathy for the unemployed. Republican presidential candidate, Herman Cain, told the Wall Street Journal, "If you don't have a job and you're not rich, blame yourself."

President Obama has tried to do the right thing, both for the economy and the unemployed, but has had no support from Republicans. That situation is unlikely to change until Democrats control Congress.

The chart below (the Beveridge-Curve) is the plight of the long term unemployed in the wake of the Great Recession. If you look at the economy before the recession (the blue line), it works pretty much as you think it would: as the number of job openings goes up, the long term unemployment rate goes down. But then the Great Recession happened, and now we’re in a bizarro world where the long term unemployment rate goes up even as the number of job openings increases. The Beveridge-Curve: Here's another version of this chart at BusinessWeek

Other Opinions...

The Daily Beast by Megan McArdle: "We could replace extended unemployment benefits with a WPA-style jobs program, paired with a very lengthy probationary period in case some of the long-term unemployed are unemployed because they're lazy or useless."

The Daily Beast (again) by Megan McArdle (again): "Extended unemployment benefits probably caused the unemployment, by giving people an incentive to stay home instead of finding a job."

The Boston Globe: Suffolk University economist David Tuerck said he supports eliminating unemployment benefits and other social safety-net programs, such as food stamps, because they discourage workers from doing whatever it takes to get a job. Proposals to raise the minimum wage should be scrapped too, he said, because it discourages employers from hiring. (He says this even though there are only 3 million job openings for almost 12 million "reported" unemployed Americans.)

BusinessWeek: Andy Stern, the former president of the Service Employees International Union, says the long-term unemployed are among the first to suffer from what he predicts will be a more generalized job drought, which will be the result largely of automation. Stern, who is now a senior fellow at Columbia University says, “You ain’t seen nothing yet.”

Could it get any worse?

* American Enterprise Institute: 5 ideas to help the long-term unemployed

* The National Journal: 6 Ways to Get the Long-Term Unemployed Back to Work

* My Solution: Bring back jobs from Asia or fine the corporations that don't, end all "free trade" agreements, force a repatriation of all overseas profits (and hire government workers), provide STEM scholarships in public education, and pass strict laws banning the future outsourcing of all manufacturing, engineering and call service-center jobs. Simple.

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