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Unemployment's Long-Term Problem
 

By Joseph Coombs  2/7/2014
Recent improvements in the job market have been overshadowed by the fact that millions of Americans remain out of work. Many of them haven’t had a job for months, or perhaps years. Congress is debating whether to extend unemployment insurance benefits that expired for more than 1 million workers in December 2013, and President Barack Obama unveiled in his January State of the Union address a new strategy that focuses on addressing the plight of the long-term unemployed (LTU).

So what do we know about the long-term unemployed?

On any given month, tens of thousands of Americans “drop out” of the labor force, or give up their search for work, which partially explains the decline in the unemployment rate; these people are not included in the federal employment survey. Those who continue to look for jobs often fall into the category of “long-term" unemployed, defined by the U.S. Bureau of Labor Statistics (BLS) as those who have been without work for 27 weeks or longer.

From a numbers standpoint, their share of the nation’s jobless is quite substantial. When the Great Recession began in December 2007, there were 1.3 million LTU persons in the United States, and they represented 17.5 percent of all the unemployed, according to the BLS. Six years later, in December 2013, they represented 37.7 percent of those out of work.

“There are [approximately] 4.1 million people that have been unemployed between 5 and 26 weeks, and there are an additional 4 million ‘long- term unemployed,' ” wrote Hilary Wething, a researcher with the Economic Policy Institute (EPI), in an e-mail to SHRM Online. Currently, there are 41 states, plus the District of Columbia, with long-term unemployment shares above 26 percent, according to EPI. To check the share of the unemployed in each state who have been jobless for 27 weeks or more, click here.

Also, “there are many others that have simply gotten so discouraged that they have left the labor force,” wrote Wething.  “We call this group of folks ‘missing workers’—potential workers who because of weak job opportunities are neither employed nor actively seeking a job.In other words, these are people who would be either working or looking for work if job opportunities were significantly stronger. As of December 2013, there were 6.0 million missing workers.  If they were included in the labor force, the unemployment rate would be 10.2 percent.”

Causes, Solutions

The severity of the economic downturn has made LTU a bigger problem today than in the past, though pinpointing the cause of this trend might be as difficult as determining who exactly fits the LTU profile.

Nevertheless, commonly cited factors contributing to the problem include:

  • A weak economic recovery that has stifled demand for new jobs.
  • The elimination of many jobs during the downturn that are not coming back (due to automation and related technological improvements).
  • A skills gap between the requirements of new jobs and the abilities of applicants who are out of work.
  • Employers’ unwillingness (perhaps) to hire workers with large gaps in their resumes.

“We would maintain that the root cause of the long-term unemployed is systemic of the larger underlying weakness of the labor market,” wrote Wething. “Weak demand for workers is broad-based; job seekers dramatically outnumber job openings in every industry, and unemployment is significantly higher at every education level than in 2007.” 

A July 2013 report, published by Washington, D.C.-based economic and social policy research nonprofit The Urban Institute, analyzes the demographic composition and labor market history of the long-term unemployed and how they compare with other types of workers (for example, the newly unemployed, discouraged workers and currently employed workers).

Among the report’s major findings: “The long-term unemployed tend to be quite different from workers currently in the job market along such dimensions as education and family composition, but less different in terms of industry and occupation,” wrote EPI research associate and report author Josh Mitchell. Specifically, “… relative to currently employed workers, the long-term unemployed tend to be less educated and are more likely to be nonwhite, unmarried, disabled, impoverished, and to have worked previously in the construction industry and construction occupations.”

But, Mitchell wrote, “[They] also bear many similarities to discouraged workers and the newly unemployed. This suggests that solutions that remove barriers to reemployment for the long-term unemployed will also be beneficial for other workers facing some degree of labor market distress.”

There are many reasons why the LTU population is the focus of labor force reform, said David Remick, executive director of the Virginia-based nonprofit Alexandria/Arlington Workforce Investment Board. For example, loss of income can affect mental and physical health for the unemployed and their families, and there are other factors.

“Skilled labor that is unemployed for a long period of time can see their talents atrophy,” Remick said. “A long-term unemployed IT worker, for example, might not be current on his network certification. Employers are looking for people with the latest skill set. If this individual isn’t current on his certifications, then finding an employer to hire him is challenging.”

The economic ramifications of an elevated LTU population are also significant, he added. “An individual who isn’t earning a paycheck is a person who isn’t spending on consumer goods and services, paying off loans and contributing to the tax base,” he said. “That means businesses, both local and global, aren’t maximizing revenues from their customer base. And it means government spending increases to support this population.”

Obama hosted more than 300 of the country’s business leaders and elected officials on Jan. 31, 2014, to discuss ways to expand and improve their efforts to recruit and hire the long-term unemployed.  

“Long-term unemployed workers need this chance to rejoin the workforce,” Obama said during the event. So we need to find ways to look past long stretches of unemployment and see what the real skills and talent are there.”

The Society for Human Resource Management (SHRM) and the Business Roundtable have already published a set of inclusive hiring policies and best practices for employers that can help eliminate discrimination against job applicants who have been unemployed for long stretches of time.

Acknowledging that the federal government needed to commit to the hiring initiative, Obama signed a presidential memorandum guaranteeing that his administration would work to adopt the same inclusive hiring policies and best practices.

The president also announced a $150 million grant competition that will be administered by the Department of Labor and is designed to support public-private partnerships that prepare and place long-term unemployed workers in open job positions.

Some prominent U.S. employers, such as Wal-Mart, Apple, General Motors and Ford Motor Co., have already committed to the initiative.

For more information, please visit SHRM’s Labor Market and Economic Data page.

Joseph Coombs is a senior analyst for workforce trends at SHRM.

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