The Shame of America's Long-Term Unemployment Crisis

Reuters

Politics is complicated until it isn't. Like today, when a Republican filibuster blocked a vote to extend jobless benefits for millions of Americans who have been out of work for more than six months. There is a near-consensus in the academic community that long-term unemployment is the most serious crisis in the U.S. job market. Today, Senate Republicans stared the jobs crisis right in the face, yawned, and blamed the deficit.

The plight of the long-term unemployed isn't complicated. Here are the facts.

  1. They are still far too many. There are 4 million people who count themselves as long-term unemployed, more than any time on record before 2007. This number has declined in the last three years, but most of the decline is illusory. It's people leaving the jobs market, not people finding new jobs.
     
  2. They are doomed. The labor market stops working for Americans after they've been out of work for too long. Employers simply screen them out. Rand Ghayad, a visiting scholar at the Boston Fed and a PhD candidate in economics at Northeastern University, conducted an experiment where he sent out thousands of nearly identical fake resumes with various unemployment durations. Firms ignored the people who'd been unemployed for six months or longer, even when they had better credentials, as our Matthew O'Brien explained. On "60 Minutes," Scott Pelley found business who refused to even consider the long-term unemployed.
     
  3. Washington doesn't care... In a market failure like this, only Washington can intervene—through stimulus, through direct hiring, or through clever incentives. That's not some hippy-dippy conclusion. Plenty of conservatives and Republicans agree, including Michael Strain at AEI and Sen. John Thune, who teamed up to propose a plan that would give businesses a six-month payroll-tax holiday for each long-term jobless worker they hired and give the workers special loans to move to areas with lower unemployment. Strain's colleague at AEI, Kevin Hassett, has repeatedly argued that government should hire these workers directly.
     
  4. ...because Republicans wrongly think that unemployment benefits are responsible for long-term unemployment. The anxiety about extending unemployment benefits is nonsensical. Republicans like Rand Paul have argued that these checks artificially raise unemployment, since they literally pay people to be unemployed. It might be true, but jobless benefits also literally pay people to look for work. When the checks run out, many people stop looking. The San Francisco Fed concluded that extended benefits raise unemployment by 0.4 percentage points—but mostly because they encourage people to stay in the labor force, which means they count against the unemployment rate. As O'Brien sums up: "Extended unemployment benefits haven't kept people from trying; they've kept people from giving up."

Long-term unemployment is a cancer in the jobs market, but unlike some cancers, we know how to begin to treat this. We know that unemployment benefits help several million people in destitution, since the long-term jobless are 5X more likely to be living in poverty than somebody with a job. We know that extended benefits keep them attached to the workforce by paying them to look for work. We know we can hire them. We know we can pay businesses to hire them. We know we can pay them to move closer to businesses that will hire them.

We know we have options. The first step in this diagnosis is caring. Too many Republicans simply don't.

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.


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