Policy Responses to Long-Term Unemployment

By
Thursday, June 17, 2010 at 5:32 pm

We are in the midst of a jobs crisis, with the unemployment rate stuck around 9.7 percent. The labor market is particularly bleak in terms of duration of unemployment. Half of the unemployed have been out of work for more than six months, nearly five million for more than a year and one million for two. The ranks of the 99ers, who have collected the maximum weeks of state and federal unemployment insurance but remain without jobs, are increasing.

This morning, Berkeley economics professor and blogger Brad DeLong asked, “So what do we know about policies to successfully move the long-term unemployed back to where they ought to be?” Atrios jokingly responded, “We could hire them to dig holes and then fill them up again,” elaborating, “the way to do it is to have the government hire people to do stuff. Inevitably not all of that stuff will be tremendously productive, but plenty of it will be.”

Last week, the House Ways and Means Committee held what I think is the first Hill hearing on long-term unemployment. And a number of policy experts came to explain the gravity of the situation and to propose solutions. Their papers make for good, if depressing, reading: Here they are from Larry Mishel, president of the Economic Policy Institute; Heather Boushey, senior economist at the Center for American Progress; Michael Reich, economics professor at the University of California, Berkeley; Till von Wachter, economics professor at Columbia; and Jason Taylor, economics professor at Central Michigan University.

And, from their testimonies and a bit of research, here are some proposals that could help Americans out of work for more than a year (or two):

  1. Offer bonuses for long-term unemployed persons who find work. A number of studies show that paying people to find jobs works to reduce the average length of unemployment. One Illinois study, for instance, found that offering unemployment insurance recipients $500 bonuses for finding a job cut spells of joblessness by about two weeks. However, other analyses cast doubt on the efficacy or fairness of such programs. (Offering reemployment bonuses to the long-term unemployed might feed into the inaccurate presumption that they are lazy, and don’t want to find jobs.)
  2. Offer bolstered work-search help for the long-term unemployed. Expand offices that help workers find jobs, and update those offices to help the unemployed find short-term, contract or telecommuting work. Such offices do not always work well, but they do work on aggregate. This Upjohn Institute study, for instance, finds, “While the size of the estimated impacts differ, the consistent finding is that both UI work search requirements and reemployment services tend to shorten insured unemployment durations by speeding return to work.”
  3. Expand retraining programs and increase outreach. A number of academic studies throw cold water on the notion that job retraining programs really work on a broad scale. This USA Today article gives an excellent layman’s explanation of why retraining in the midst of a jobs crisis is not always the best path to employment. That said, much of the current unemployment crisis is due to structural unemployment; those workers need to find different fields. I wonder if targeted programs, focused on taking workers from collapsing fields (construction) into expanding fields (home health work), might work better than the broad-based programs of the past.
  4. Expand relocation allowances. The government already provides workers with funds to help them move to take a job. The program could be expanded or improved.
  5. Encourage self-employment. Another pre-existing program that could be expanded into a number of other states and made more generous for the long-term unemployed. The Self-Employment Assistance Program excuses unemployment insurance recipients from work-search requirements, and lets them keep proceeds from businesses they start or expand.
  6. Expand work-sharing programs, and include incentives for employers to hire the long-term unemployed.
  7. Provide generous tax incentives for employers to hire the long-term unemployed.
  8. Hike interest rates to prevent inflation. Just kidding.

Of course, the problem is, all of these programs cost money. Politicians’ concerns about the nation’s debt have made the likelihood of a deficit-funded direct-hiring program virtually nil. There is no easy and cheap policy solution, and therefore it will be difficult for Congress to act. In all likelihood, I fear, hundreds of thousands of workers — older workers in particular — will simply never find a proper, well-paying job again, instead moving into Social Security and in many cases disability benefits to stay afloat.

Follow Annie Lowrey on Twitter


Comments

71 Comments

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Henk_sg
Comment posted June 17, 2010 @ 10:38 pm

Here's something that can work: Hire people to dig holes and other people to fill them up.


strangely_enough
Comment posted June 17, 2010 @ 10:49 pm

Beats making more bombs…


tony
Comment posted June 17, 2010 @ 11:06 pm

Same Ol' Same Ol'! Congress is full of buffoons that take money from the special interest groups,and doing treir bidding, all the while denying we unemployed just a small stipend to help us until a job comes up. I will vote for any candidate this November that is not an incumbent. I dont care who they are. I have had it with the U S congress, serving their own agenda. Maybe B P has a few cond gressmen or senators in their back pocket? Would'nt surprise me.We “LITTLE PEOPLE ” need to band together & turn this ship around. Remember taxation without representation? It is alive & well in the U S capitol . Don't forget come november.


Deann984
Comment posted June 17, 2010 @ 11:37 pm

The long termed unemployed over 2 yrs 99ers are not lazy the jobs are not out there especially for the older workers-Quit calling them lazy


SamR
Comment posted June 17, 2010 @ 11:55 pm

Ugh. Just hire them! There's all these Rube Goldberg machine proposals out there—well, if we do this, then this will happen, and then this, and etc etc etc.

The solution to large numbers of unemployed people is for the government to hire people to do work that needs to be done—cleaning run-down areas, fixing roads, etc. Give states more money to hire more teachers to lower class sizes, police to lower crime, etc. But oh, we're not allowed to do that, because socialism will happen or something.

The most effective government program to combat unemployment so far was the Census, because it gave people jobs.

An obvious starting point is the Gulf spill. Hire unemployed people to help clean the shore. Hire unemployed fisherman (or others with boats) to help clean the water.


Glenn B NJ
Comment posted June 18, 2010 @ 12:14 am

All of talk this is great, now if only there were jobs available for me to get that bonus. Everyone's brain seems to jump right past the fact that we were all dismissed from our jobs and not enough replacement jobs have been created. Correct me if I'm wrong! I've read one article that indicates a job growth.

Jobs Growth Continues in May, as Unemployment Rate Falls

http://cityroom.blogs.nytimes.com/2010/06/17/jo…

THE NUMBERS GAME. 9.6 percent of Americans are still unemployed. This headline makes it appear everything's getting better. Not for those 9.6 percent of the people still unemployed.

The number of people that recently became employed is a very small number compared to the large number of people that have not found a job.

Also a break down of those over 50 would give a bigger picture of how severe this situation is for older Americans Too old to hire too young to retire.

Are there any mainstream reporters (CBS, ABC, NBC) that are willing to investigate and tell the truth about the numbers and the stories not being covered, how older people are being discriminated against.

In addition, this current bill as of this writing has no provisions for the 99ers (a lot of them in their 50's and older). If and when this bill is passed all of America will think benefits have been restored for everyone.

99ers will be left out in the cold! We need a Tier 5 passed in this bill. Senators will cry this is too expensive and continue turning their backs on the longest working group of Americans, over 30 years or more!. That's a lot of taxes paid over the years! Where's AARP when you need em'. Please speak out for us!

Senators…You can fool some of the people some of the time……

THE TRUTH IS OUT THERE!


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DaveM710
Comment posted June 18, 2010 @ 12:45 am

If you want to vote someone out. Vote out a Republican, they are the ones fighting tooth and nail to deny benifits to the unemployed. Saying 'I'm gonna vote everyone out”, benifits the people who hate the unemployed and could care less if they starved. Now if you were a multimillionaire or billionaire then you would get taxs cuts worth trillions from the GOP. Vote everyone out is a tactic of the Tea Party and they want the unemployed to be homeless.


Mareada
Comment posted June 18, 2010 @ 1:03 am

5-6 OFFICIALLY unemployed people for every job opening, not counting competition from jobless who don't qualify for benefits or the under-employed who are still applying for something better.

I love hearing from senators-for-life, most of them sons of wealthy prominent men who never had to find a job for themselves, lecture the jobless to “Look Harder!” There are states(Michigan) that are never going to have new jobs again and people over 50 who will just have to survive and move in with their children until Social Security(Raise the age to 70! from senators-for-life). “Take a job beneath you!” Yes, the US will really benefit from having the highly skilled and college educated taking retail and cleaning jobs from working class and high school educated.


no_more_yesterdays
Comment posted June 18, 2010 @ 1:11 am

Tell Congress To Take A Pay Cut!

The last time Congress cut its pay: April 1, 1933.

Salary – $174,000 per year, as of 2009

535 Senators and Representatives

Rough estimate of savings – $24,000,000

http://www.rallycongress.com/letters2congress/1…

As the economy continues to lean closer toward a depression and Americans are losing their jobs and homes we ask that our elected officials do their part to help spread the wealth.

We want all members of congress to take an immediate 25% pay cut and that a wage-freeze begin immediately. This wage-freeze should remain in effect until the economy has completely recovered.

We want our elected members of congress to begin paying into social security instead of their privately funded retirement program.

We want our elected members of congress to pay their own way to and from work and for their meals (like the rest of us) instead of using a government expense account. This should also include using your own vehicle versus a government car.

These are hard times in America and your jobs are secure at least until the next election. Ours are not. We are losing our homes and forced to pay into social security and being a public servant should not equate to being an elitist.


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kli
Comment posted June 18, 2010 @ 2:46 am

Thank you for this post. I would be interested in seeing more about the relocation allowances, but I think the link is broken. Could you repost?


monkey99
Comment posted June 18, 2010 @ 6:28 am

I've been saying that for quite some time, now.

I think the best example of what you are talking about is the Gulf disaster. BP and their a**licking cronies from the GOBP have shown EXACTLY where they stand in regard to the people.
You are dead-on about the baggers, as well.
I think by November, the American people will be, in these extremely tough economic times, tired of being led down the road of horsedung, and vote accordingly. Democrats, even with their faults, are the ONLY ones working for the people.


Cas
Comment posted June 18, 2010 @ 9:04 am

Congress is causing the unemployment.

1. OBama repealed the Section 179 investment expense deduction. This credit lets small-businesses expense the first year, instead of 5 to 30 years. Then they can expand and hire new employees.

2. Increasing unemployment benefits from two months to two years forced my state to sharply increase unemployment-insurance rates; employers can’t hire new workers: it’s too expensive.

3. Why work when unemployment benefits pay as much as a job? An auto-body owner said his “best guys won't return because they make as much on unemployment.” A private placement agency’s owner said he’d been embarrassed by applicants refusing job offers in line with their former wages because they made as much unemployed..

This two-year unemployment benefit makes a profession out of doing nothing


Warren Mosler
Comment posted June 18, 2010 @ 12:33 pm

my three lead proposals:

1. full payroll tax (fica) holiday to restore take home pay, sales, and jobs. Jobs were lost because sales fell off

2. $500 per capita of fed revenue sharing to state govs with no strings attached

3. $8/hr fed funded job for anyone willing and able to work to facilitate the transition from private sector to public sector employment.

Warren Mosler
http://www.moslerforsenate.com
http://www.moslereconomics.com


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Mallorydonna
Comment posted June 19, 2010 @ 10:34 pm

That's just stupid!!


Warren Mosler
Comment posted June 19, 2010 @ 11:07 pm

While I have no problem cutting waste and fraud from Federal spending, keep in mind that means taxes need to be cut that much more. This is not the time for the Federal government to be (net) removing additional dollars from the private sector.


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