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Congress Warned Not to Forget Long-Term Unemployed

Baucus-grassley.jpg
Baucus-grassley.jpg

Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa) (WDCpix)

There is unemployment, and then there is long-term unemployment. As Congress grapples this month with ways to tackle the nation’s jobless crisis, many economists are hoping lawmakers recognize the distinction.

Not only is there often a stigma associated with being out of work for long stretches, but the long-term unemployed are also more likely to have lost a competitive step in their field, requiring focused retraining programs more nuanced than simply throwing federal dollars to existing industries**.** Many other workers will discover that the task they’ve spent a lifetime doing is no longer relevant on the other side of the recession.

[Economy1]“The longer you remain unemployed, the tougher it is to get a job,” said Gus Faucher, director of macroeconomics at Moody’s Economy.com. “Your skills atrophy. Employers — rightly or wrongly — take that as a signal that you’re damaged goods.”

The combination of factors presents a dilemma, not only for jobless folks in search of work, but also for the Washington lawmakers trying to stoke the coals of hiring. That long-term unemployment is at the highest level since recording began in 1948 only adds to the urgency of getting the policy right.

“It’s a hard question for policymakers,” said Chad Stone, chief economist at the liberal Center on Budget and Policy Priorities. “There aren’t a lot of things they can do quickly.”

Not that they aren’t trying. The House in December passed a $154 billion jobs bill, including billions of dollars in highway infrastructure, public transit and emergency help for struggling states. Few observers, however, gave that proposal much chance of passing the Senate, where Republicans have been pushing for a smaller bill with a greater emphasis on tax cuts. Indeed, on Thursday Sens. Max Baucus (D-Mont.) and Charles Grassley (R-Iowa), the leaders of the powerful Finance Committee, introduced a jobs bill of their own. The $85 billion draft proposal is centered around a series of business tax breaks designed to spur hiring and individual tax relief designed to encourage spending.

Senate Majority Leader Harry Reid (D-Nev.) was quick to dismiss the proposal, arguing that it was too heavy on Republican sweeteners and too light on actual job-creation provisions. “The message is so watered down,” he said. The final product, though, is certain to look more like the Baucus-Grassley draft than the bill passed by the House.

Some economists are warning, however, that tax provisions like those in the Senate bill pretend that the jobless pool is a level playing field, ignoring the stigma and skills questions associated with the long-term unemployed — and therefore favoring those who lost jobs more recently. ”Someone who’s been unemployed only 6 or 8 weeks often looks like a much stronger job candidate than someone who hasn’t been employed for the last 66 or 68 weeks,” said economist Gary Burtless, formerly with the Labor Department and now at the Brookings Institution.

Desmond Lachman, economist at the conservative American Enterprise Institute, agreed, arguing that policymakers should be drafting their legislative fix in recognition that the nation’s jobless crisis is historically long-term. ”There is a distinction to be made,” Lachman said. “Policy needs to concentrate on retraining the long-term unemployed. Those who are short-term unemployed can rejoin the labor force more easily. They would benefit from policies that got the economy moving again and that subsidized employment through tax credits [among other things].”

The $787 billion economic stimulus, enacted last winter, included billions of dollars for new job training. Economists are largely in agreement, however, that the package wasn’t large enough to address the recession. Another pickle: deciding which jobs merit retraining is never easy. It leaves lawmakers with the task of trying to distinguish which occupations were shed as a result of the recession, and which were lost due to deeper structural shifts governing the ever-changing economy in the age of increasing globalization. In short, some experts warn, not all retraining is created equal. “There’s a mismatch between the skills these people have and the skills we need moving forward,” Faucher said. “Retraining won’t do any good if the demand isn’t there.”

The comments are timely. Even as the nation’s jobless rate fell to 9.7 percent last month — down from 10 percent in December — that headline-grabbing figure disguised a deeper problem: Namely, the number of American workers who’ve been unemployed longer than 27 weeks hit another all-time high of 6.3 million in January — up 183,000 since December and 5 million since the start of the recession in December 2007. And that doesn’t count the roughly 2.5 million folks who want to work but have stopped looking.

The National Employment Law Project, an advocacy group, lent a bit of context to those numbers, pointing out recently that the average stretch of unemployment has topped 30 weeks — a full nine weeks longer than the most recent severe jobs crisis in 1983. Another dismal milestone: more than 41 percent of jobless Americans have been without a job for longer than six months, NELP noted, up from 26 percent in 1983. Since the start of the recession in December 2007, the economy has shed roughly 8.4 million jobs.

It’s a trend that threatens the economy in a number of ways. Not only do the long-term unemployed consume less, but they’re also more likely to foreclose on their homes — a situation that only cripples recovery efforts by depressing the housing market even further.

The White House seems to be well aware of the hurdles ahead. On Thursday, the administration issued its annual economic outlook, warning that long-term unemployment — and the skills lost as workers sit idle — can lead to a reduction in productivity and earning power, even long after the economy rebounds. The White House estimated that the economy will begin creating jobs this spring, though not in significant enough numbers to keep up with the labor pool, which grows by 100,000-150,000 workers each month. Indeed, Moody’s Economy.com is predicting the nation’s unemployment rate will jump back up near 11 percent later this year.

For his part, Brookings’ Burtless suggested that the depth of the crisis demands a public jobs program on the level of the Franklin Roosevelt’s Works Progress Administration — which employed 3.3 million people in 1936 — or the Comprehensive Employment and Training Act under Jimmy Carter, which grew to 725,000 public jobs in 1978. The political reality, however, is that today’s Congress is much too conservative to endorse such large, government-backed programs, even despite the stagnant jobs picture the country faces.

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