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What To Do for the Long-Term Unemployed

This morning, I recapped the current legislative efforts to further extend unemployment benefits and aid the millions who have been out of work for more than six months:

The union is intently focused on pressuring legislators to move forward on two bills to give additional weeks of benefits to jobless workers. One bill, by Reps. Shelley Berkley (D-Nev.) and Jim McDermott (D-Wash.), grants 20 more weeks of benefits to workers in states where the unemployment rate is above 10 percent [...]

The second bill — fuller legislation that is therefore the subject of more 99er activism — is Sen. Debbie Stabenow’s (D-Mich.) Americans Want to Work Act. That legislation raises the maximum number of weeks to 119 in states with unemployment rates above 7.5 percent, meaning 34 states and the District of Columbia would currently qualify. It also extends a tax credit to companies that hire workers who have been unemployed for more than two months.

Matt Yglesias responds:

I would really like to see some more ambitious thinking than this. Extending eligibility to a hundred weeks or more seems like a humane thing to do given the state of the economy. But realistically, people who’ve been jobless for two years are more are going to have a very hard time finding work even in a hypothetical healthier labor market 6-18 months from now. We need to think about intensive strategies for helping people retrain and relocate—possibly with direct government employment at the end of the road—and alternatively transitioning some people to early retirement. If you’re in your 99th week of unemployment and you’re 59 years-old, it’s extremely unlikely that you’re ever going to get full-time work again and policymakers may as well acknowledge that in their thinking about this.

Conversely, very long-term unemployment people who are too young for that to be a reasonable option probably need a lot of help reintegrating themselves into the labor market. Absent that kind of assistance, I’m getting worried that the legacy of this recession is going to be some kind of semi-permanent expansion in the size of the underclass.

This is a good point. Additional unemployment benefits would help these folks keep their heads above water, but they wouldn’t help them find jobs.

There are, however, many more ambitious solutions, both current policies and ones suggested in the economic literature. Job retraining programs, helping workers transition into growing industries, are probably the most-cited and most-supported programs on the Hill. But they are expensive and actually don’t work very well. Moreover, the United States’ joblessness problem is mostly cyclical, not structural. If there just aren’t enough jobs to go around and all sectors of the economy are hurting, it makes little sense to retrain workers from one industry into another en masse.

Wage-subsidy programs, while expensive, demonstrably improve unemployment rates. The TANF Emergency Fund, created with stimulus funds, did just that and proved wildly successful:

With TEF, the federal government offered to reimburse states for 80 percent of the cost of job-subsidy or certain public assistance programs. Thirty-seven states took the government up on it, leading to the hiring of 240,000 previously unemployed workers nationwide [...]

The Center on Budget and Policy Priorities summarized some of the Emergency Fund’s achievements. One county in Tennessee used TEF funding to bring its unemployment rate from 27.3 to 18.6 percent in eight months. North Dakota used it to provide jobs for jobless parents without the means to pay their child support. South Carolina used it to give jobs to parents who would otherwise collect welfare. Illinois provided 20,000 jobs, 67 percent more than its goal. Alabama used it to gin up rural jobs.

That program runs out of funding on Sept. 30 — just three days from now — meaning thousands of workers will lose their jobs. The House has extended the funding for another year twice. The Senate has not managed to pass an extension.

There are other preexisting programs that could be renewed, expanded and improved as well, such as relocation assistance funds to help unemployed workers with the cost of moving to a new area, or entrepreneur grants for unemployed workers to start their own businesses.

And outside the realm of political feasibility exist many more options. In a number of European countries, unemployment insurance actually lasts for much less time, but the government provides guaranteed jobs for the long-term unemployed.

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