The Terrifying Reality of Long-Term Unemployment

http://www.theatlantic.com/business...ing-reality-of-long-term-unemployment/274957/

It's an awful catch-22: employers won't hire you if you've been out of work for more than six months

Close your eyes and picture the scariest thing you can think of. Maybe it's a giant spider or a giant Stay Puft marshmallow man or something that's not even giant at all. Well, whatever it is, I guarantee it's not nearly as scary as the real scariest thing in the world. That's long-term unemployment.

There are two labor markets nowadays. There's the market for people who have been out of work for less than six months, and the market for people who have been out of work longer. The former is working pretty normally, and the latter is horribly dysfunctional. That was the conclusion of recent research I highlighted a few months ago by Rand Ghayad, a visiting scholar at the Boston Fed and a PhD candidate in economics at Northeastern University, and William Dickens, a professor of economics at Northeastern University, that looked at Beveridge curves for different ages, industries, and education levels to see who the recovery is leaving behind.

Okay, so what is a Beveridge curve? Well, it just shows the relationship between job openings and unemployment. There should be a pretty stable relationship between the two, assuming the labor market isn't broken. The more openings there are, the less unemployment there should be. If that isn't true, if the Beveridge curve "shifts up" as more openings don't translate into less unemployment, then it might be a sign of "structural" unemployment. That is, the unemployed just might not have the right skills. Now, what Ghayad and Dickens found is that the Beveridge curves look normal across all ages, industries, and education levels, as long as you haven't been out of work for more than six months. But the curves shift up for everybody if you've been unemployed longer than six months. In other words, it doesn't matter whether you're young or old, a blue-collar or white-collar worker, or a high school or college grad; all that matters is how long you've been out of work.

...

It's time for the government to start hiring the long-term unemployed. Or, at the least, start giving employers tax incentives to hire the long-term unemployed. The worst possible outcome for all of us is if the long-term unemployed become unemployable. That would permanently reduce our productive capacity.

We can do better, and we need to start doing so now. We can't afford long-term thinking in either the short or the long-term.

 

A few nits with this.

First, we're in a recovery? I don't think so. It felt like a big drop and we haven't even really leveled off.

Second, in the second to last paragraph, the writer Matthew O'Brien suggests government hire the long term unemployed. Well, government basically is creating long term unemployment and encouraging it through welfare programs, 99 weeks of unemployment, and the swelling ranks of the "disabled."

Third, he doesn't even mention that people go out and seek degrees and advanced degrees and aren't finding work. They're in debt up to their eyeballs, too. When you go 4 years between graduation and getting your first job, that's the same thing as being long term unemployed.

Not only are people living off the generous government teet, they're tapping into their life savings and retirement funds, bailing on their homes and other means of building wealth.

Tax the rich, for whatever reason, isn't the answer. A little tough love is. In 2000, the economy lost just as much wealth and nearly went into a depression. Without the government largesse, people tapped into their life savings and retirement funds and formed companies.

 

I don't blame the people in the least. The object of government spending and tax code and the like is to elicit behavior and this is what the results of current policies are.