"The Job"
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On Tuesday, the Senate failed to muster up the votes to pass an extension of unemployment insurance. Some 1.3 million workers lost their jobless benefits on Dec. 28 when an emergency program to help the unemployed expired.
(Steve Helber/AP)
Two different bills came up for a vote. The first would have extended unemployment benefits for 11 months and paid for it by extending the existing 2 percent cuts to Medicare health providers another year, to 2024. The second would extended unemployment benefits for three months at a cost of $6.4 billion.
Neither bill got the 60 votes necessary to overcome a filibuster and move forward. Republicans opposed (and effectively blocked) both bills because, they argued, Senate Majority Leader Harry Reid (D-Nev.) refused to let them offer amendments.
So why does any of this matter? Below is our primer on the broader long-term unemployment situation in the United States—and how unemployment insurance fits in:
1. Long-term unemployment is still as high as its ever been since World War II. There are currently about 4 million people who have been out of work for 27 weeks or longer. Although that's come down since the nadir of the Great Recession, the U.S. long-term unemployment rate is still as high as it's been since World War II:
The ranks of the long-term unemployed include all types of workers, according to a survey by the Urban Institute. There are young workers who have been out of work for more than 27 weeks. Married workers with kids. Older workers. College-educated workers. High-school dropouts. The problem touches nearly every demographic group you can think of.
2. Most of the long-term unemployed are having an extremely difficult time finding jobs. If you've been out of work for 27 weeks or longer, then you currently have just a 12 percent chance of finding a new job in a given month. And those odds go down the longer you're out of work:
Note that job prospects for the long-term unemployed are even worse today than they were in 2007. And the long-term unemployed have a much harder time finding jobs than those who have been out of work for just a few weeks.
Why is this? It's possible that the long-term unemployed are simply less employable. But there's also evidence that businesses actively discriminate against these workers. In one recent study, Rand Ghayad of the Boston Fed sent out a flurry of fictitious résumésto different employers, tweaking some of the characteristics of the applicants. He found that most employers won't even look at the résumés of the long-term unemployed, even if they're otherwise perfectly suitable.
One possible reason for this, as Michael Strain of the American Enterprise Institutepoints out, is that employers are leery of hiring the long-term unemployed because they assume there must be something wrong with these workers. Why else would they be out of work for so long? That may well be irrational. But there's little doubt that it's a huge obstacle for these workers.
3. Long-term unemployment takes an extreme toll on people's health and well-being. It's hard to overstate how much damage long-term unemployment can do to a human being. This recent study (pdf) by the Urban Institute offers a gruesome summary.
Workers who have been out of a job for longer than 27 weeks typically see their incomes fall by 40 percent. Even if they do find a new job, it tends to be lower-paying, and their long-term earning prospects are usually impaired. These workers tend to have worse health, higher rates of suicide and strained relationships with their families. They see a massive drop in self-esteem. Their children do worse in school and earn less over the long run.
(For some recent portraits of the long-term unemployed, see this piece by Annie Lowrey or this piece by Ylan Mui.)
4. The expiration of emergency benefits took away a key source of income for millions of people. Back in 2013, many states still offered up to 63 or even 73 weeks of unemployment aid, and benefits average around $300 a week. But that all changed on Dec. 28. At that point, most states went back to offering 26 weeks of jobless benefits at most, as they did before the recession.
That creates a problem: Right now, as a result of the downturn, the average job-hunter takes about 35 weeks to find a new job. So that means many jobless workers will see their benefits cut off before they find work again. All told, the Center on Budget and Policy Priorities expects some 4.9 million people to get kicked out of the program before they find a job in the coming year:
5. There's scant evidence that the long-term unemployed will find it easier to get jobs if their benefits are cut off. For starters, there still aren't enough jobs to go around: There are currently about 2.9 unemployed workers for every job opening. That's worse than the ratio at any point during the 2001 recession.
Recently, JP Morgan's Michael Feroli surveyed the evidence and found that the long-term unemployed don't typically find jobs en masse when their benefits expire. Some workers who get cut off may take lower-paying jobs than they otherwise would. But many seem to give up looking and drop out of the labor force entirely. Indeed, there are some signs that this is happening in North Carolina, which recently slashed its state unemployment program.
Strain argues that this makes intuitive sense. "If you look at the long-term unemployed, a good chunk of them have children. A good chunk are married. A good chunk are college-educated or have had some college and in their prime earning years," he told me. "It strikes me as implausible that this person is engaged in a half-hearted job search."
6. Congress is doing very little else to help the long-term unemployed find work. It's worth noting, as Strain does, that simply extending jobless benefits once again won't solve the problem of long-term unemployment. Not even close.
Economists on both the left and the right who have looked at this problem tend to think the government needs to do a lot more to tackle long-term unemployment. That could include work-sharing programs. Or tax incentives for companies that hire the long-term jobless, as economist Dean Baker has suggested. Or relocation assistance. Or even, as AEI's Kevin Hassett has proposed, the government could hire people directly.
But Congress isn't doing any of these things. They're not even talking about any of these things. The only debate is between Democrats (and some Republicans) who want to extend the emergency unemployment insurance program and conservatives who oppose it. But there's little legislative debate over larger, more comprehensive measures.
7. All this long-term unemployment is hurting the U.S. economy. Last year, three economists at the Federal Reserve published an unsettling paper arguing that the long-term productive capacity of the U.S. economy has been greatly diminished. The reason? Long-term unemployment:
The economists' argument goes like this: There are now millions of Americans who lost their jobs in the recession, often through no fault of their own, and they've now been out of work for years. Those workers have seen their skills atrophy, their networks fade, and many of them have dropped out of the workforce entirely, discouraged by their inability to find work. That, in turn, has weakened the total potential of the U.S. economy.
This is an extremely worrisome situation. It means that long-term unemployment isn'tjust a temporary ailment that will heal itself as the economy keeps rebounding. It has left permanent scars. The U.S. economy will never be as productive as it could have been had we figured out how to get people back to work more quickly. And those scars are still getting deeper.
2.3 million children live with long-term unemployed parents. "Throughout 2013, an average of 2.3 million children -- or about 3.3% of all kids in the U.S. -- lived with a parent who had been seeking work for at least half a year, according to new figures from the Urban Institute, a Washington think tank. That's up from about 754,000 in 2007." Josh Mitchell in The Wall Street Journal.
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