The Struggles of the Long-Term Unemployed

Econ bloggers have been discussing this topic for awhile, but now it’s even making its way into the New York Times (I saw the same article on Yahoo! Finance yesterday). The longer you’ve been out of work, the harder it is to find work, because your skills get rusty and if you’ve been out of work for a year you don’t look as attractive as someone who’s currently using those skills at a job. There are openings out there, but we are hearing about increasing numbers of employers saying they are only interested in workers who currently have jobs, or essentially, “Unemployed need not apply.” Well, now what are you supposed to do, right?

Of course, there are NYTimes readers who view this as discrimination and want a legislative fix. But, like a lot of things, I think this problem is part of a strong enough reality that you can’t just pass a law to make it go away. Employers have enough applicants right now that they can be picky about hiring the best workers, regardless of how much you try to make them consider unemployed workers along with employed workers. (A bit of a straw man here, but what are you gonna do? Some sort of affirmative action that mandates a percentage of new hires have been unemployed for more than X weeks? Just thinking about the bloated regulation required to stop businesses from getting around that law’s intention has my head screaming boondoggle!)

Of course, there are Marginal Revolution readers who don’t view this as a problem at all. Back in February TomHynes remarked, “It doesn’t matter. Hiring an employed person creates a job opening at his former company. Eventually a job goes to an unemployed person. Which is better – five employed people get slightly better jobs and an unemployed person gets a job, or an unemployed person gets a job?” I like this thinking because it’s clever, and because it fits my bias about problems solving themselves without government help. But I’m not convinced that it fully works in reality, either, because if such remarks are true now, they would also be true in a situation where there aren’t millions of long-term unemployed folks. In that situation, there are still enough employed and recently unemployed folks to work the merry-go-round, so when you add the long-term folks to the mix, what stops them from being ignored just like the times when they aren’t there at all? When an employed person creates a job opening at his former company, it may eventually “trickle down” to an unemployed person, but how do we do know that this process is happening fast enough with the long-term unemployed to make a difference? The sheer numbers of the long-term unemployed are nearly proof that it isn’t.

This is one of those complicated issues about which I don’t have a strong, informed opinion. There are two sides to me here.

There’s the “bootstrap” side of me that wants to welcome this kind of news. Good! We’re giving some folks up to 99 weeks of benefits to sit around and collect money while they pursue the kind of job they want. If some of these folks realize that by being unemployed they are decreasing their chances of becoming employed in the job they want, they might have more of an incentive to take a job they don’t want while they’re waiting. I’ve seen plenty of Help Wanted signs in restaurants, yadda yadda yadda. And this would all help unemployment go down and help the economy, etc.

But there’s the “compassion” side of me that realizes it’s probably not that simple. The NYT article talks about glaring holes in work history on resumes. Is a stint at McDonald’s after your office job really going to look better than just leaving a two-year hole? Maybe not.

Still, I can’t help but think that there are plenty of things you could do to stay productive while you’re unemployed or underemployed to keep yourself looking attractive. Volunteer, read books from the library, start a blog and interact with others of similar interests – anything to display a pro-active initiative-taking passion! As the economy undergoes continual transition, I think a lot of unemployed people aren’t going to be able to find the same jobs they had before. If you think you still want to work that kind of job, prove that you’re passionate about it! An ex-accountant working at Taco Bell who is also reading and blogging about accounting trends, volunteering to help his friends’ finances or help audit the books at his subdivision meetings, and so on — that person has to look more attractive than an ex-accountant who has just been collecting unemployment benefits while sending in thousands of resumes, right? I don’t know, but if it were me, that’s the kind of stuff I would be doing. I’m just not sure what the government should do. It’s not very good at simultaneously optimizing compassion and incentives.