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Long-Term Unemployed Still Struggle in Post-Recession Economy

The United States economy is in the midst of a slow and uneven recovery in the wake of the Great Recession—corporate profits have rebounded, stock prices are up, yet the livelihoods of millions of American workers remain in jeopardy. Of the nation’s 11.3 million unemployed, more than one-third have been out of work for six months or longer. Millions more, unable to secure full-time positions, have settled for part-time work. Younger workers, seeking to make critical early labor market connections, face an unemployment rate more than double the national average. The Rockefeller Foundation believes that philanthropy has an important role to play in addressing these challenges.

The Foundation supports efforts to examine the causes and consequences of labor market weakness. We are also looking for innovative solutions that will lead to more job opportunities. This post takes a look at our work to better understand one of the most troubling features of the post-recession U.S. economy: record-high long-term unemployment.

The facts

After peaking at 10 percent in October 2009, the overall unemployment rate is currently at 7.3 percent. While the number of workers experiencing shorter bouts of unemployment continues to slowly decline in line with overall unemployment, long-term unemployment remains alarmingly high; currently, 4.3 million U.S. workers, or 37.9 percent of the unemployed, have been out of work for 27 weeks or longer (the Bureau of Labor Statistics definition of long-term unemployment)—down slightly from a peak of 45 percent in 2010 but still far above the peak of 25 percent in the 1980s recession.

What caused this spike in long-term unemployment?

We wanted to first learn whether the recent increase was purely a result of the economic downturn, or if there were other longer-term forces at work. Research by the Urban Institute confirmed that the severe, broad-based economic recession that began in late 2007, and a tepid recovery since are indeed responsible for the surge in long-term unemployment. Other hypotheses—for example a mismatch between worker skills and employer needs, frequently cited as a potential factor—were found to have a minimal impact on the rapid rise in long-term unemployment.

“The longer someone is unemployed, the more difficult it may be to find a job.”

Despite the fact that long-term unemployment is a product of the economic downturn, many are worried that the elevated levels will persist. The longer someone is unemployed, the more difficult it may be to find a job, which creates a self-reinforcing cycle. Breaking this cycle early may be best way to prevent the problem from becoming entrenched.

Who is impacted?

We also wanted to know if long-term unemployment was specific to any particular population, industry, or geography. The Urban Institute found that poor, minority, and disabled workers are disproportionately likely to be long-term unemployed. For example, black workers make up 22.6 percent of the long-term unemployed but only 10.5 percent of the employed.

However, this work also highlighted the widespread and pervasive nature of long-term unemployment, affecting every demographic, industry and region in the United States. There was no safe harbor from this storm.

How are they impacted?

We know that being unemployed is bad for your pocketbook, your health, and your happiness. We wanted to dig deeper to examine the particular challenges of being unemployed for an extended period. In-depth interviews with the long-term unemployed by highlighted the significant toll that extended joblessness takes on workers and their families. Long-term unemployment erodes assets, diminishes re-employment possibilities, and significantly reduces lifetime wages. In addition, the long-term unemployed face higher rates of family instability, mental, and physical health problems.

“Long-term unemployment diminishes re-employment possibilities, and significantly reduces lifetime wages.”

The interviews with the unemployed and potential employers also highlighted the difficulty in regaining employment. Employers are faced with a digital deluge of resumes, and many of their screening techniques may particularly disadvantage the long-term unemployed. For example, extended gaps in one’s employment record or a poor credit score can disqualify one for a job for which they are otherwise qualified.

What can be done?

Reports by the Urban Institute and Arabella Advisors identified strategies to respond to long-term unemployment. While direct, macro-level stimulus by Congress remains unlikely, these reports highlight promising interventions by governments and other stakeholders. These include efforts designed to match long-term unemployed workers with training programs in in-demand industries, and programs to protect at-risk workers from becoming unemployed in the first place.

Though more needs to be learned about how to create opportunities and successfully reintegrate long-term unemployed into the workforce, some of these efforts show promise. An evaluation of subsidized employment programs by Economic Mobility Corporation found significant employment and earnings gains by long-term unemployed workers who participated in those programs. Few interventions focus on the long-term unemployed as a unique population with distinct needs, presenting a potential opportunity to bridge successful re-employment programs that focus on other sub-groups or the unemployed more broadly.

The Rockefeller Foundation will continue to investigate and unearth solutions to this and other challenges faced by workers in the changing global economy.

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