Long term unemployment is a perennial policy concern for several reasons. First, it tends to have detrimental effects on the individuals involved. Workers’ human capital (whether actual or perceived by employers) may deteriorate during a spell of unemployment, and the time devoted to job search typically declines. Both factors imply that the chances of getting employed may increase thereby reducing the time period used up for job search.
More generally, long-term unemployment adversely affects people’s mental and physical well being and it is one of the most significant causes of poverty for their households. Second, insofar as the long-term unemployed become gradually detached from the labor market, they play a reduced role in the competition for jobs. This means that unemployment is less effective in curbing wage pressure, potentially leading to even further increases in unemployment and its persistence (Machin and Manning, 1999). These and related considerations have motivated a wide variety of policies to address the problem of long-term unemployment.
Policy interventions combine elements of ‘stick’ and ‘carrot’. They involve job search requirements and sanctions to promote sufficient search effort; or direct assistance to the unemployed, including help with their job search process and training provision. In addition, governments may provide wage subsidies to firms that hire the long-term unemployed. A number of social experiments in the United States provide evidence on the effects of job search assistance and stricter search requirements. The combination of these two policies often leads to a reduction in the time spent on unemployment benefits. At the same time, this does not necessarily mean that everyone coming off benefits is being employed in a new job (Card et al, 2010).
The US evidence on the effects of training programmes for welfare recipients and employment subsidies is, at best, mixed. The overarching conclusion is that these programmes – at least in the short term – are often ineffective at improving the re-employment chances of the unemployed and in several cases would not pass a cost-benefit test.
Statistical Reflection of the Long Term Unemployment Issue in the US
In January 2017, the Bureau of Labor Statistics released the December 2016 jobs report. The new numbers demonstrated a positive sign towards a reduction of unemployment, with employers reporting net job growth of 2, 30, 000 for the month.
However, one disturbing aspect of the report should be the relatively high rate of long-term unemployment. While the percentage of jobless workers unemployed 27 weeks and longer has been trending downward in recent years, it is still exceptionally high by historical standards and has shown no signs of improvement in the last 6 months.
Even more disturbing is the relatively high rate of “extreme” long-term unemployment, the condition of being unemployed one year or longer. The figure below shows extreme long-term unemployment as a percentage of total unemployment from May 1977 to present. Currently, as per the Bureau of Labor Statistics reports, there are over 2.1 million Americans who have been out of work over the past 18 months.
It is noteworthy that in both 2015 and 2016, the average duration of unemployment was 16.3 weeks; as of last month, i.e. December 2016 the average unemployment spell was around 40 percent longer at 27.6 weeks. And because most of the long-term unemployed are no longer eligible for unemployment insurance, they have to get by without any public support.
Collective Approach to Seeking a Solution for Long Term Unemployment
In May 2013, a Joint Economic Committee was constituted by the US Congress to come up with solutions to tackle the menace of long term unemployment and also suggest remedies through collective participation of employers and employees. The Committee came up with a list of guidelines which are still in the process of being implemented right from the grass-root level to the national level.
The guidelines were meant to provide employment to long-term unemployed people aged between 25-60 (which includes people seeking temporary positions even after retirement from the full time job) including returning war veterans who are not allowed to take up any positions in government offices as well as the armed forces, after retirement. Some of the major points in the guidelines were:
- Providing incentives for private-sector employers to hire veterans and the young, including extending or expanding tax credits.
- Streamlining the process of obtaining certifications and occupational licenses.
- Furthering higher education opportunities for young early-career and mid-career professionals.
- Building upon existing programs to ensure that both young persons and returning veterans can obtain the training required for jobs in growing industries.
- Ensuring that returning veterans have the assistance they need in transitioning from active duty to the civilian workplace.
It remains to be seen now whether the above guidelines are implemented effectively over the next 5-6 years to do away with the issue of long term unemployment.
Finding Solutions to Long Term Unemployment at an Individual Level
Some of the major steps that have been taken across the world to tackle long term unemployment effectively may also be used in the USA by the Department of Labor as well as the central think-tank to tackle this issue. Some of those remedial measures are:
Counselling the long term unemployed aged between 25-45 by orienting them to change the professional avenue they may have been involved in, earlier. For example, orientation to switch over from a job that involves physical labor to one that involves more of skilled mental labor.
The Department of Labor and the Departments of Training and Skill Development need to organize long term training programmes at economical rates to help the unemployed population develop hard and soft skills for different types of jobs. This will increase options at the time of job search at an individual level.
Education at all levels including the undergraduate and postgraduate levels should ensure inclusion of practical training programmes best suited for a particular profession through long term engagements such as research projects, internships etc.
Individual psychiatric counseling should be provided through both the public and private health care system to keep the unemployed population motivated for long periods and to guard against the cons of long term job search and its effects on a person’s mental and physical health.
Every state should prepare a list of their unemployed population and make special efforts to place the right people in the right jobs by dividing the existing population and creating a talent pool for various kinds of organizations. This will ensure people with the right kind of educational background (in case of freshers) and the right kind of work experience (in case of those with work experience) walking into the right organizations best suited to the needs of both the employers and the potential employees.
The Department of Labor should reach out and tie up with recruitment consultant agencies to notify the unemployed about vacancies in government jobs more often. Currently, the agencies only notify about vacancies mostly in the private sector which limits the options for the unemployed.