The problem of the long-term unemployed | Arkansas Blog

Wednesday, April 2, 2014

The problem of the long-term unemployed

Posted By on Wed, Apr 2, 2014 at 9:22 AM

Good piece from Danny Vinik at the New Republic this morning on the long-term unemployed, an issue that should be regarded as a moral (and economic) crisis even if you wouldn't know it from following the newsmakers in Washington. 

If you’ve been reading any economic news over the past few months, you’ve undoubtedly heard about the plight of people who have been out of work for longer than six months—in other words, the long-term unemployed. You’ve heard that they number about 3.8 million, that they have similar characteristics to the short-term unemployed, and that 82 percent of them have a high school diploma.

You’ve heard individual stories—like the one that Fed Chair Janet Yellen shared in a speech in Chicago this week. Yellen spoke of Dorine Poole, who lost her job as the recession started and struggled to find a new one. “When employers stared hiring,” Yellen said. “two years of unemployment became a disqualification.” You’ve heard about the study published by the Federal Reserve Bank of Boston that found that companies discriminate against the long-term unemployed, in just the way they did to Dorine. Most recently, you heard about of a new study from three Princeton economists—a studying showing that it’s nearly impossible it is for the long-term unemployed to find steady work.

Vinik highlights a new paper today from the Center on Budget and Policy Priorities on a possible solution: a subsidized employment program. The basic idea is that the government subsidizes jobs for people that cannot find work in the regular labor market, using public funds to pay all or a portion of their wages. As Vinik illustrates, this isn't a crazy idea — a $1.3 billion subsidized employment program was implemented in 2009 as part of the stimulus, and it was a huge success. And this wasn't make-work. Most participants worked for private companies. States had the flexibility to design their own programs, sometimes incorporating employers essentially as contractors, and it was a major success. These programs increased earnings and employment for low-income folks, and not just temporarily — the gains continued even after they were phased out of the program. 

Congressional Republicans refused to continue funding in 2010 and the federal program ended. Bringing it back and implementing a subsidized employment program across the country — a program with a proven track record of success — would cost just $1 to $2 billion per year. It would almost certainly pay for itself, both in terms of economic benefit and by keeping more people off the public dole. Of course...it has no chance in Congress! (Vinik notes that this idea has gotten conservative buy-in in the past, but let's just say that "conservative buy-in in the past" doesn't have a great track record.) Still, it's important to think about the best possible solutions to the problems we face, even if they are — for now — politically impossible. If you're feeling wonky this morning, check out the CBPP paper, which makes a convincing case

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