The Long-Term Unemployed Are Stuck Without Work Thanks To Bad Luck

Unemployed workers waiting to enter a career fair CREDIT: AP
Unemployed workers waiting to enter a career fair CREDIT: AP

The long-term unemployed have most likely been out of work for so long simply because they had the misfortune of losing a job during a bad economy, according to an analysis by FiveThirtyEight’s Ben Casselman. His work “shows that by far the single biggest predictor of whether someone will be out of work for a year or more is the state of the economy when he or she loses his or her job,” he writes.

This is true for the current recession and for other downturns more broadly. Over the last 15 years, during which they were two recessions, “a one-point increase in the unemployment rate increased an individual’s odds of remaining unemployed for at least a year by about 35 percent,” he finds. If someone loses a job when the unemployment rate is 8 percent or higher, he will be three and a half times more likely to be unemployed for about six months or longer compared to someone who loses her job when the unemployment rate is below 6 percent. Those who lost their jobs during the Great Recession were more than four times as likely to be unemployed for a year or more than those who lost a job in 2007, when the economy was stronger. Today, 3.7 million people have been out of work for 27 weeks or more, a figure that only declined by 837,000 people over the past year, making up about 36 percent of the unemployed.

Casselman examined a variety of characteristics to see whether they also predict long spells of unemployment, such as job, age, race, sex, education, and others, but none of them “had even close to that big an effect,” he writes. The close tie between the unemployment rate and long-term unemployment is “by far the strongest relationship of any characteristic I examined.”

Indeed, the long-term unemployed don’t look very different from those who have been out of work for shorter periods of time. While they tend to be older and a bit more racially diverse, there is little difference when it comes to gender, career field, or health impairments. They even tend to have more education than those experiencing shorter spells of joblessness.

Casselman also considers a factor that some believe could explain the persistence of long-term unemployment: the government extending unemployment insurance. Under this theory, workers will avoid jobs because they have benefits to fall back on. But benefits “don’t appear to be a major cause of the pattern,” he finds. By comparing those who lost their jobs to those who quit — people who quit usually don’t qualify for benefits — he finds that those who got them actually had lower odds of long-term unemployment than those who didn’t. That may be thanks to the job search requirements in order to get benefits, which have been shown to push those who get them to spend more time job hunting than those who don’t. Other research has found that receiving benefits doesn’t discourage people from getting a job.

Right now, however, the long-term unemployed are going without benefits. Congress let them lapse at the end of last year, and although the Senate passed a deal to extend them, House Speaker John Boehner has stood against taking the measure up. To find out what that might mean for the job prospects of the long-term unemployed, one can take a look at the natural experiment going on in North Carolina, where benefits were cut off in June of last year. Since then, the state has experienced the largest drop in its labor force in its history — meaning that people are likely giving up looking for a job in huge numbers.

Meanwhile, being out of work for extended periods of time erodes someone’s attractiveness for a job, despite her past experience and qualifications. Those who are unemployed for six months or longer get fewer calls back for an interview than those who have a job but don’t have the right experience. In the eyes of a prospective employer, being unemployed for longer than nine months is the equivalent of losing four years of experience from a resume.