The Republic of T.

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Is Long-Term Unemployment America’s Future?

Like tea party activists and some of their fellow conservatives, Congress’ reckless inattention to the deficit makes me concerned for my children’s future and the kind of economy they will inherit if indifference continues. It’s not because Congress is spending too much. It’s because Congress is investing far too little where it’s needed most, to do what the private sector can’t right now — create jobs. The alternative is long-term unemployment, for a long, long time — and all its attendant consequences.

When I look at the current reality of long-term unemployment and the appalling failure of our elected officials to do anything about it — despite having ready options that might begin to offer some relief — I fear I’m looking at my children’s’ future, and that of millions of our children. As parent who’s already doing all I can, I’m asking: Why doesn’t somebody do something?

At the rate we’re growing now as far as jobs are concerned, we’ll stay far short of what’s necessary to even return to the same level of employment we had in 2007, before the financial crisis. The latest jobs numbers can’t be encouraging to anyone who can do simple math. Sure we gained 431,000 jobs in May, but 411,000 of those were Census jobs that will evaporate come the end of summer. That means we really added only about 20,000 jobs in may. That’s 520,000 less than the 540,000 analysts expected, and still 109,000 short even if we count all of the census jobs.

Our real job growth in May was just 20,000 private sector jobs, and mostly in manufacturing, suggesting that non-government hiring barely registers a pulse. Meanwhile, we need to be adding between 150,000 to 200,000 to even have any hope of replacing the more than 8 million jobs lost since the end of 2007, when the recession began. (Factor in population growth over the next several years, and we need to add more than 10 million jobs to keep up.) And every month we’re fall short, we’re further away from returning to the level of employment we had in 2007. (And that doesn’t even begin to address nearly a decade of zero job growth during the George W. Bush administration.)

As hopeless as those numbers sound it’s not like there nothing to be done. Passing the Local Jobs For America Act, is something Congress can and should do that would:

  • Allot $23 billion dollars to create or retain jobs in education, including jobs to modernize or repair educational facilities. The Act would also provide $1.18 billion for the hiring and rehiring of law enforcement officials, $500 million to retain and hire firefighters, and $500 million for private sector on-the-job training.
  • Provide $75 billion in federal assistance to states and localities over two years for a Local Community Jobs Program. Funds could be used to directly create jobs to meet crucial community needs, and to retain existing public workers in the face of crushing budget crises. The Local Community Jobs program would:
    • Immediately reduce unemployment. The funding available would save or create 750,000 jobs. Direct job creation is the fastest, most effective way to get people back to work.
    • Ensure localities can maintain critical services. Communities across the country have been forced to lay off workers and cut services in the wake of falling revenues. This funding would ensure that states and localities can retain workers who provide needed services while putting people to work to address community needs that have long gone unmet. Positions could include staffing vital public and social services, such as expanding child care services and home health care aides for the elderly, and rehabilitating basic infrastructure, such as schools, community centers and parks.
    • Provide necessary economic stimulus to local communities and help put us back on the road to real economic recovery. Workers who are hired as a result of this program will spend their paychecks in their communities, providing a badly needed boost to the local economy that will help lay the foundation for more private sector hiring.

The Jobs for Urban sustainability Act would direct $10 billion in newly returned TARP money into cities with populations of 600,000 or more and unemployment rates of 10% or more, to provide job training, public works, and economic development in those cities. This would

Every job created, retained or restored — state or local private or public sector —strengthens local economies, because it literally means people who would have otherwise been laid-off have income that they spend in local businesses, thus supporting jobs that will likely disappear as demand for goods and services disappears with the jobs and income that created and drove that demand. Even extending jobless benefits will help ensure this, and protect some existing jobs.

Contrary to being "anti-market" creating, retaining or restoring jobs means more consumers — literally, more people "going to market" with money to spend —which would seem to be good for the "market." It makes sense to me, but then again I’m not an economist. David Leonhardt, however, is closer being one than I am, and he pretty much says the same thing.

Voters may not like deficits, but they really do not like unemployment.

Looking at the problem this way makes the jobs bill seem like less of a tough call. Luckily, the country’s two big economic problems — the budget deficit and the job market — are not on the same timeline. The unemployment rate is near a 27-year high right now. Deficit reduction can wait a bit, given that lenders continue to show confidence in Washington’s ability to repay the debt.

As a result, Congress does not have to choose between the problems. It can pass the jobs bill, putting people back to work, and even pass a separate bill to help struggling states. History has shown that state aid, which prevents layoffs of teachers, emergency medical technicians and other workers, is the single most effective form of stimulus.

Long-Term Unemployment Now

The alternative is a 10% or higher unemployment rate in the long-term, and even more long-term employment. The Wall Street Journal paints the picture of long-term employment today.

The job market is improving, but one statistic presents a stark reminder of the challenges that remain: Nearly half of the unemployed—45.9%—have been out of work longer than six months, more than at any time since the Labor Department began keeping track in 1948.

…Overall, seven million Americans have been looking for work for 27 weeks or more, and most of them—4.7 million—have been out of work for a year or more.

Long-term unemployment has reached nearly every segment of the population, but some have been particularly hard-hit. The typical long-term unemployed worker is a white man with a high-school education or less. Older unemployed workers also tend to be out of work longer. Those between ages 65 and 69 who still wish to work have typically been jobless for 49.8 weeks.

The effects of long-term unemployment are likely to linger when the overall jobless rate falls toward normal, threatening to create a pool of nearly permanently unemployed workers, a condition once more common in Europe than in the U.S.

The picture is that of a crisis or a correction, depending on your point of view. Regardless, it is the the reality of more than 7.9 million Americans who have fallen off the economic radar, of "off the grid" depending on where you stand on the crisis/correction question. The downward slide that started with manufacturing, blue collar and construction workers is now reaching other classes of workers — from the toolmakers, woodworkers and food processors (median 38.1 weeks unemployed) whose work was supported or was supported by jobs now lost to the those who once worked in management, business and financial operations (median 32.3 weeks unemployed).

Ezra Klein, and an unemployed correspondent at Andrew Sullivan’s blog, paint a picture of the consequences of long-term unemployment, particularly as it affect "re-employment."

Unemployment isn’t just a problem because it means someone loses his job. It’s a problem because it means that person’s next job is likely to be worse than his last one. People lose their skills, their contacts, their self-confidence. Their resume begins to look worse and, if they’re older, age discrimination kicks in. This unemployed correspondent of Andrew Sullivan’s explains it eloquently:

Several things I’ve learned: You can’t apply for jobs well under what your previous job was; you won’t be taken seriously and will be considered over-qualifed. You must fall completely to the bottom and get the occasional minimum wage, temporary job. No one will commit to any training for a new position. If you’ve done exactly the job advertised before, you’ll be considered. But you’ll be considered incapable of learning anything new. General experience will not be considered. Stuff learned on your own will be denigrated or discounted. University degree qualification doesn’t matter. Age discrimination is alive and well.

Unemployment, in other words, lasts. It affects re-employment. And the longer you’re unemployed, the worse your next job is likely to be. So the spike in the number of long-term unemployed is the sort of thing that we need to worry about even as we move into recovery, because it implies that recovery, for a lot of people, will not be the return to normalcy that they’d hoped.

That’s the scenario facing the currently long-term unemployed — many of whom have worked all their lives, and would very much like to find work again. If Sullivan’s correspondent’s experience is any indication, the longer many of them are unemployed, the less likely they are to find jobs as good as the ones they had before in terms of income and benefits, if they find permanent positions at all. (And no amount of magical thinking about jobs is likely to change that.)

If not, they join the newly minted entrepreneurs whose ranks growing at a surprising rate during this recession. Even more surprising is that most rise in business start-ups have been fueled by 35-to-44 year olds, followed by the 55-to-64 set. If you’re thinking this sounds like people who were previously otherwise employed, you’re right. But these are not people freeing themselves from the "bureaucratic straightjackets" of their old jobs and striking out to "fulfill their creative dreams."

According to Paul Krugman, "entrepreneur" and "self-employed" in this economy are new names for an old familiar problem: unemployment. Krugman also relates the story of an acquaintance he calls "George," an entrepreneurial everyman whose story echoes that of Sullivan’s unemployed correspondent.

But this upbeat interpretation doesn’t include lots of people who don’t particularly relish becoming their own employers, like an acquaintance whom I’ll call George. George was an associate partner at one of the world’s largest technology and consulting firms until he lost his job last year in a wave of layoffs. For months, George knocked on doors but got nowhere because of the deep recession.

Finally, his old firm got some new projects that required George’s skills. But it didn’t hire George back. Instead, it brought him back through a “contingent workforce company,” essentially a temp agency, that’s now contracting with George to do the work. In return, the agency is taking a chunk of George’s hourly rate.

Technically, George is his own boss. But he’s doing exactly what he did before for less money, and he gets no benefits — no health care, no 401(k) match, no sick leave, no paid vacation. Worse still, his income and hours are unpredictable even though his monthly bills still arrive with frightening regularity.

The nation’s official rate of unemployment does not include George, nor anyone in this new wave of involuntary entrepreneurship. Yet to think of them as the innovative owners of startup businesses misses one of the most significant changes to have occurred in the American work force in many decades.

And don’t think that the George’s in this economy will bounce back when we finally see a recovery that reaches beyond Wall Street. A New York Times article from February of this year, along with christening George and others like him "the new poor," suggested that even with a vigorous recovery George and American’s like him will remain out of work for years, and then for most recovery will not mean a return to their middle-class economic status.

Every downturn pushes some people out of the middle class before the economy resumes expanding. Most recover. Many prosper. But some economists worry that this time could be different. An unusual constellation of forces — some embedded in the modern-day economy, others unique to this wrenching recession — might make it especially difficult for those out of work to find their way back to their middle-class lives.

Labor experts say the economy needs 100,000 new jobs a month just to absorb entrants to the labor force. With more than 15 million people officially jobless, even a vigorous recovery is likely to leave an enormous number out of work for years.

When I look at the crisis of long-term employment, I have to ask whether George’s present reality is the future our children — yours, mine, and millions more — have to look forward to.

I have to wonder whether thelack of action to prevent it by addressing long-term employment now, is because to some people present levels of long-term unemployment and its long-term consequences are not a crisis, but an opportunity.

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