Lingering Unemployment Poses Long-Term Risk

Nearly five million Americans out of work for more than six months are left to wonder what kind of help might be coming, as the Federal Reserve, the International Monetary Fund and a bipartisan swath of policy experts implore Washington to act — both to alleviate human misery and to ensure the strength of the economy.

The pain of the long-term unemployed has persisted even as the overall jobs picture has brightened a bit and the unemployment rate has fallen to 7.8 percent. The new government report for October was due to be released Friday morning.

“The problem is incredibly urgent,” said Kevin A. Hassett, director of economic policy studies at the American Enterprise Institute and an adviser to Mitt Romney’s campaign. “Spain had a financial crisis in the late 1970s and has never seen its unemployment rate drop back to where it was before that crisis. The unemployed become discouraged, and ultimately the employment to population ratio might take a permanent hit.”

On the agenda for the next Congress and the next president is ensuring that the unusually long spells of unemployment now afflicting jobless workers remain a temporary setback of the recession.

Economists warned that long-term unemployment could be transformed in the next few years into structural unemployment, meaning that the problem is not just too few jobs and too many job seekers, but a large group of workers who no longer match employers’ needs or are no longer considered employable.

“Skills become obsolete, contacts atrophy, information atrophies, and they get stigmatized,” said Harry Holzer of Georgetown University.

That has been the experience of millions of workers like Beatrice Hogg, 55, of Sacramento, a college-educated white-collar worker who has slid from the middle class into poverty.

Her last job — doing administrative work and advising students at a community college — ended in June 2009. Her unemployment benefits ended more than a year ago. She was evicted from her apartment in December and has been staying at friends’ homes and occasionally at train stations. Despite her efforts, she has been turned down for job after job after job, and is surviving on food stamps.

“I don’t enjoy being out of work,” Ms. Hogg said in an interview. “I don’t enjoy having to ask friends to give me rides or get things for me. I want to take care of myself. I’ve been on my own since I was 18 years old. It’s hard for me. It’s demoralizing. It’s hard to ask people for things when you’ve been independent the rest of your life.”

Stronger economic growth may help to whittle the ranks of the long-term unemployed over time, experts said.

“There must have been a lot of workers badly scarred by long bouts of unemployment in the Great Depression,” said Gary Burtless of the Brookings Institution. “Even in 1939 we had unemployment somewhere around 14 percent, as we’d measure it today. A lot of people who were jobless had been jobless for a long, long time. But in the space of a couple of years those disadvantages looked like nothing given that employers had voracious appetites for workers.”

But many economists contended that policies to help the long-term unemployed are needed as well, to ensure that they have the skills necessary to compete for the jobs that the economy is adding — turning construction workers into oil-and-gas extractors and administrative assistants into home health care providers, for example.

In Washington, many politicians support measures for the long-term unemployed; few demand them.

Both Democrats and Republicans have proposed or supported revamping job-training programs, giving states more flexibility in using funds for the unemployed and providing credits to companies that hire workers who have been out of a job for more than six months, for instance.

Annie Lowrey reported from Washington and Catherine Rampell from New York.

Article source: http://www.nytimes.com/2012/11/02/business/economy/lingering-unemployment-poses-long-term-risk.html?partner=rss&emc=rss