In a sobering new study, three Princeton economists found that only 11% of the long-term unemployed in any given month found full-time work a year later.
The paper, presented Thursday at a Brookings Panel on Economic Activity, offered a comprehensive look at the profile of the long-term unemployed. The lead economist behind the study is Alan B. Krueger, the former chairman of President Obama’s Council of Economic Advisors.
The economists tested the hypothesis of whether a low supply of jobs or discrimination by employers contributed to long-term unemployment.
The answer? Probably both.
“The demand-side and supply-side effects of long-term unemployment can be viewed as complementary and reinforcing of each other as opposed to competing explanations,” the economists wrote. "[S]tatistical discrimination against the long-term unemployed could lead to discouragement, and skill erosion that accompanies long-term unemployment could induce employers to discriminate against the long-term unemployed.”
One of the paper’s finding is that long-term unemployed people exert little pressure on parts of the economy such as wages and inflation.
The paper concludes that “a concerted effort will be needed to raise the employment prospects of the long-term unemployed.” Otherwise, these job seekers will continue to drop out of the workforce and hold the economy back, the economists said.
Despite an improving economy, the proportion of people who have been unemployed for more than six months still exceeds the previous peak set in the early 1980s, the economists said. That’s why the overall unemployment rate is still well above average.
According to the U.S. Bureau of Labor Statistics, the number of people unemployed 27 weeks or longer rose by 203,000 in February, reaching 3.8 million.
The paper found that those who have been out of work for months come from all industries, but are primarily concentrated in sales, service and blue-collar jobs. The share of the long-term unemployed from sales and service jobs was 36%, and from blue-collar jobs 28%.
Even in states with booming economies, such as North Dakota, the long-term unemployed find landing a full-time job elusive.
The paper looked at unemployment rates in 14 states, including Minnesota, Hawaii and Kansas, where the average unemployment rate was 4.4%. Long-term unemployment rose even in these states, suggesting that even if the national economy improves, these job seekers will be left out in the cold.
New in the paper was a more detailed breakdown of who exactly makes up this group. The economists found that in 2012:
-- More than 30% of those out of work for extended periods are 50 or older, compared with 20% of the short-term unemployed.
-- 55% of the long-term unemployed are men.
-- 44% of the long-term unemployed have never been married and nearly 20% are either widowed, separated or divorced.
-- Blacks represent 22% of the long-term unemployed, a rate higher than their share of the population.
-- More than half of the long-term unemployed are white.
The paper’s unveiling comes as Congress is set to decide on an extension of unemployment benefits. The Senate recently voted to reauthorize federal unemployment benefits that expired at the end of December. It would make 2 million long-term jobless eligible, but House Speaker John A. Boehner (R-Ohio) said this week that he opposes the bill.
Boehner, echoing remarks by the National Assn. of State Workforce Agencies, said the bill cannot be implemented because states’ unemployment systems are too antiquated to handle the legislation.