Long-Term Unemployment Is a Long-Term National Problem
Matthew Yglesias points to Rand Ghayad’s research showing—unsurprisingly—that employers are reluctant to hire people who’ve been out of work for longer than six months. The result, then, of policies that don’t put the unemployed to work as quickly as possible is dependency and a long-term economic drag:
The high status thing to say is always that politicians focus too much on the short term and we ought to be worried about the long-term fundamentals. And back in 2009 and 2010 you certainly heard a lot of this kind of rhetoric that was aimed at establishing the seriousness of the speaker by disparaging the idea of juicing the economy in favor of the need to work on the long term economic fundamentals. But six months is a relatively short span of time in the course of human history. And it turns out that a six month spell of unemployment leads to a significant decrease in a potential worker’s attractiveness to employers. That means a six month spell is relatively likely to turn into a year-long spell or a two-year one. And that kind of prolonged absence from the labor force doesn’t just represent lost income and economic output for two months or 24 months. It represents lost opportunities to learn on-the-job skills and build organizational capital. It represents a worker who’ll probably drop out of the workforce altogether if he can get himself eligible for disability benefits or plausibly recast herself in a socially validated housewife role.
Perhaps outside the framework of a welfare state and the bureaucracy that attaches to hiring (and firing), the long-term unemployed would quickly be picked up by someone at some wage level. But we actually do have a welfare state, and the effect Yglesias describes makes matters worse for everyone: the unemployed remain out of work, the taxpayer has to foot the bill, and the private sector loses the value that would come from maintaining the skills of these workers. One would have to dig deeper into historical data to see what can counteract these effects: Yglesias argues that World War II put the Great Depression’s unemployed back to work, but that era is incomparable to any other in more than one way. What happened to the long-term unemployed of, say, the early 1980s?
Whatever the case, unemployment ought to concern conservatives at least as much as federal spending does. Especially if the two threaten to become a vicious circle in circumstances like those facing the country today.