Unemployed? You Might Never Work Again

http://economix.blogs.nytimes.com/2014/03/20/unemployed-you-might-never-work-again/?_php=true&_type=blogs&_r=0

Mar. 20, 2014
By BINYAMIN APPELBAUM

The long-term unemployed “are an unlucky subset of the unemployed.” They tend to be a little older, a little more educated, a little less white – but really they’re not that different from the broader pool of people who have lost jobs in recent years. Except for one thing: There is a good chance they’ll never work again.

These are the sobering conclusions of a new paper by three Princeton University economists including Alan B. Krueger, the former chairman of President Obama’s Council of Economic Advisors. The paper, presented Thursday at the Brookings Panel on Economic Activity, is part of a growing body of research showing that the prospects of people who lose jobs deteriorate rapidly unless they find new jobs quickly.

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People are only counted among the long-term unemployed if they say they are still looking for jobs. As time passes, people tend to give up, and those who do are no longer counted as members of the labor force. So why do the people who persist in trying become less successful with time?

“Either because, on the supply side, they grow discouraged and search for a job less intensively or because, on the demand side, employers discriminate against the long-term unemployed, based on the (rational or irrational) expectation that there is a productivity-related reason that accounts for their long jobless spell,” the new paper says. It adds that the two explanations are complementary, “as statistical 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.”

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But if long-term unemployment is more common in industries recovering more slowly, because would-be workers are trapped in those industries, this too suggests that the problem may be economic rather than personal.

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