Is This the Solution to the Long-Term Unemployment Problem?

Source: Thinkstock
Source: Thinkstock

News regarding the economy has mostly been positive, particularly over the past several months. The unemployment rate is down, and several analysts think it will continue to dip. Despite all of the traction on that front, there is still a big elephant in the room: the long-term unemployment problem.

This is a bit paradoxical in nature; after all, the latest numbers from the Bureau of Labor Statistics show that there are 5 million job openings in the United States as of this March, with little changed since. As Ben Casselman at FiveThirtyEight explains, that was the most the economy has seen since January 2001, and an uptick of 28% over the past year. It also means that there are 1.8 job-seekers per job, a huge improvement over the ratio of 7:1 during the recession.

Given those figures, it seems like the odds are finally in favor of job-seekers, particularly those who have been out of work for sometime, and often find it hard to lock down a job after having been unemployed for six months or more. Funny enough, the number of long-term unemployed has remained high in spite of drops in the official unemployment rate. The current number of long-term unemployed sits at 2.7 million — 31.1% of all unemployed — and the official unemployment rate is 5.5%, for those counting.

And right there is the issue: many long-term unemployed still can’t manage to find jobs, even though there are more jobs available than at any time in several years. So where is the breakdown? According to a new study titled Strengthening Reemployment in the Unemployment Insurance System from The Hamilton Project, part of The Brookings Institution, the answer may in part be how we approach unemployment insurance programs.

Source: The Brookings Institution
Source: The Brookings Institution

One argument in favor of cutting such programs is that it leads to long-term dependency on government. While that hasn’t necessarily proven to be true, it has been the prevailing logic in reducing benefits, or allowing those benefits to run out — although many recipients have yet to find a new position. According to The Hamilton Project’s Adriana Kugler, reforming the way we think about unemployment insurance programs may be the key to solving the long-term unemployment problem once and for all.

“The unemployment insurance system is structured to provide benefits to unemployed workers while they search for work, many of its eligibility requirements can effectively discourage a large number of unemployed workers from pursuing job opportunities that may be to their advantage,” Kugler writes.

In order to address that issue, Kugler suggests three pilot programs that could be instituted to help smooth out the process of returning to work. “The first program would allow the unemployed to continue claiming benefits while receiving entrepreneurial training and other assistance for setting up a business. The second program would support the unemployed through temporary positions and internships that might lead to full-time jobs. The third program would provide partial benefits to claimants who accept part-time jobs.”

Obviously, each of these programs is filled with nuance and more detail than we can actually include here, but this is the gist of Kugler’s proposals. At first glance, however, they do seem to have some merit. Any one of these would get workers who might otherwise be afraid of losing their benefits back to work in some capacity, helping to fill a hole in their resumes and getting them out of the house.

Perhaps the most valuable aspect of these proposals is that the experimenting with differing approaches can provide valuable insight into how to deal with similar economic conditions in the future. That data, along with using fewer public resources, might be the panacea to finally help alleviate the problem.

“All three programs are designed to hold costs down, so that they may be roughly budget-neutral when a reduced need for UI benefits is taken into account, and are very likely to have benefits exceed costs in a broader social sense when all the benefits of lower levels of long-term unemployment are taken into account,” Kugler says.

The trick, as always, is getting policymakers to actually pay attention and seriously consider adopting changes. That’s unlikely to happen, but it goes to show that there are minds hard at work trying to solve our economic woes.

Follow Sam on Twitter @Sliceofginger

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