Here's one big reason why America's unemployment crisis may be here to stay. Thanks to the lasting effects of the recession, there are currently 4.7 million workers who have been out of work for at least 27 weeks. And new research suggests that employers will almost never consider hiring them.
Matthew O'Brien reports on a striking recent experiment by Rand Ghayad of Northeastern University. He sent out 4,800 fake resumes at random for 600 job openings. And what he found is that employers would rather call back someone with no relevant experience who's only been out of work for a few months than someone with more relevant experience who's been out of work for longer than six months.
In other words, it doesn't matter how much experience you have. It doesn't matter why you lost your previous job — it could have been bad luck. If you've been out of work for more than six months, you're essentially unemployable. Many companies won't even consider you for a job. Here's what this looks like in chart form:
This jibes with earlier research (pdf) by Ghayad and William Dickens showing that the long-term unemployed are struggling to find work no matter how many job openings pop up. And it dovetails with anecdotes that workers and human resource managers have been recounting for years now. Many firms often post job notices that explicitly exclude the unemployed.
Now, it's unclear whether companies are irrationally discriminating against the long-term unemployed or whether they have good reason for screening out these applicants. Privately, many employers worry that someone who's been out of work for six months "may have outdated skills, or may be a short-timer who is desperate enough to take any work now but will leave when something better comes along."
Either way, the broader trend is having disastrous effects. As my colleague Ylan Mui reported earlier, this is partly why Boston Fed President Eric Rosengren worries that our cyclical unemployment problems could become structural and long-lasting. The recession threw many people out of work. Those who stayed unemployed for six months or more can't even get a callback for jobs. Their skills erode further. Eventually they drop out of the labor force. That all weighs down on America's long-term growth prospects.
So is there a remedy? Dozens of states have been considering legislation that would make it illegal to discriminate against the long-term unemployed. Some proposals would even allow unsuccessful applicants to sue under the same discrimination laws that apply to race or gender bias. These proposals have plenty of critics. But it's also unclear whether they would have much impact. New Jersey has had a law of this sort in place since 2011, and only one company has been cited for violating it to date.
The Obama administration, for its part, has proposed a few other ideas, including training programs and tax credits for businesses that hire the long-term unemployed. (The latter were even included in the American Jobs Act that Republicans blocked in Congress.) Yet economists have argued that while these programs might help at the margins, they won't necessarily bring down the overall unemployment rate. For instance, a company might just hire a subsidized worker over someone else.
It's worth noting, as Matt Yglesias points out here, that long-term unemployment was a major structural problem after the Great Depression too. But as this old essay by Richard Jensen suggests, it took World War II to finally solve the problem: "The war, by removing millions of prime men from the labor market, by restructuring the work process, by subsidizing wages, and by massive retraining, finally gave the private sector the methods and the incentives to rehire the hard-core."
That's not really an option today, but it underscores a bleak fact about the recession. When the labor market stays weak for years on end, the damage becomes long-lasting — and extremely difficult to reverse.