“This is a warning signal,” said Robert Rosener, senior U.S. economist at Morgan Stanley. “If we have a large pool of long-term workers, it could mean persistently higher unemployment rates and a persistent need for support for things like unemployment benefits.”
The ripple effects of long-term unemployment can be serious, affecting everything from personal savings and future earnings to mental and physical health and even child well-being. The problem is the unique composition of the long-term unemployed in this recession, a significant proportion of whom worked in low-wage jobs in the leisure and hospitality industry and who are less likely to have a savings account or safety net to help them. again a long period without a salary.
‘It’s mostly about people with low incomes and a large part of it. That is why a large proportion of the unemployed run the risk of losing their apartment or house, ”said Bill Spriggs, chief economist of the AFL-CIO.
Some jobs in these sectors have completely disappeared because restaurants and hotels closed during the crisis or reduced their operations. But the greater risk with long-term unemployment centers is the concern that even once the industry recovers, these workers would have completely detached themselves from the labor market, or had to end up in such deep financial difficulties that they would not be able to find their way back.
One study by Princeton University economists after the Great Recession found that only 11 percent of workers who were long-term unemployed during a downturn in a given month got a full-time job again a year later.
“You’re thinking about the problem of getting a long-term unemployed person into work – it’s very difficult to do,” Spriggs said. ‘When you talk about getting a homeless person into a job, you have to forget it. You went from ‘it’s a very difficult thing to do’ to ‘it’s almost impossible.’ ‘
The growing problem is at odds with the idea that the U.S. economy and labor market could quickly bounce back to pre-pandemic levels once the shutdown surveys are lifted and consumers flow back to restaurants and shops. Some recent economic forecasts reflect this: The non-partisan Congressional Budget Office predicted this week that unemployment will remain above pre-pandemic levels until the end of the decade.
Democratic lawmakers and many economists stress that the sharp rise in long-term unemployment underscores the urgent need for Congress to pass a further round of bailouts, and quickly help keep unemployed Americans afloat through the end of the crisis and faster repair. as soon as the pandemic subsides. A further expansion of unemployment benefits would, according to supporters, have the dual benefit of giving unemployed Americans money for rent and bills – which studies show they will spend to put it back in the economy – while staying attached to the labor market, since the program requires workers to continue to look for work.
On the other hand, spending too little can only lead to sluggish economic growth and lead to a slower recovery, where the long-term unemployed struggle for months or years without work.
“You do not want people to go bankrupt and dig out of it later,” said Katharine Abraham, who served as a member of the White House of Economic Advisers in the Obama administration. “It’s going to be bad for them, and it’s going to be bad for the economy, too.”
In addition to emergency relief, others are pushing for more targeted solutions to help the long-term unemployed. Sen. Chris Van Hollen (D-Md.) Introduced legislation before the pandemic that sought to bring these workers back into the workforce by using federal funding to create year-round jobs at the local level, while providing resources to support workers – training programs, as well as child care or drug abuse.
“The idea is to give people a foothold to build on,” Van Hollen said in an interview.
The Maryland Democrat has been talking to members of Biden’s economic team over the past few weeks, including the director of the National Economic Council, Brian Deese and Cecilia Rouse, who will chair the Economic Advisers Council if the Senate is confirmed. Both were receptive, Van Hollen said. He insists that some aspects of his plan be included in the next round of stimulus legislation that Biden promised as part of his “Build Back Better” agenda.
“There is strong support,” he said. “The question is exactly what form it takes, and exactly when.”