“It’s a sign of caution,” said Robert Rosener, a senior economist at Morgan Stanley in the United States. “If we are left with a large group of long-term unemployed workers, it could mean persistently higher unemployment rates and persistent need for support for things like unemployment benefits.
The side effects of long-term unemployment can be severe, affecting everything from personal savings and future earnings to physical and mental health and even the well-being of children. To compound the problem is the unique composition in this recession of the long-term unemployed, a significant part of whom worked in low-paid jobs in the leisure and hospitality industry and who are less likely to have a savings account or safety net to help them. they resist a long period without a paycheck.
“These are mainly low-income people, and a large part of them. And therefore, a large proportion of the unemployed are at risk of losing their apartment or home, ”said Bill Spriggs, chief economist at AFL-CIO.
Some of the jobs in these sectors have disappeared completely, as restaurants and hotels closed during the crisis or reduced their operations. But the biggest risk with long-term unemployment centers is the concern that, even after the industry recovers, these workers may have completely detached themselves from the labor market or been involved in financial problems so profound that they will not be able to find the job. way back.
A study by economists at Princeton University after the Great Recession found that only 11% of workers who were long-term unemployed in a given month during the recession had returned to steady full-time employment a year later.
“You think about the problem of getting a job for the long-term unemployed – that’s very difficult to do,” said Spriggs. “If you talk about putting a homeless person in a job, it’s like, forget it. You went from ‘this is a very difficult thing to do’ to ‘this is almost impossible.’ “
The growing problem runs counter to the idea that the US economy and labor market will be able to recover quickly to pre-pandemic levels, once closing orders are canceled and consumers return to restaurants and retail stores. And some recent economic forecasts reflect that: The nonpartisan Congressional Budget Office projected this week that unemployment will remain above pre-pandemic levels until the end of the decade.
Democratic lawmakers and many economists emphasize that the sharp rise in long-term unemployment highlights the urgent need for Congress to approve another round of bailout spending, and quickly, to help keep unemployed Americans afloat until the end of the crisis and allow a faster recovery as soon as the pandemic subsides. Another extension of unemployment benefits, advocates say, would have the double benefit of giving unemployed Americans money for rent and bills – which studies show they will spend, putting them back in the economy – while keeping them trapped in the labor market. , as the program requires workers to continue looking for jobs.
On the other hand, spending too little could only trigger slow economic growth and lead to a slower recovery, where long-term unemployed people are left struggling for months or years without working.
“You don’t want people to go bankrupt and then have to get out of it,” said Katharine Abraham, who served as a member of the White House Council of Economic Advisers in the Obama administration. “This is going to be bad for them and for the economy as well.”
In addition to providing emergency aid, others are pushing for more targeted solutions to help the long-term unemployed. Senator Chris Van Hollen (D-Md.) Introduced pre-pandemic legislation that sought to bring these workers back into the workforce using federal funds to create one-year jobs at the local level, while providing resources to support workers – training programs, for example, as well as child care or substance abuse treatment.
“The idea is to give people a base to build on,” said Van Hollen in an interview.
The Maryland Democrat has talked about the issue in recent weeks with members of Biden’s economic team, including National Economic Council director Brian Deese and Cecilia Rouse, who will chair the Council of Economic Advisers if confirmed by the Senate. Both were receptive, said Van Hollen. He is pushing for some aspects of his plan to be included in the next round of stimulus legislation that Biden promised as part of his “Build Better” agenda.
“There is strong support,” he said. “The question is exactly what form it takes and exactly when.”