More than four years into the U.S. economic recovery, extraordinary federal support for the long-term unemployed should no longer be necessary.
Sadly, it is.
Meager growth since 2009 has done far too little to lift the misery caused by the recession. As of November, 4.1 million people, almost 3 percent of the labor force, had been looking for work for more than six months. That’s down from more than 4 percent in 2010, but higher than anything the U.S. experienced in the worst crises of the previous six decades.
These people are employable. At the end of last year about four-fifths of the long-term unemployed had at least a high school education, and almost half had some college, according to a study by the Urban Institute. About one in five had previously worked in professional or management positions. As time goes on, though, the chances of finding a new job declines and idleness erodes motivation and skills—a loss that could permanently impair the economy’s productive capacity.
Efforts to reduce long-term joblessness have been inadequate. The federal government said states could pay unemployment benefits to workers whose hours are cut—a “work-share” policy to help keep people in their jobs. It was a modest proposal, but worth doing. So far only about half the states have such a program in place.
Other ideas would merit a try. The U.K. reports some initial success with programs (first suggested by U.S. scholars) that aim to build confidence and encourage the unemployed to keep looking for work. Washington should pay attention. The U.S. could make its mess of separate retraining programs—there are dozens—more effective through streamlining and better coordination. Helping people meet the expense of moving to take a job would make it easier for qualified workers to connect with companies that need them.
Some 1.3 million people are receiving extended unemployment benefits paid for by the federal government. The Congressional Budget Office has estimated that extending federal benefits for another year would cost less than $20 billion in 2014, adding about half a percent to government spending. It would directly relieve the distress of those involved and, as a byproduct, modestly boost demand and increase economic output, adding about 200,000 jobs by the end of next year, according to the CBO.
When the U.S. has a tight labor market and jobs for all who want them, the case for extended unemployment benefits can be dismissed. The U.S. isn’t there yet, not by a long way. Congress should extend the benefits for another year.