Chad Stone is chief economist at the Center on Budget and Policy Priorities.
The long-term unemployed are in deep trouble, with the human and economic costs of long-term unemployment reaching crisis proportions. That was the message of a piece in Sunday's New York Times from an incongruous pairing of economist policy wonks from opposite sides of the political divide. Policymakers should take heed.
Dean Baker from the Center for Economic and Policy Research, with his impeccable progressive credentials, and Kevin Hassett from the American Enterprise Institute, an adviser to top Republicans, write:
Policy makers must come together and recognize that this is an emergency, and fashion a comprehensive re-employment policy that addresses the specific needs of the long-term unemployed…Every month of delay is a month in which our unemployed friends and neighbors drift further away.
Long-term unemployment is conventionally defined as unemployment that lasts 27 weeks or longer. (Before recent cutbacks by several states, regular state unemployment insurance for qualified unemployed workers typically lasted up to 26 weeks.) As the chart below shows, the long-term unemployed as a share of the total unemployed rose to unprecedented levels in the Great Recession and remains very high (41.3 percent in April).
Baker and Hassett discuss the special challenges that the long-term unemployed face in finding a job and the need for special policies to assist them. This economics odd couple came together over a shared interest in a policy called work-sharing, which allows employers to avoid layoffs by reducing the hours of a larger group of workers, with the government covering a portion of their lost wages in lieu of paying standard unemployment compensation. Baker and Hassett worked with Sen. Jack Reed, a Democrat of Rhode Island, to craft a work-share provision for the bipartisan agreement of earlier this year to extend the payroll tax cut and federal emergency unemployment insurance.
Unfortunately, that work-sharing provision is a drop in the bucket when it comes to addressing the challenges facing the long-term unemployed. More generally, policies to help them find jobs are seriously hampered by the general lack of jobs in the sluggish economy. Under these circumstances, the additional weeks of federal emergency unemployment insurance that kick in when unemployed workers exhaust their regular benefits provide a crucial safety net for the long-term unemployed and their families. Emergency unemployment insurance also helps to keep the long-term unemployed from dropping out of the labor force entirely, and the extra purchasing power that it provides gives valuable support to the economy.
For various reasons, policymakers have been reluctant to pursue aggressive monetary and fiscal policies to boost economic growth and improve the job prospects of the long-term unemployed (and everyone else). To add insult to injury, on the very day that the Baker-Hassett article appeared, payments under the Extended Benefits program—one piece of the emergency federal unemployment insurance program—ended prematurely for over 200,000 long-term unemployed workers in eight states. That makes 25 states where Extended Benefits ended prematurely and over 400,000 long-term unemployed who have lost benefits. The premature termination of Extended Benefits payments is part of the phasing down of emergency unemployment insurance in the same legislation that contained the work-sharing measure.
To their credit, Baker and Hassett have shown that political differences need not stand in the way of crafting a real solution to a real problem. But policy wonks don't make policy. It's past time for those who do to roll up their sleeves and get to work finding real solutions to the real problems that we face.
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