The economy has seen an “unprecedented” number of long-term unemployed under the Obama administration, according to a liberal think tank, and economists say plans pursued by Democrats in Washington are unlikely to curb the problem.
Nearly 5 million workers are classified as long-term unemployed, while 900,000 more have stopped looking for work altogether, according to a new series of reports issued by the Urban Institute.
Three percent of the labor force has been out of work for more than six months, an improvement of only one percentage point since unemployment spiked in October 2009, according to the study.
“That long-term unemployment would rise during a recession is not at all surprising, but the extent of the increase and its persistently high level since the start of the recovery are both troubling and unprecedented,” the report states. “The U.S. economy is now well into its fourth year of recovery, the unemployment rate is below 8 percent, yet the long-term share of unemployment is still near 40 percent.”
The center-left think tank said that those startling figures are unlikely to change unless the United States can achieve dramatic job growth, rather than the middling 2 percent overall economic growth figures the Obama administration has averaged.
While the think tank stresses that many of the causes of long-term unemployment are outside of the control of the government, it outlined a number of policies that could help alleviate long-term unemployment, including reforming unemployment insurance to subsidize wage decreases and hour reductions and increasing workforce training subsidies at the local level, rather than a “one-size-fits-all federal approach.”
Michael R. Strain, a labor economist with the American Enterprise Institute, said the Obama administration has failed to lead in the effort to solve the crisis of long-term unemployment.
“There are plenty of solutions that could be supported by Republicans and Democrats, but we’ve failed to find someone to champion them—most of the blame lies with President Obama because he sets the agenda in Washington,” Strain said.
He agreed with the Urban Institute that unemployment benefits could be better utilized by using them to subsidize workers who take lower-paying jobs following layoffs. Getting back in the job market quickly, even at a lower salary, can prevent workers from suffering long-term damage to their earning potential as well as ensure that they do not fall further behind in the skills gap.
However, the debate over America’s record-high spending on unemployment has focused on how long workers receive benefits, rather than how to spend that money effectively.
Many of the long-term unemployed come from the manufacturing and construction industries. Minorities and those with less education are the most likely to be out of work for long periods of time, according to the Urban Institute.
Job seekers are also stuck in regions that have failed to produce new jobs. Strain said that these workers could be assisted using unemployment benefits to help them relocate to areas that have wider access to jobs, rather than repeating a cycle of poverty in cities like Detroit.
“Let’s allow firms to pay workers whatever they can, supplement those earning with subsidies; let’s open those workers up to new skills and new lines of work and new locations to cope with manufacturing’s decline,” Strain said.
Democrats have focused on playing politics with hot-button political issues such as the minimum wage and top tier tax rates “to paint Republicans as the party of the elite and wealthy.”
The minimum wage is an area where Democrats are pursuing good politics using bad policy, according to Strain. It raises the cost of hiring young and inexperienced workers—those hit hardest by the recession.
“Raising the minimum wage is a debate to have during boom times when there’s money to spread around,” Strain said. “Raising the minimum wage now is a bad idea; the government should be reducing the rigidity of the labor market rather than making it harder and more expensive to hire workers.”
He sees politics at play.
“Nancy Pelosi and other Democrats have been explicit in saying that the minimum wage is being used as a midterm election issue and President Obama is helping them achieve that,” Strain said.