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Friday, December 3, 2010

Long-Term Unemployment and Recessions

Gerald Mayer
Analyst in Labor Policy

Linda Levine
Specialist in Labor Economics

The recession that began in the United States in December 2007 and officially ended in June 2009 was one of the deepest and the longest since the Great Depression. One feature that distinguishes the recent recession from its postwar predecessors is the historically high percentage of workers who have been unemployed for more than six months (the long-term unemployed). This report analyzes the trend in long-term unemployment over the postwar period and offers explanations for its unusually high incidence during the most recent postwar recession. It compares the individual, job, and household characteristics of the long-term unemployed during the latest recession (2007-2009) with the long-term unemployed at the end of the two previous recessions (1990-1991 and 2001).

Long-term unemployment varies across individuals based on demographic and job characteristics. In each of the last three recessions, older unemployed workers were more likely than younger workers to have been unemployed for over six months. While an equal share of unemployed men and women were unemployed for over half a year during the last two recessions, unemployed women were less likely than men to have been out of work for 27 or more weeks at the end of the 1990-1991 recession. Unlike the two previous recessions, in 2009, unemployed workers with less than a high school education were more likely than unemployed workers with more education to have been out of work for at least six months. Also, in 2009, workers laid off from the financial activities and information industries were the most likely to have been jobless longer than 26 weeks. Workers displaced from management, business, and financial occupations were most at risk of long-term unemployment during recent recessions.

Unemployment affects both the individuals who are without work and their families. Households of the long-term unemployed have lower earnings and income than other households (where households include married couples, single parents, and single individuals). In 2009, the most recent year for which data are available, the long-term unemployed were more likely than all unemployed workers to live in households with incomes below the official poverty line. They were more likely than other unemployed workers to receive benefits from the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp program) or be covered by Medicaid. In 2009, only 1.6% of the long-term unemployed received public assistance.

Slightly over half (55%) of the long-term unemployed had some type of health insurance coverage at some time during 2009, compared to a larger majority (83%) of employed workers. Although a small majority (58%) of the long-term unemployed were homeowners in 2009, they were less likely than employed workers (71%) to own their own homes.

As the economy recovers and employers increase hiring to meet the growing demand for goods and services, many currently unemployed workers will be able to find new jobs. However, finding work may be more difficult for the long-term unemployed if, for example, employers believe that their skills have deteriorated during their lengthy time away from the workplace. The long-term unemployed displaced from industries in which restructuring has occurred may also have a hard time finding new jobs in other industries, especially if the jobs require skills different from those they possess. Policies to encourage employers to hire the long-term unemployed include wage and training subsidies. Offering wage insurance and reemployment bonuses to unemployed workers may encourage them to accept jobs sooner than they otherwise might have.

Date of Report: November 22, 2010
Number of Pages: 30
Order Number: R41179
Price: $29.95

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