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Economic Research

Out of the Workplace...and Struggling to Find a Way Back In

A striking feature of the 2007–09 recession has been the swelling ranks of the long-term unemployed (those without a job for 27 weeks or longer). However, the effects of the high jobless rate spreads beyond those immediately affected, notes staff writer Ed English in "Out of the Workplace...and Struggling to Find a Way Back In." The article, featured in the second-quarter issue of EconSouth, examines the costs of long-term unemployment and the challenges this cohort faces in reentering the workforce.

The common side effects of long-term unemployment on the population as a whole include depressed wages, lower tax revenues, and higher tax burdens, says English. Although it's difficult to quantify these costs, it is possible to measure government outlays on benefits for the unemployed, which skyrocketed during and after the recession to reach an estimated $168 billion in fiscal 2010, he adds.

Although the recession most likely ended in the summer of 2009, the jury is still out on how quickly job growth will return, he explains. It's feasible that the recovery could be faster than those following the previous two recessions, but many economists, including Lakshman Achuthan of the Economic Cycle Research Institute, point to trends such as weak postrecession growth and a quickened pace of recession and recovery as factors working against a speedy rebound in jobs. These trends are especially troubling for the long-term unemployed, who may have an even tougher time reentering the labor market, according to Achuthan.

Further, some jobs that were lost during the recession will probably never return, due to structural changes in the labor market, says English. One often-cited fix is job retraining, but experts warn that individuals frequently have to expend major resources to prepare themselves for another job, and retraining isn't a magic bullet. Policy responses such as wage subsidies are sometimes equally ineffective—which goes to show that there are no easy answers. As Barry Hirsch, the W.J. Usery Chair of the American Workplace in the Andrew Young School of Policy Studies at Georgia State University, says, "It's frustrating both for observers and economists to be saying we don't have any easy policies."