I don’t usually write about macro things. But a journalist asked me about the duration of unemployment, and I checked out how this recession compares to previous ones. I looked at the percentage of the unemployed who have been out more than 26 weeks in past recessions: July 2009, 34 percent; July 2003, 22 percent; July 1992, 22 percent; and even in the very deep and long 1980 to 1982 double-recession it was 25 percent in July 1983. “So what?” you might ask, since the unemployment rate this time is not likely to reach the 10.8 percent of late 1982.
The answer is that the welfare effect of unemployment depends on its duration. Society is worse off at 10 percent unemployment if that figure is concentrated on a small number of long-term unemployed than if it’s spread more evenly across the labor force. A few weeks of unemployment don’t exhaust savings and don’t lead to great depreciation of skills. A year of unemployment can do both.
By this important criterion, this recession has had the biggest negative impact since the Great Depression.
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The1994 CPS re-design complicates comparisons of long-term unemployment rates pre- and post-1994. The Polivka-Miller paper suggests that the re-design likely had little effect on the overall unemployment rate, but may have had sizable effects on the duration distribution. The old question methodology may have had biases in the direction of short durations and the new methodology may have biases in the opposite direction. For example, workers unemployed in the reference week in two successive interviews now are not asked about if they had jobs in the intervening weeks. Their unemployment duration is assumed to be 4 or 5 weeks longer than it was in the previous interview. In the past those workers were re-asked about unemployment duration each month. The old methodology resulted in inconsistencies, which is what lead to the new methodology.
The re-design probably does not explain the entirety of the increase in long-term unemployment, but it is hard to know how big of a factor it might be.
@ #2 has it right — and after the 26 weeks, many drop off the rolls (and the dole, natch) and aren’t counted.
I’ve been out of work for 16 months. There was California unemployment for a while. When that was exhausted, I was automatically enrolled in a Federal extension. Then when that was exhausted I was automatically enrolled in a second Federal extension. And finally when that was exhausted, I was enrolled in a new California state extension. When I was laid off in April of 2008, I was expecting just 6 months of unemployment support, and yet here I am 16 months later still receiving payments.
Had I not received these payments, I would’ve been forced to accept a retail job paying literally one third of what I’d been earning during the last 8 years of my high tech career.
If your goal is to see how “bad” things are, you need to consider people on unemployment, people who have dropped off the unemployment rolls, and people who are UNDERemployed. In all three cases people are likely supporting themselves with savings, and that can’t last.
There should be a better incentive to cut #11 “Bob”‘s unemployment checks so he actually feels like he should take a job and be better off for it, rather than turning it down.
He would do more good as an over-qualified retail sales person who might make a chain store more appealing to buyers than he is sitting on his couch catch 66 weeks of unemployment checks while someone who’s not as talented works in that retail spot.
for all practical purpose every job hasat least one taker. Those who want to skate for a while while on unemployment are not hurting the system. As jobs increase and benefits are no longer extended those not working will in fact go back to work. Why shouldn’t the unemployed enjoy themselves as much as they can?
@8
Housewives fit into employment figures the same way that drug dealers and college students do: non-participation.
Its hard to track numbers if its untaxable (ie: illegal drugs, prostitution, or even selling items at a garage sale) or if its a human capital development thing (Ie: going to school or parenting).
I’m sure there are studies and surveys tracking “Due to tougher economic times, do you read your children more or less stories and go for more or less walks in the park?” but that would be for the “Socio-freak-ology” blog, not the Freak-onomics one. Economics tracks GDP very well, psychological effects not so much.
Okay, stephen, I just remember reading something like this (below) once and wondered how hard it is to avoid the sociofreakology parts of the argument back then and different sociofreakology arguments now.
“Simply fire all the women, who shouldn’t be working anyway, and hire the [unemployed] men,” Norman Cousins wrote in 1939, summarizing this simplistic argument. “Presto! No unemployment. No relief rolls. No depression.” Such arguments ignored a fundamental fact about the power of gender roles in the era: No matter how desperate they were for work, most men would not consider taking a job that was culturally defined as “women’s work.”
The depreciation of skills is now instantaneous with layoff since they were all specific to a particular company and industry that no longer needs them. Growing industries need skills that as yet don’t exist. Skills have now become as perishable as summer fruit so that should modify what people are willing to pay to attain them.
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