“For months now a debate has been raging in economic circles about the long-term unemployed. One group argues that the current unemployment rate, currently at 6.7 percent, is unrepresentative of the labor market because it doesn’t include the millions of long-term unemployed: discouraged workers who have left the labor market. The other side argues that the labor market has segmented—that those with jobs and the short-term unemployed compete for work in one labor market that is tightening, while the long-term unemployed compete in another where jobs are scarce.”
“A new Brookings Institute paper by Princeton economists Alan B. Krueger, Judd Cramer, and David Cho provides the strongest evidence to date that the latter group is correct. If so, the authors argue, then “a concerted effort will be needed to raise the employment prospects of the long-term unemployed.” In other words, Congress needs to act.”
“The long-term unemployed can become disconnected from the labor market in two ways. The first is on the labor supply-side. As time goes by, the long-term unemployed become discouraged and their job search intensity drops. Eventually, they drop out of the labor force altogether. On the labor demand side, employers discriminate against the long-term unemployed and pass over their applications out of fear that their skills have atrophied. In either case, the labor market segments.”
Read full New Republic Article here.