How to Help the Long-Term Unemployed

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from Bloomberg Businessweek,

More than four years into the U.S. economic recovery, extraordinary federal support for the long-term unemployed should no longer be necessary.

Sadly, it is.

As of November, 4.1 million people, almost 3 percent of the labor force, had been looking for work for more than six months. That’s down from more than 4 percent in 2010, but higher than anything the U.S. experienced in the worst crises of the previous six decades.

These people are employable. As time goes on, though, the chances of finding a new job declines and idleness erodes motivation and skills—a loss that could permanently impair the economy’s productive capacity.

Efforts to reduce long-term joblessness have been inadequate. The federal government said states could pay unemployment benefits to workers whose hours are cut—a “work-share” policy to help keep people in their jobs. It was a modest proposal, but worth doing. So far only about half the states have such a program in place.

Other ideas would merit a try. The U.K. reports some initial success with programs (first suggested by U.S. scholars) that aim to build confidence and encourage the unemployed to keep looking for work. Washington should pay attention.

Some 1.3 million people are receiving extended unemployment benefits paid for by the federal government. The Congressional Budget Office has estimated that extending federal benefits for another year would cost less than $20 billion in 2014, adding about half a percent to government spending.

When the U.S. has a tight labor market and jobs for all who want them, the case for extended unemployment benefits can be dismissed. The U.S. isn’t there yet, not by a long way. Congress should extend the benefits for another year.

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