What 27 Weeks of Unemployment Does to the American Worker
Even if February was 28 days of awful weather for most of the country, it was, all in all, a solid month for employment figures, with 295,000 new jobs added to the economy, and the closely watched unemployment rate slipping further, to 5.5 percent.
The February jobs report is the latest in a series that demonstrates that the job market in the U.S. is slowly but surely improving. According the Bureau of Labor Statistics, someone who is currently unemployed would need, on average, just over three months (about 13.1 weeks) to find work again. In 2010, it would’ve around 25.2 weeks, or almost half a year for the average American to get back into the job market, according to Pew Research.
To be certain, the recovery has provided some significant progress in the realm of overall unemployment—and economists say that much of that improvement has helped to alleviate the share of workers who are left jobless for extended periods of time. Between 2010 and 2014 about two-thirds of the overall unemployment decline went to reductions in long-term unemployment (characterized as those who've been out of work for 27 weeks or more, but are still searching), according to data from the Federal Reserve.
So where are we now in terms of long-term unemployment? Before the Great Recession, the share of the unemployed who'd been out of work for 27 weeks or more mostly hovered between 10 to 20 percent, according to BLS data. But during the most recent recession long-term unemployment reached rates as high as 45 percent in 2010, according to Fed data. Those are the highest levels seen since the Great Depression.
In February, about 31.1 percent of unemployed Americans had been out of work for 27 weeks or more. While that's better, it's still well above normal levels, and leaves about 2.7 million people without work. And assessments of the long-term unemployed don’t even count the much-talked about population who have been out of work for so long that they’ve given up on finding a new gig.
Long-Term Unemployment as Share of Total Unemployment
According to a Federal Reserve post written by Tomaz Cajner and David Ratner, the prospects for the long-term unemployed are still relatively dim.“Their monthly probability of moving from unemployment to employment has recovered only modestly and still remains depressed relative to its pre-recession level… The long-term unemployed are about twice as likely to move to nonparticipation (that is, to drop out of the labor force) as to employment.”
If the long-term unemployed were consistently dropping out of the job search, and staying out, the supply of long-term unemployed counted by BLS would have already been exhausted, write Cajner and Ratner. Instead, what’s more likely is that the group moves between non-participation and other periods of more intense job searching.
Why should people care so much about this specific population? Well, any level of unemployment can be personally devastating, but an extended stint of unemployment can have particularly pernicious effects, some of which last well after someone finds a new job. In addition to taking a bite out of current income, a period of unemployment can hurt future income, too, according to a 2013 study from the Urban Institute.
When it comes to depleted earnings, the reason for unemployment may matter. Urban Institute researchers found that one to 20 years after a period of unemployment, workers who were fired from a job have earnings that are 15 percent lower than those who worked continuously. For those who are laid off due to company closings, the results are less detrimental, costing them about 5 to 10 percent of their wages for about four to 10 years after closing. That might be, the study suggests, because future employers look more favorably on those who appear to have lost a job due to circumstance rather than the quality of their work.
Though that might seem comforting in the aftermath of the mass layoffs associated with the Great Recession, a 2011 study by Steven J. Davis and Till M. von Wachter found that when the overall state of the economy is suffering during a period of mass layoffs, future earnings for those laid off tend to suffer more than they otherwise would. According to the paper, unemployment due to a mass layoff caused men to lose twice as much lifetime income when the national unemployment rate was above 8 percent, like it was from 2009 to 2012, than they did in the same circumstance when the national unemployment rate fell below 6 percent.
And as a period of unemployment wears on, workers can end up playing a role in their decreased earnings, as desperation for income leads many to lower-paying jobs than they had prior to unemployment. “Reservation wages (the lowest wage at which a job would be accepted)...decline over time, as workers’ expectations degrade and their needs increase,” the Urban Institute study found. It makes sense that, as workers enter the period which differentiates an extended unemployment period from a short one, they also become more desperate for income, since it coincides with the expiration for unemployment insurance in much of the country—which lasts for up to 26 weeks. After that, those who still haven't found work often turn to other methods to find income, like accepting low-paying jobs, or positions for which they're overqualified. Some even look to disability insurance for income, but as my colleague Alana Semuels points out, if they're successful in qualifying, it often means that they give up on finding work at all.
There are mental consequences to extended periods outside of the workforce, too. A 2014 study by Gallup found that those who had been unemployed for a long time faced significant mental-health hurdles, with about 18 percent of long-term unemployed adults saying that they were being treated for depression, suggesting that there's a correlation between lengthy unemployment and depression symptoms.
There could also be broader physical and psychological consequences, too. Though there are mixed findings on whether or not unemployment depletes health—some studies have shown that unemployment leads to more exercise, less drinking, and less smoking—there are other causes for concern. According to the same study from Urban Institute, those who were unemployed for 27 weeks or longer were likely to skip out on important medical care in an effort to save money. In 2011, 63 percent skipped dental visits, 56 percent said they put needed medical care on the back burner, and 40 percent did not fulfill prescriptions—practices which can lead to significant health complications later on.
A recent study in the Journal of Applied Psychology that took a look at the impact of unemployment on personality traits found that unemployment can also cause personality changes, some of which might make it more difficult to find a new job. According to the authors, “Unemployment has one of the strongest impacts on well-being with the impact often lasting beyond the period of unemployment.” Researchers found that the duration of unemployment, gender, and reemployment status factored into people’s personality shifts. The study showed that during periods of unemployment personality traits like contentiousness, openness, and agreeableness were all impacted and that lengthier unemployment changed the degree to which subjects displayed traits of agreeableness—as well as the extent to which men in particular displayed the trait of openness, which could be contributing to difficulty in looking for, and getting, a new job.
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