As a college student, I’m acutely aware of the job market. There’s always that fear that when I graduate, there won’t be any jobs, no matter which field I pursue, economics or journalism. Most of this is an irrational fear that my four years of studying and excessive tuition is worthless, but those with higher education tend to do much better than those with only a high school degree.
However, according to a new paper focused on long-term unemployment by Alan Krueger, even those with higher degrees may be subject to high unemployment rates if they are part of the long-term unemployed. In fact, their chances of being hired drastically diminish after long-term unemployment.
Not only are people more likely to dip into savings to pay for necessities, they also are less likely to find a new job. This study shows that generally the long-term unemployed have a decreased chance of getting hired, and that when they do find a job, it’s not for long. According to the Krueger, “only 11 percent of those who were long-term unemployed in a given month returned to steady, full-time employment a year later.”
“Although the long-term unemployed have about a one in ten chance of moving into employment in any given month, when they do return to work their new jobs are often transitory,” said Krueger. The long-term unemployed are more than likely to leave the labor force. After 15 months of unemployment, they are twice as likely to leave.
This grim outlook for the long-term unemployed affects the economy and the interest rate. The Federal Reserve has kept the interest rate near zero to help with recovery from the recession, citing the long-term unemployment as one reason. But the individuals who are out of work for such a long time may not actually have the same influence on inflation as the short-term unemployed.
What do you think about the long-term unemployed and the inflation rate? More importantly, should the government step in and drastically help the long-term unemployed, and if so, how?