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Study: Only 1 In 10 of Long-Term Unemployed Finds A Job Within Year

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The unemployment situation in the United States economy remains to be one of the most important issues facing the country today. Many finance experts have called it a jobless recovery, while Federal Reserve Chair Janet Yellen has vowed to improve the employment situation through central banking action.

A new study coming from Princeton University paints a very bleak picture for the chronically unemployed, which are individuals who have been out of work for at least six months: only 11 percent of the near four million individuals – or one in 10 – finds an employment opportunity within one year.

The report authored by Alan Krueger, a former top economist for President Barack Obama; Judd Cramer; and David Cho; stated that being unemployed for the long-term can hurt job seekers in two very important ways.

The first is the fact that the jobless become discouraged and cease searching for work. The other element is when these people apply for work they are frowned upon by hiring managers because these job applicants might lack the sufficient skills for the job and taking a long hiatus might indicate they are incompetent.

All of these factors are ingredients for putting the long-term unemployed on the “margins of the labor force.”

“A concerted effort will be needed to raise the employment prospects of the long-term unemployed, especially as they are likely to withdraw from the job market at an increasing rate," 

Since the Great Recession, the Fed has maintained its 6.5 percent unemployment rate threshold as being the benchmark to raise rates. It has since eased up on those plans and has decided instead to look at an array of other factors. The Princeton economists made the case in their paper that the central bank should instead observe the jobless rate for the short-term unemployed as an indicator for inflationary wage pressures, though the Federal Open Market Committee (FOMC) remains divided on revising its monetary actions course.

“Further declines in short-term unemployment would be expected to be associated with rising inflation and stronger real wage growth," 

Nevertheless, Yellen, who spoke at her very first press conference as head of the Fed last week, reiterated her concern for the long-term unemployed, but noted that past economic research has shown that they have less of an impact on wage inflation.


“I’ve seen research along those lines," Yellen told reporters. "But I think it would be tremendously premature to adopt any notion that says that that is an accurate read on either how inflation is determined or what constitutes slack in the labor market."

This study comes as a Gallup poll found that only one-quarter of Americans think now is a good time to find a job. Although it is an increase from the eight percent figure from two years ago, it still reinvigorates the negative sentiment that the country holds towards the potential labor crisis.


“Americans now rate unemployment, along with dysfunctional government and the economy in general, as the most important problems facing the country,” Gallup wrote in its conclusion. “The data reported here, showing that fewer than three in 10 Americans say it is a good time to find a quality job, reinforce the public’s decidedly negative views of the jobs situation today.”

The U.S. unemployment rate currently stands at 6.7 percent. However, others argue that the number is really in the low- to mid-20s because the Bureau of Labor Statistics (BLS) purposely omits certain data, such as part-time workers, those who have stopped looking for work and individuals who have left the labor force entirely. This has been the mandate since the administration of former President Lyndon Baines Johnson.

Youth Unemployment

Furthermore, a study by the Brookings Institute entitled “The Plummeting Labor Market Fortunes of Teens and Young Adults” discovered that employment for youth is at its lowest rate since after the Second World War. The think-tank highlighted that the average youth employment numbers in the U.S. is at 26 percent.

The institute suggested that governments should offer work-based learning opportunities in secondary and post-secondary institutions, provide enhanced assistance to help youth find jobs and improve financial assistance, such as the Earned Income Tax Credit, to encourage younger workers without children to attain a job.

Other experts purport that the minimum wage should be abolished, or at least for youth. The argument suggests that employers often ignore job candidates who are inexperienced or uneducated and would refrain from spending unnecessary money on training. Essentially, why pay a set wage for an inexperienced worker when they can pay the same wage to someone with experience and education?

Murray N. Rothbard, an economist from the Austrian School of Economics, referred to the minimum wage as “compulsory unemployment.”

Last year, the Bank of Spain actually recommended to the Spanish government to suspend the minimum wage in selected cases to bolster the jobs situation. More than six million people are out of work in Spain, including 3.5 million citizens under the age of 25.

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