How chronic joblessness affects us all

By Don Peck
September 8, 2011

This is an excerpt from “Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It.”

By Don Peck
The opinions expressed are his own.
Last summer, the phone maker Sony Ericsson announced that it was looking to hire 180 new workers in the vicinity of Atlanta, Georgia. But the good news was tempered. An ad for one of the jobs, placed on the recruiting website the People Place, noted the following restriction, in all caps: “NO UNEMPLOYED CANDIDATES WILL BE CONSIDERED AT ALL.”

Ads like this one have been popping up more frequently over the past year or so; sometimes the ads disappear once the media calls attention to them (a spokesperson for Sony Ericsson said its ad was a mistake). But new ones continue to appear.

The prohibition against the unemployed applying for jobs is an unjust by-product of the desperation of many unemployed Americans, who have inundated companies with applications, sometimes indiscriminately. And it also shows the extent to which this is still a buyer’s market, in which employers can afford to be extraordinarily selective. But these restrictions may portend something more enduring, as well. Temporary unemployment can become permanent after a time; companies sometimes ignore people who have been out of a job for a year or two, and the economy—somewhat shrunken—just moves on without them.

The economic term for this phenomenon is hysteresis, and it can be one of the worst consequences of a very long recession. When people are idle for long periods, their skills erode and their behavior may change, making some of them unqualified even for work they once did well. Their social networks shrink, eliminating word-of-mouth recommendations. And employers, perhaps suspecting personal or professional dysfunction even where it is absent, may begin to overlook them en masse, instead seeking to outbid each other for current or recently unemployed workers once demand returns. That can ultimately lead to higher inflation, until the central bank takes steps to depress demand again. The economy is left with a higher “natural” rate of unemployment, a smaller working population, and lower output potential for years to come.

The blight of high unemployment that afflicted much of Europe in the 1980s and ’90s is a case in point, and an important cautionary tale. The persistence of high unemployment resulted from several factors, including overly rigid labor markets in some countries and welfare programs that dulled the incentive to find a job in many others. But analysis by the Johns Hopkins economist Lawrence Ball reveals that much of it was the result of hysteresis caused by a long period of disinflation and weak demand in the early and mid-1980s. In some countries, the natural rate of unemployment rose by five to nine percentage points.

The scars from this period will be deepest for the unemployed, but they will be felt by most of us. Communities marked by high, persistent unemployment devolve over time; social institutions wither, families disintegrate, and social problems multiply. Many American inner cities still bear scars from the sudden loss of manufacturing, and the attendant rise in male unemployment, in the 1970s. Parts of Europe now struggle with a burgeoning underclass. When geographically concentrated, idleness and all its attendant problems are easily passed from one generation to the next.

 

Especially in middle-aged people, long accustomed to the routine of the office or factory, unemployment seems to produce a crippling disorientation. At a series of workshops for the unemployed that I attended around Philadelphia, the participants—mostly men, and most of them older than forty—described the erosion of their identities, the isolation of being jobless, and the indignities of downward mobility. Over lunch I spoke with one attendee, Gus Poulos, a Vietnam-era veteran who had begun his career as a refrigeration mechanic before going to night school and becoming an accountant. He was trim and powerfully built, and looked much younger than his fifty-nine years. For seven years, until he was laid off in December 2008, he was a senior financial analyst for a local hospital.

Poulos said that his frustration had built and built since then. “You apply for so many jobs and just never hear anything,” he told me. “You’re one of my few interviews. I’m just glad to have an interview with anybody,” even a journalist. Poulos said he was an optimist by nature, and had always believed that with preparation and steady effort, he could overcome whatever obstacles life put before him. But sometime in the past year, he’d lost that sense, and at times he felt aimless and adrift. “That’s never been who I am,” he said. “But now, it’s who I am.”

Recently he’d gotten a part-time job as a cashier at Wal-Mart, for $8.50 an hour. “They say, ‘Do you want it?’ And in my head, I thought, ‘No.’ And I raised my hand and said, ‘Yes.’” Poulos and his wife met when they were both working as supermarket cashiers, four decades earlier—it had been one of his first jobs. “Now, here I am again.”

Poulos’s wife was still working—as a quality-control analyst at a food company—and that had been a blessing. But both were feeling the strain, financial and emotional, of his situation. She commutes about a hundred miles every weekday, which makes for long days. His hours at Walmart were on weekends, so he didn’t see her much anymore and didn’t have much of a social life.

Some neighbors were at the Wal-Mart a couple of weeks earlier, he said, and he rang up their purchase. “Maybe they were used to seeing me in a different setting,” he said—in a suit as he left for work in the morning, or walking the dog in the neighborhood. Or “maybe they were daydreaming.” But they didn’t greet him, and he didn’t say anything. He looked down at his soup, pushing it around the bowl with his spoon for a few seconds before looking back up at me. “I know they knew me,” he said. “I’ve been in their home.”

Poulos’s experience is supported by studies that show that long-term unemployment leads to growing social isolation of the unemployed, a warping of family dynamics, and a slow separation from mainstream society. Take Poulos’s story and multiply it by millions and we can begin to see the scale of the current problem.

 

One reason the problems ushered in by the Great Recession are so urgent is that once too much time passes, they no longer can be solved. Once the character of a generation is fully formed, it cannot be unformed; once reactionary sentiments come out of the bottle, they are hard to put back in. And once large numbers of people cross the Rubicon from temporary unemployment to chronic joblessness, they, their families, and their communities can be lost for good. Finding our way to a full recovery from this period, and soon, is not just a matter of alleviating temporary discomfort. By degrees, economic weakness is slowly narrowing the life opportunities of many millions of people, and leaving our national future pinched.

More government support for the economy – and direct creation of jobs through, for instance, heavier investment in infrastructure – is urgently needed today.  The recent debt ceiling deal gets things almost exactly backwards, doing little to stop the long-term growth of the national debt while turning to deficit reduction right now.  Consumers are still paying down debts accumulated over a decade or more, and that process will likely take another couple of years.  Until they are able to spend more freely again, the government must fill the gap.  A big increase in infrastructure spending, more aid to states, extended aid to the unemployed, and an extended payroll tax holiday would all be good places to start.

Even once the economy recovers, many people who’ve been unemployed for a year or two or more will not find work easily.  Chronic unemployment is an ugly problem, and we also need to begin devising specific strategies to bring the long-term unemployed back into the workforce.  One way to do that would be the creation of aggressive wage subsidies given to employers who hire the long-term unemployed, making that hire extremely cheap for, say, a year before the subsidy is withdrawn. By providing a targeted and temporary incentive, we can help long-displaced workers shed the stigma that they have developed, rebuild skills and work habits, and reenter mainstream society. Even workers who are not retained after the subsidy is removed will emerge with recent work history, reacquainted with the rhythms of the workplace.

The temptation to hunker down and simply try to wait this long downturn out is high today, and lately our national leaders have succumbed to it.  But doing so would be a terrible mistake.  President Obama and members of Congress say frequently that job growth is our biggest national priority.  They need to match those words with action.

PHOTO: A protester holds a placard at a peaceful march in Pittsburgh, Pennsylvania September 20, 2009. REUTERS/Michelle Nichols

4 comments

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[...] //'); //]]> #debatethis | jobs | recession | unemployment This is a response to Don Peck’s book excerpt “How chronic joblessness affects us all.” [...]

yea………but.

with all the productivity that technology has given us………not to mention all the offshoring of jobs……….it takes far less people to make all the products our marketplace needs.

given the fact that every person laid off loses purchasing power…….that makes the pool of customers smaller…….meaning we need even fewer employees.

how do you create customers?……..the workers in the developing world don’t make enough money to buy things in our marketplace.

Posted by Robertla | Report as abusive

[...] //]]> #debatethis | jobs | unemployment This is a response to Don Peck’s book excerpt, “How chronic joblessness affects us all.” Labor economist Gary Burtless also responded [...]

If O would like to offer companies a tax incentive to hire unemployed — scale it to increasing incentive to hire a long term unemployed over a shorter term unemployed over 52 wks gets twice the incentive or 26 wks and over 100 wks gets twice that of a 52 wk unemployed term — this would get those long term unemployed off the ranks and into the work forces faster.

Posted by Distressed | Report as abusive

Excellent article. I wish that Obama and his team of economists would take the time to read it and absorb its message. As a retired HR executive I can attest to the dangers of long term joblessness and how it acts as an impediment to being rehired. Unfortunately our practice of providing two to three years of unemployment compensation, while well intentioned, has the perverse effect of preventing some recipients from taking lower paying jobs or agressively mounting a job search until their benefits run out. My neighbor is a roofing contractor. He pays his roofers between $10-15 dollars per hour. When he advertises for an opening 90% of the applicants are Hispanics with questionable documentation. Our state has 11% unemployment and yet few Americans apply for these jobs. Could it be that we have turned our safety net into a “hammock” for the indolent?

Posted by jkk1943 | Report as abusive

There are many jobs out there and many qualified applicants. It is too bad that there are hiring managers that do say that candidates need to be currently employed. Many of the unemployed are through no fault of their own and are missing out on some good talent.

Posted by natref | Report as abusive