Robert Samuelson muses about long-term unemployment:
A study by Princeton economists Alan Krueger, Judd Cramer and David Cho is discouraging. Among the long-term unemployed from 2008 to 2012, only 36 percent had jobs 15 months later, the study found. As for the rest, 30 percent were unemployed, and 34 percent were not in the labor force. Even for workers with jobs, success was limited. A third had full-time jobs; the others had part-time or interrupted full-time work.
Disturbingly, the study also argues that labor markets may be tighter than they seem. We could be closer to an inflationary wage-price spiral than the relatively high unemployment rate (6.7 percent in March) suggests. With a lot of unemployed workers, competition for jobs should prevent an inflationary wage surge. But, says the study, the long-term unemployed are so much “on the margins” that they only weakly influence wages. More important is short-term unemployment of less than six months. If it’s low, wage pressures are high; surprisingly, it’s now close to its 20-year average of about 4 percent. This could cause the Federal Reserve to tighten credit to prevent labor bottlenecks.
Of course, that would be disastrous for the long-term unemployed, because it would probably slow hiring and make finding a job even harder. It’s also unnecessary. Other indicators portray a labor market that isn’t tight, notes David Stockton of the Peterson Institute, formerly a top Fed economist. Employee “quit rates” remain below pre-crisis levels, betraying workers’ fears of finding new jobs if they leave the ones they have. Business “hire rates” are similarly low, reflecting ingrained cautiousness. Involuntary part-time work is two-thirds higher than before the Great Recession. A broad unemployment measure, so-called U-6 (covering the officially unemployed plus involuntary part-time workers and “marginal workers”), is 12.7 percent.
None of this describes an economy close to its productive capacity.
Now consider the hot-button political issues of the day. Immigration reform that includes normalization and a “path to citizenship”. Increasing the minimum wage. Increasing the number of people with healthcare insurance. Balancing the budget. Ending global warming.
Whatever the merits of any or all of those issues, it’s hard for me to see how any or them or all of them will result in putting more people who’ve been unemployed for six months or more back to work.