What to do about the long-term unemployed?

9/25/09 - Nearly 15 million Americans are jobless, and the number is widely expected to remain high even as the economy slowly begins to recover. Part of the problem many of the unemployed face: the very fact that they have been out of work a long time.

About five million of the jobless are what economists class as "long-term unemployed," people who have been out of work for 27 weeks or more. As challenging as it is for anyone to find a good job in this economy, it can be even harder for people out of work a long time.

Skills atrophy. Demoralization sets in and can become permanent. Some potential employers shy away.

Discouraged, some workers who have spent many months on the sidelines simply fade out of the work force, applying for union pensions or Social Security benefits they didn't intend to take until much later, or trying to get in on other government programs such as Social Security disability benefits.

The probability that a laid-off worker will find a job grows smaller the longer people have been out of work, according to studies in the 1980s by economists Lawrence Katz of Harvard University and Bruce Meyer of the University of Chicago. "Someone unemployed for six months is much less likely to find a job in the next month than someone unemployed for one month," Mr. Katz says.

The problem today: The proportion of the unemployed who have been out of work for over 26 weeks, at one-third, is the highest since World War II.

Researchers have found that wages the laid-off can expect when they do find a new job also tend to be lower the longer they were without work.

A growing number of long-out-of-work adults facing these odds appear to be giving up. The labor-force participation rate -- the proportion of working-age people who either have jobs or are actively looking for one -- was 65.5% in August. That was the lowest in 22 years, according to the Labor Department.

Increasing numbers are filing for Social Security disability, available to people who can show they have a medical condition that is likely to keep them out of work for at least a year. While the program's rolls were already rising before the recession, as baby boomers aged, the pace of applications sped up with the economy's downturn. The Social Security Administration received 1.9 million applications for disability benefits in the first eight months of this year, up 23% from a year earlier.

Last year, the Social Security Administration paid out about $106 billion in disability benefits, equal to nearly 4% of the federal budget. The payout was up about a third from four years earlier.

The agency projects it will receive roughly a million more disability applications from 2009 through 2011 than it would have without the recession. If acceptance rates stay the same, this would add roughly 500,000 more people to the rolls by the end of 2011.

So far, much of the government's response to long-term unemployment has been to extend jobless benefits, a support that keeps workers off the streets but can lead some to languish in unemployment instead of searching for work as if it were a full-time job.

The federal government extended the standard 26 weeks of benefits by 20 weeks, and to as much as a total of 79 weeks for some workers in high-unemployment states.