Study on the Effects of Long-Term Unemployment in the Great Recession

Five years after the end of the Great Recession, unemployment remains high. And, of the 9.8 million people currently unemployed, 3.5 million are long-term unemployed. The long-term unemployed face significant risks and disadvantages—from loss of earnings, to the deterioration of skills, increased rates of poverty, increased likelihood of divorce, and poor physical and mental health outcomes. How does the likelihood of finding a job change as the duration of unemployment increases? What does this mean for government employment policies and workforce development strategies? What interventions might reduce long-term disadvantages for workers who lost their jobs in the wake of the Great Recession? To address these questions, Andreas Mueller and colleagues designed and implemented a survey of over 6,000 unemployed workers in New Jersey, who were interviewed every week for up to 24 weeks from fall 2009 through spring 2010. They found that the amount of time devoted to job search declined sharply as the duration of a spell of unemployment increased. They also showed that the lowest wage that unemployed workers were willing to accept remained remarkably stable over time, and the exit rate from unemployment, which was low at all durations, declined gradually as a spell of unemployment increased. Interestingly, there was some evidence that full-time job seekers who accepted part-time jobs were more likely to subsequently find a full-time job than otherwise similar individuals who did not accept part-time job offers. Mueller and his collaborators will extend this previous research and examine the effects of long-term unemployment on a broader set of outcomes, distinguishing among workers who lose jobs (and become reemployed) at different points in time. Specifically, they would conduct a follow-up survey that would allow them to investigate the extent to which workers who lost jobs in 2009 managed to transition back into the workforce, whether they cycled between temporary jobs and unemployment, or dropped out permanently from the labor force.