Long Term Unemployment as a National Emergency

Economist Kevin Hassett is a Senior Fellow at the American Enterprise Institute and served as an economic adviser to McCain's and Romney's presidential campaigns. So he is no liberal. But he is so worried about the plight of the long-term unemployed in America that he thinks maybe the government should just give them jobs:

In 2007, before the Great Recession, people who were looking for work for more than six months — the definition of long-term unemployment — accounted for just 0.8 percent of the labor force. The recession has radically changed this picture. In 2010, the long-term unemployed accounted for 4.2 percent of the work force. That figure would be 50 percent higher if we added the people who gave up looking for work. . . .

The result is nothing short of a national emergency. Millions of workers have been disconnected from the work force, and possibly even from society. If they are not reconnected, the costs to them and to society will be grim. . . .

This is especially a problem for workers over 50:

The number of unemployed people between ages 50 and 65 has more than doubled. The prospects for the re-employment of older workers deteriorate sharply the longer they are unemployed. A worker between ages 50 and 61 who has been unemployed for 17 months has only about a 9 percent chance of finding a new job in the next three months. A worker who is 62 or older and in the same situation has only about a 6 percent chance. As unemployment increases in duration, these slim chances drop steadily.

As Hassett put it in an interview,

I have a friend who’s a priest, and he said long-term unemployment is a bigger pastoral care challenge than a death in the family. A death in the family, there’s this impulse of incredible negativity, but then people start to recover. A person, say a 55-year-old who’s always the breadwinner in his family, if he loses his job, every morning it gets worse. The result is that many people over 50 who lose their jobs will end up on disability, at great expense to the rest of us.

Firms have good reasons for being reluctant to hire these people, so it is unlikely that the private sector will ever put many of them back to work:

Long-term unemployment is serving a screening purpose. . . . It may be because they’re more likely to have health problems, and mental problems because of the stresses of unemployment, and so employers wouldn’t want to face an issue like that. I was talking to a friend who’s a very successful venture capitalist, and he said, if you hire one very bad guy, the amount of damage they can do is extraordinary. So how do you convince firms to take that risk?

So, he says, the best solution may be for the government to just give these people one-year jobs, or copy a German program that paid large fees to private job placement firms if they could  place the long-term unemployed in a job. Hassett suggests that given the costs, it would be well worth it to pay as much as $100,000 to place a 50-year-old, unemployed man in a steady job.

Of course, we will do nothing, because helping people would be too offensive to Republicans in Congress and their Tea Party supporters.