Urban Wire Long-term unemployment and poverty produce a vicious cycle
Austin Nichols, Zachary J. McDade
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Today’s release of the 2012 annual poverty numbers will generate many charts and analysis in the media. The one below is pretty simple, maybe even obvious. It shows that the monthly poverty rate for households with a long-term unemployed member (someone unemployed for six months or more) is much higher than the rate for households with no long-term unemployment.

Intuitively obvious, but this chart actually signals a lot. For one thing, that increase in annual poverty you see during the recession is driven by two trends: rising poverty in each group and growth in the proportion of households in which someone is long-term unemployed.

For another, this relationship between growing long-term unemployment and poverty runs both ways, where poverty can reinforce joblessness just like joblessness can increase poverty.

Let’s back up. Our colleagues’ recent in-depth feature on long-term unemployment, "27 Weeks and Counting", documents some startling facts: 4.2 million Americans—37 percent of the unemployed—have been jobless for longer than six months. That’s the highest rate, by far, for the last 60 years. Study director Greg Acs believes that it’s the result of a “general aversion to hiring.”

Long-term unemployment is one part of a vicious cycle. As the feature documents, the longer one is unemployed, the harder it is to find work. Skills erode, professional networks deteriorate, and workers become tainted by a perception of “unemployability.” Long-term unemployment begets longer-term unemployment.

Throw poverty into the picture and it’s only worse. Long-term unemployed workers are much more likely to be poor. Poverty makes it more difficult to travel to interviews, pay for child care, or care for one’s health, making the job hunt all the harder.

There is also a potential generational cyclical effect. These consequences of long-term unemployment spill over to other members of a worker’s family. Kids whose parents are unemployed for extended periods do worse in school than peers with employed parents. Family stress, lack of health insurance, and reduced income (34 percent of long-term unemployed families lived in poverty in 2012) likely all contribute to poorer outcomes for kids. And living in poverty as a child has profound negative economic consequences in adulthood, as well as for the government safety net that must support those future adults.

What can we do about it?

Though strong economic growth is the most effective way to put people back to work, anemic job market improvement has marred this recovery. But there are some simple policy prescriptions that might help break the cycle.

Workforce development programs generally benefit workers with little education and experience (those who are most likely to be long-term unemployed). This training must reflect the needs of local employers, so state and locally tailored programs will likely do best. Meanwhile, large-scale public works programs can have an important short-term stopgap effect. They help workers retain their skills, avoid the stigma of long-term unemployment, and provide a regular income. They also help upgrade our roads, bridges, and other infrastructure.

“A lot of the problems associated with unemployment come at the start of unemployment,” Acs says in “27 Weeks and Counting.” “So keeping people in their jobs and helping them make job-to-job transitions would help us out in the future.”

Ultimately, the future is what we care about: every policy choice we make should be an investment in the future.

Photo by David Goldman/AP


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Research Areas Wealth and financial well-being
Tags Employment and income data Wages and nonwage compensation Workers in low-wage jobs Unemployment and unemployment insurance