JEFFREY BROWN: Finally tonight, an unfolding national emergency of long-term unemployment.
According to Labor Bureau statistics, some five million Americans have been looking for work for more than six months, a percentage of the overall work force that’s grown dramatically in the last several years.
Two Washington policy economists came together in an op-ed in yesterday’s New York Times that called the problem a human disaster. What made that piece especially interesting is that the two normally come from opposite ends of the spectrum.
Dean Baker is co-director of the liberal Center for Economic and Policy Research. Kevin Hassett is director of economic policy studies at the conservative American Enterprise Institute and an adviser to the Romney campaign, but the op-ed piece wasn’t connected to the campaign.
Welcome to both of you.
DEAN BAKER, Center for Economic and Policy Research: Thanks very much.
JEFFREY BROWN: This idea of a national emergency, that’s your term, both of your terms.
DEAN BAKER: Both of our terms.
JEFFREY BROWN: What do you mean? What — is it a new emergency?
DEAN BAKER: Well, it’s a worsening emergency.
I mean, obviously, this is getting worse by the month, which is one of our points. But we have been lucky in a sense that historically the United States has not had a big problem with the long-term unemployment, that in general if we go back before the downturn, the long-term unemployed, people unemployed more than six months, were less than eight-tenths of a percent of the work force.
This is something that’s a result of the prolonged downturn, that we have had a severe downturn. It’s lasted a long time. And the numbers of long-term unemployed just keep going higher.
JEFFREY BROWN: And, Kevin Hassett, who is most affected? Who are we talking about?
KEVIN HASSETT, American Enterprise Institute: Well, I think that we’re seeing is that over time people that have become more affected or most affected are folks that are a little bit on in age, people above 50, people above 60, because folks who are younger are more likely to be fire, but they’re also more likely to be hired.
And so if you let a long-term unemployment problem run for a few years, what you end up with is a large group of older workers that have a hard time reattaching. And an economist can tell you why that is. If a firm brings in a new person, they have to invest in training somebody.
And if they’re on in age, then maybe they are not going to have a big payback period afterwards. But it’s a real urgent problem.
DEAN BAKER: We should also point out there’s a racial aspect. . .
DEAN BAKER: . . . as well, as with all our numbers. So you would see much higher rates for Hispanics and particularly for African-Americans. It’s about twice the overall rate.
JEFFREY BROWN: And one of the things you both — you talk about here is the physical and psychological impact of that.
You want to tackle that one?
KEVIN HASSETT: Right.
I mean, it’s really chilling. I think, in some ways, losing one’s job is like having a death in the family. The statistics are — really were shocking to us as we dug into them. The fact is that if somebody loses their job, then, in the year after their job, the probability of them dying is 50 to 100 percent higher.
Being separated from your job can take about a year-and-a-half off your expected life. And there are reasons for that. One is that the suicide rate is higher. Dean and I calculated that right now because of the higher long-term unemployment, it’s probably the case there are about an extra 130 or so suicides a month, because of just the terrible stress that people go under when this happens.
Too many people, too many of us think of our job as our life. And so when you take the job away from someone, you can take away almost everything.
JEFFREY BROWN: Now, you both deal in the world of policy. And you point out in this article that neither party was really prepared to deal with this or has responded adequately.
And then you talk about examples where there is a sort of response, particularly in Germany, of work-sharing.
DEAN BAKER: Yes.
Actually, Kevin and I earlier worked together on this. And I think we can claim some success, because a lot of people don’t realize that there was actually a provision in the bill that extended the payroll tax cut that helped — that encouraged states to have more work-sharing.
JEFFREY BROWN: Explain what work-sharing is.
DEAN BAKER: Okay. So, 23 states have as part of their unemployment insurance program a policy where instead of laying workers off, employers can reduce their work hours.
So say you were going to lay off 10 workers. Instead of doing that, you have 50 workers work 20 percent fewer hours, 32 hours a week, say, rather than 40. Well, if you lay the workers off, they get half pay as unemployment benefits. Well, in this case, with work-sharing, the government picks up half of their lost wages.
So they’re working 20 percent fewer hours. They’re getting paid 10 percent less. And this keeps them on the job, gaining skills, in touch with the work force. It’s a much less debilitating experience. And we point to Germany as the model here.
Germany actually has a lower unemployment rate today than it did at the start of the downturn. It is not because it’s had great growth. It’s growth has been roughly the same as ours. It’s because they have policies, most importantly work-sharing, that keep people on the job, encouraging employers to keep them there, rather than lay them off.
JEFFREY BROWN: And this is an idea that can appeal to both liberals and conservatives?
KEVIN HASSETT: Right. In fact, that’s how Dean and I started working together on the work-sharing project.
It was about a couple of years ago a find of mine asked me, because I used to live in Germany, I speak German — they said, hey, why is it so German unemployment so low? I started studying it. I wrote a piece about it.
And Dean sent me an email and he said, yeah, exactly. We need a program like that in the States.
And so then I started talking to my friends in the Republican Party. He started talking to his friends in the Democratic Party. And became law in March. And I think it was a bipartisan success that is pretty rare in. . .
JEFFREY BROWN: Well, is it a success? Is it happening enough? Because you’re saying not enough has been. . .
KEVIN HASSETT: It’s a potential success.
JEFFREY BROWN: It’s a potential success.
KEVIN HASSETT: It’s a potential success.
JEFFREY BROWN: So what are the barriers to keep it from disbanding?
KEVIN HASSETT: Well, I think that the states have to aggressively pick up work-sharing programs now. If they do, the federal government will help them financially, and significantly so.
JEFFREY BROWN: Beyond work-sharing, do you see evidence in the world in which you both live of a willingness of left and right to come up with other solutions? Because here we are, of course, in another campaign season.
DEAN BAKER: Well, I think part of Kevin and my motivation was to make sure this stays on the agenda.
And there should be a sense of urgency about it. And we wish we could say here’s three things you can do that we know will work. Kevin and I went back and forth. Okay, what do we think will work? All we can say is there are some things you could try. There’s been some success with training programs, some success with public employment.
We can go down the list. There’s no — everything we say, someone can get up there and go, oh, but what about this, what about that, what about that? The important thing is this is — you have a lot of people in a really desperate situation. We should be trying. We should be experimenting.
KEVIN HASSETT: And the thing I want to add too is that this is kind of a new problem for America.
You have to go back to the Great Depression before you see numbers like what we have. And what Dean and I wanted to accomplish in this piece is to just get everybody thinking about this national emergency. It’s kind of time for a Manhattan Project.
And I know that my think tank and Dean’s think tank, we’re pouring a lot of resources into creative ideas to solve this problem. But the fact is that we have got people that are basically drifting away from society. We see the terrible effects that it has on their own lives and even the lives of their children.
We cite one study that finds that if you ask an adult, hey, when you were young, did your dad lose his job? And if he says yes, then he’s going to have a salary that’s 9 percent lower today. And so it has permanent effects on people and their families. And so what we’ve got to do is study it and we have got the come up with ideas that reconnect these people.
JEFFREY BROWN: And what’s on the top of your list of possible things to do? Dean just mentioned a few.
KEVIN HASSETT: Right.
Well, I think that one of the paths out of unemployment and long-term unemployment that we’ve seen some success with is entrepreneurship. People start businesses. Maybe it’s on eBay. Maybe it’s — they will open up a cart at the mall or maybe they will do something — they will have the next great idea.
But there are a lot of barriers to entrepreneurship that I think that we could try to fix. And so, for example, if you’re on unemployment insurance and you become self-employed because you decide to start a business, then you can lose your unemployment insurance. We need to think about ways that maybe we can use what’s left over in your unemployment insurance to help you finance a new entrepreneurial idea.
That’s the kind of idea that you could imagine maybe both parties could. . .
DEAN BAKER: Well, just to give my caution, I point out to Kevin something like eight out of 10 new businesses fail. The last thing we want to do is for people who have lost their job to also take their life’s savings and end up throwing it down the rat hole.
JEFFREY BROWN: All right, well, that shows — the debate to continue, right?
KEVIN HASSETT: Right.
JEFFREY BROWN: Dean Baker and Kevin Hassett, thanks so much.
KEVIN HASSETT: Thank you.
DEAN BAKER: Thanks for having us.
JEFFREY BROWN: And we’ve been talking about older workers that are hit particularly hard by long-term unemployment trends. A new PBS website launches tomorrow that’s designed for Americans over 50. It’s called Next Avenue, and taps trusted sources for information about work, health, finances, leisure and caregiving.
You can explore nextavenue.org beginning tomorrow. And you can find a link on our home page.