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March 23, 2014 5:29 PM Four policies that would provide relief for the long-term unemployed — and they’re all far more practical than you may think

By Kathleen Geier

One problem with the Brookings paper about the long-term unemployed that I wrote about yesterday is that while the authors say that helping the long-term unemployed find jobs will require “a concerted effort by policy makers, social organizations, communities and families,” they don’t recommend any specific course of action. So in this post, I thought I’d identify policies that would help. Here are four of them:

Fiscal policies that encourage full employment. The recently released “Better Off Budget” by the Congressional Progressive Caucus might be a model here. It would finance $1.6 trillion in direct job creation measures over FY2014-2024 through spending on infrastructure, education, health, and more.

TANF-subsidized jobs. These are jobs programs run by state governments where, for a limited time, the federal government pays most of the employee’s wage. These programs are targeted at low-income young people and adults and have been found to increase employment and earnings among participants. What’s interesting is that they’ve also been shown to be particularly effective for the long-term unemployed. As economist Jared Bernstein pointed out last year:

In Mississippi and Florida, average annual earnings of the long-term unemployed rose by about $7,000 after participating; in Los Angeles and Wisconsin, they rose by about $4,000. In all four sites, earnings rose much more among the long-term unemployed than among people who had been unemployed for shorter periods.

Expansion of short-time compensation (STC) benefits. STC is a form of unemployment insurance received by employees whose hours are cut. It makes up for the portion of an employee’s wages that are lost when full-time hours are reduced to part-time. According to a recent report by the Upjohn Institute, an employment think tank, only 17 (update: it’s now 21) states have STC. Take-up rates of the benefit have been low, but that may be largely due to lack of employer awareness of the program. Upjohn’s analysis found that the program would need to be scaled up to substantially mitigate job loss, but that if it were expanded it could be an effective counter-cyclical tool. Crucially, STC would perform the important public service of preventing many people from becoming unemployed in the first place.

One point about STC deserves special emphasis. The Upjohn study notes that

A large body of research shows that the U.S. unemployment insurance system has the effect of subsidizing layoffs [emphasis mine], causing employers to rely too much on layoffs and too little on work sharing to achieve hours reductions during recessions.

Given how dismal job prospects are for the long-term unemployed, do we really think our government ought to be in the business of subsidizing layoffs? It’s long past time we re-orient our public policies towards saving jobs whenever possible. Towards that end, expanding STC benefits and creating incentives for employers to increase their usage of the STC program as an alternate to layoffs are policies that should be aggressively pursued.

Direct job creation by the government. The virtues of such a program are many. It would be fast-acting, cost-effective, and targeted to those who need it most. Writing for the think tank Demos, Philip Harvey argued that:

The advantage of the direct job-creation strategy lies in its unique ability to serve the goals of anti-recessionary fiscal policy at the same time that it is serving the social welfare needs of jobless workers. There is no other anti-recession strategy that can do either of these things as well as a direct job-creation program, let alone combine them in a single programmatic initiative.

I can already hear the criticisms. “But a jobs program is too pie-in-the-sky!” “It’s utopian!”

I’m afraid that some people have lost any sense of what the word “utopian” means. A world without violence? An economy not driven by the profit motive? Now, those things are utopian.

But a government-run jobs program for the unemployed? That is something practical, that could very well exist in this world. In fact, we’ve operated such programs in this country, most notably the WPA during the Great Depression (though CETA, during the 1970s, is another example).

Given the extraordinary difficulties the long-term unemployed are having in finding new employment — difficulties that are amplified by the findings of the Brookings report — the time has come for progressives to put a public jobs program back on the political agenda. The sheer human misery caused by prolonged unemployment is well-documented in the social science literature. Our national un- and under-employment crisis has dragged on for far too long. The needless human suffering it has caused, and the damage it has done to our economy, need to come to an end, now.

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee

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