Policy Responses to Long-Term Unemployment

Testimony Before the House Ways and Means Subcommittee on Income Security and Family Support

CAP Action’s Heather Boushey testifies before the House Ways and Means Subcommittee on Income Security and Family Support. Read the testimony (CAP Action)

Today’s record-high long-term unemployment is a function of the reality that there simply aren’t enough jobs to go around due to a lack of demand. While the economy has been growing for three quarters now, businesses have not yet begun to ramp up hiring. While long-term unemployment creates significant hardships for individual families, it also threatens the nascent economic recovery: The long-term unemployed can’t spend what they don’t earn and most are limited in what they can borrow due to falling home prices and the credit squeeze, and spending is what keeps our economy humming. Thus, there is a direct link between lack of hiring and future economic growth.

In thinking about a policy agenda to address long-term unemployment, there are some key principles to keep in mind. First, there is a new face of the long-term unemployed, who have new and potentially different problems from prior recessions. Second, at this point in the economic recovery, the costs of inaction far outweigh the cost of action. While we need to keep our eye on a growing federal debt, addressing the scourge of long-term unemployment now will do more to cut future deficits than not.

Congress should focus on three policy goals:

  • Stop adding to the problem of unemployment. In this recession, once someone has lost their job, they are facing historically low odds of finding a new job. Policy efforts here include expanding work-sharing programs and having the temerity to keep recovery dollars flowing until the recovery actually takes hold. Recovery dollars will be especially useful for the long-term unemployed, as well as budget-constrained states and localities that are, as we speak, adding to our unemployment woes by laying off teachers and police officers. 
  • Help the long-term unemployed beat the odds and find work. We know from decades of research that the displaced and long-term unemployed are more often at the bottom of the hiring queue and often suffer years of lowered earnings. Policymakers should recognize the unique challenges of today’s long-term unemployed and improve the basket of services available, including improving employment services, addressing the challenges of the collapse of the housing bubble for those who need to move for work, and supporting workers who need to take lower paying jobs.
  • Fund national jobs programs. The data are clear here as well: We have a growing problem that is threatening to leave millions of workers out of the labor market, especially younger workers, older workers, and those in declining industries. Congress should consider the need to create and expand jobs programs, including those outlined in the Jobs for America Act, increase funds for our national service programs, and continue the TANF Emergency Funds that are putting people to work.

I want to stress that helping the long-term unemployed is not just about doing right by America’s families, although that is certainly important. Getting the long-term unemployed back to work is critical for our economy and the general welfare of our nation. But, we also know that recessions that follow from a financial crisis are deeper and more protracted than typical recessions, and right now, there continues to be little wiggle room in terms of monetary policy. Unlike any point in the decades since before World War II, the challenge of laying the foundation for a strong economy lies with you and this body of government. These are unusual times because fiscal policy continues to be the primary lever that the federal government has at its disposal to spur economic growth. I urge you to consider that these extraordinary times call for extraordinary action—continued spending to aid to the long-term unemployed. The sense of imminent collapse of our financial sector, thankfully, now appears behind us, but the fallout for our economy remains and it is just as dramatic and continues to require bold steps.

Poll data continues to confirm that the public prefers Congress to address unemployment over deficit reduction in the short-term. Over the long-term, the public is concerned about deficit spending, but the priority is to get people back to work. In a new poll released earlier this week, the Hart Research Associates found that the majority of Americans believe Congress should continue the health care subsidy and jobless benefits. An overwhelming 74 percent of Americans agreed with the statement “With unemployment close to ten percent and millions still out of work, it is too early to start cutting back benefits and health coverage for workers who lost their jobs.”

CAP Action’s Heather Boushey testifies before the House Ways and Means Subcommittee on Income Security and Family Support. Read the testimony (CAP Action)