It's True: Long-Term Unemployment Can Make You Unemployable

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Sometime around 2010, employers developed a reluctance to hire workers who were not already employed. Employment postings began to note that those not currently employed would not be considered, and recruiters stipulated the same. At that point in time, the national unemployment rate was distressingly close to 10%.

Now, there seems to be a population made up of the chronically unemployed, unable to secure work simply because they have been jobless for too long.

Six to nine months out of work? Forget it
The Great Recession has left its mark in many ways, one of which is stubbornly high unemployment. Part of the problem appears to be that, sometime between six and nine months of joblessness, a worker becomes unemployable.

The Wall Street Journal describes an interesting study in which researchers found that applicants who had been out of work for fewer than six months were more able to secure employment than those unemployed for six months or longer. This situation was the most intense for low-skilled workers; after applicants had been out of work for a full nine months, finding a job became nearly impossible. College graduates did not suffer from this stigma, however.

Another study found similar results. A researcher with the Federal Reserve Bank of Boston found that prospective employers exhibited four times the interest in applicants that had not yet hit the six-month unemployment mark -- even if these job seekers had fewer of the relevant qualifications than applicants who had been jobless for over six months.

A dearth of qualified applicants?
And, yet, employers complain that there just aren't enough workers around to fill their open positions. This phenomenon is most glaring in the housing sector, where home builders have groused time and again that all the qualified construction workers seem to have vaporized since the housing crash.

The employment squeeze is so serious, according to the National Association of Home Builders, that nearly half of its members reported being unable to finish projects on time earlier this year. Just this past May, 48% of builders couldn't sign on enough framers to keep up with the workload.

In retail, a similar situation has evolved over the last few years, whereby available positions have doubled, but hiring hasn't risen to the challenge, staying essentially flat.

What can be done?
The problem is serious, and likely at least part of the reason the economy hasn't bounced back more quickly. An unemployment rate above 7% seems to be the new normal -- but I don't see a true recovery occurring while so many are unable to find work.

In early 2011, the U.S. Equal Employment Opportunity Commission took a look at this issue, and testimony from the Executive Director of the National Employment Law Project encouraged the EEOC to use anti-discrimination laws to try to halt the practice. Still, it persists and is likely hard to pin down. After all, being out of work for six months or longer isn't a protected category under federal or state laws.

Government can't really tell employers who to hire, but honey would likely work better than vinegar. For instance, state employment departments could funnel long-term, qualified workers to employers, and sweeten the deal with some sort of incentive program if companies agree to give these applicants a trial run.

Likewise, finding out from private-sector employers why this conundrum exists -- and using that knowledge to counsel the long-term unemployed -- might help increase the likelihood that those applicants will meet with success.

As for the home builders, their argument that the most qualified construction workers were immigrants that left the country after the crash sounds suspect. Surely, U. S. citizens could be enticed to enter the industry, despite lingering concerns about the health of the housing sector. Home builders have an excellent resource at their disposal, namely the NAHB -- which could retrain workers with rusty skills and attract new workers through new skill-development programs.

Two issues that are crucial to a long-lasting economic recovery are housing and the experience that qualified workers bring to companies gearing up for growth. Right now, these elements are not living up to their potential. Until they do, a full rebound from the financial crisis will remain out of reach for us all.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 18, 2013, at 11:22 AM, CharlieTX wrote:

    Must be a realllly slow news day.

  • Report this Comment On August 18, 2013, at 11:58 AM, wolfman225 wrote:

    <<In early 2011, the U.S. Equal Employment Opportunity Commission took a look at this issue, and testimony from the Executive Director of the National Employment Law Project encouraged the EEOC to use anti-discrimination laws to try to halt the practice. Still, it persists and is likely hard to pin down. After all, being out of work for six months or longer isn't a protected category under federal or state laws.>>

    So now the longer-term unemployed should be included as a protected class under "anti-discrimination" laws? Is a job the next entitlement?

    The reason for the non-hiring being a lack of qualified, experienced candidates isn't "suspect". It's fact. Keep in mind that one of the "qualifications" is a new hire willing to work for the wages offered. The system is working the way it is supposed to. When the squeeze to attract new employees gets great enough (the article made reference to builders having difficulty hiring enough framers to keep up with demand), wages will rise as necessary to attract the labor necessary to fill demand.

    To have government step in and even think of mandating that the long-term unemployed be "given a chance", regardless of whether an employer sees any value in hiring the individual is wrong thinking. And any "incentives" offered by the government would have to be paid for by increased tax levies on the rest of us.

  • Report this Comment On August 18, 2013, at 1:02 PM, bluetaz wrote:

    I think the government should get involved and set some kind of standards regarding longterm unemployment ,ive been in the management retail business for over 20 yrs, got laid off almost 3 yrs ago, and still haven't been able to get rehired , overqualified, made to much money, numerous excuses, given by employers, yet they make you go thru so much BS, numerous interviews testing, background checks,credit checks physical checkups and still, somehow they gey back to me when they do that they chose a more qualified candidate to fill their positions , anyways that's just a little of what I've come across,, going on 3 yrs unemployed ,,,, used up my 99 weeks,, by employers denying work to qualified employees everyone looses ,,, so we have to depend on others or just work under the table when possible,,,

  • Report this Comment On August 20, 2013, at 9:24 PM, recovery10111213 wrote:

    The reason employers began scapegoating the unemployed who lost their jobs in the 2007 to '09 downturn was to intentionally engineer them out of the labor force, period.

    It was done so that the people who were fortunate enough to keep their jobs during the worst of the recession/depression could be made to feel, at the time, that the economy was better than it truly was. At the time, this was done for the purpose of keeping consumer confidence and spending up amongst the unaffected group of consumers; because consumer spending is 70% of the economy.

    Now, if this scapegoating hadn't been done, 15 million unemployed workers would have been and would be competing for jobs with another 15 million workers who hadn't lost employment during the 2007-'09 "recession" years but were and are looking for work in the "recovery" years 2010 - 20xx?.

    If the long-term unemployed were or are allowed to compete as equals, a critical mass of disaffected consumers (30 million plus), all experience a bad economy at the same time. This results in additional lay-offs, on top of those already mentioned (maybe 5 or 10 million more workers?), as consumer spending slows. This is the black hole scenario that economists fear. When we can't generate an "escape velocity" to avoid permanent economic contraction.

    As was learned from the generation that went through the Great Depression, consumer spending patterns are altered for life once a person experiences this type of economic hardship. So, it was far easier to scapegoat 15 million people and end it there.

    Additionally, the long-term unemployed are out of unemployment benefits. So, for every one long-term unemployed person who is hired, a recently unemployed person is not. These recently unemployed workers all have rightful claims to unemployment benefits for many months and most states' unemployment funds are already seriously depleted.

    So the states, also, had and continue to have an interest in getting those seen as liabilities (recently unemployed) back to work ASAP while those who have no more claims for benefits tend to just drop out of the labor force though discouragement, early retirement or whatever. This makes the unemployment headline number go down artificially and saves states money.

    - And politicians like that!

    And of course the news media has been the medium of social engineering for this policy. They have, for years, scapegoated the unemployed with a ready made list of negative stereotypes for those in hiring positions to unconsciously default to: Lazy, drug users, lost their skills, bad people, etc.

    So, it all worked and continues to work rather nicely for the politicians and corporations and it doesn't appear that it will end soon. Low interest rates, quantitative easing, essentially negative interest rate loans for banks, corporations brokerage firms etc. while the job market remains in a coma and blame is passed amongst the unwashed masses.

  • Report this Comment On October 08, 2013, at 2:30 AM, hodgmo wrote:

    Does the above ‘scapegoating’ perspective seem far-fetched to you? Maybe you should read it again. I’ve seen a continuous propaganda deluge from WSJ, NY Times, Reuters, Forbes, -and now The Motley Fool of why the “long term” unemployed (six months without a job is long term? –give me a break!) are now permanently unemployable. All based on innuendo reasons like: unemployed people are “damaged goods” or “more undesirable than people with criminal records”. I dare you to show me any credible employer who would rather hire a criminal than someone without a current job (not counting Jon Corzine). The ‘journalists’ penning the articles should be ashamed. Also, if you are looking for government legislation to fix this, you’ve fallen exactly into their trap.

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