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The Long Dark Tea Time of the Unemployed

Relationship between the inflation rate and th...

Image via Wikipedia

The Economist has fallen precipitously in my esteem since the magazine turned away from economic empiricism and adopted belief in the magical pixie dust of Keynesian mystics, but they can still provide some worthwhile copy, sometimes:

The long-term unemployed are struggling most; in the year to June, the newly jobless were three times more likely to find new work in a given month than the long-term unemployed. Many of the latter have given up hope. For the first time in decades, jobless workers are more likely to drop out of the labour force (and cease to be counted as unemployed) than to get a job (see chart). Bit by bit, a large mass of American workers is losing touch with the labour market.

One might expect unemployment to carry less stigma after a deep recession—bad times, rather than personal shortcoming, being the more likely reason for a sacking. Yet a worker’s lifetime earnings are hurt more by a job loss in a weak economy. An experienced worker laid off when unemployment is at 9% faces a reduction in lifetime earnings nearly twice that of someone sacked when the rate is 5%: a loss of 20% on average, according to new work by Steven Davis and Till von Wachter. The unemployed increasingly face discrimination in the hiring queue, often enough that Barack Obama proposes to ban the practice. Such a rule might encourage employers not to hire at all, for fear of legal action.

 
That’s bad news. Long term unemployment during the ‘bad times’ reduces your lifetime income by a fifth? That’s really remarkable. But, I can say longterm unemployment gives one an appreciation of the simple life, so that 20% really isn’t missed.

*Graph has nothing to do with article, I just thought it was cool.

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One Response

  1. […] The Long Dark Tea Time of the Unemployed (martinandrade.wordpress.com) […]

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