I was glad see James Surowiecki take a close look at the long-term damage, both micro and macro, associated with long-term unemployment (see figure showing share of the unemployed who’ve been looking for work for at least six months).
He takes you through the literature, including the stuff on the dreaded “hysteresis.” This is basically what happens when a cyclical problem becomes a structural problem. In this case, it describes a situation where people are unemployed for so long that their skills erode to the point where they’re less productive and thus less employable. That slows longer term growth and raises the unemployment rate over the expansion.
However, when JS writes this:
We could also follow Germany’s example and subsidize job-sharing programs, which have helped Germany bring down its long-term unemployment rate despite the recession. Sadly, there’s little sign that policymakers have much interest in using these tools.
…he is, I’m happy to report, overlooking that we have, in fact, followed that example! As noted here, our version of the German work sharing program was included in the deal that extended the payroll tax cut and UI extension. For the record, Sen Jack Reed from RI and Neil Ridley, an author of the link above, have been tireless advocates of this idea.
It’s not often you get to crow about something we’ve done right of late to help working people, so I wanted to be sure to correct this.