The Changing Contours of Long-Term Unemployment

The Need for a More Radical Approach

Unemployment has been above 8 percent for more than three years now, but the real story has been the increase among the ranks of the long-term unemployed. On one level, long-term unemployment can be accounted for by structural changes. But on another level, the problem of long-term unemployment is really no more complicated than the absence of effective demand. The traditional approach of easing money into the economy by tinkering with interest rates and the money supply is really a top-down approach. What is needed is a grassroots bottom-up approach which affords workers the ability to demand more goods and services.

This study looks at the demographics of the long-term unemployed for the years 2007 to 2010 and compares them to the years 1991 to 1994 to see what changes have occurred specifically among the long-term unemployed. And yet, the data shows that structural changes occurring between 2007 and 2010 are really not much worse than between 1991 and 1994. Rather, the nature of this recession resulted in the composition of the long-term unemployed looking different. Because long-term unemployed in this recession is a function of a particularly deep recession, a new approach is needed. Based on the data, this study argues for a wage policy that would allow for people to increase their effective demand for goods and services.