Tim Harford wrote an interesting piece about the long-term unemployed in the FT Magazine last year. In the US during the great recession unemployment reached over 10% yet it was the long-term unemployment (being unemployed for more than 6 months) figures which were very concerning. Normally you would find that long-term unemployment figures wouldn’t reach above 20% of all those unemployed but during the great recession the figure got to 45%.
Research has shown that people who have been out of work for more than six months have been marginalised: employers ignore them, bidding up wages if necessary to attract workers from the ranks of the short-term unemployed. Also one experiment found that employers were three times more likely to call an applicant with irrelevant but recent employment experience, than someone who had relevant experience but who had been out of work for more than six months.
Problems with being long-term unemployed:
Workers become less motivated after continued failed attempts to gain employment and therefore are less active in the job and emotionally drained
Benefits become an attractive alternative – depends on the country.
According to Tim Harford the right wing policy is a tough love approach to cut benefits and entice them off the sidelines before they become unemployable
The left wing approach is that the long-term unemployed are the victims of circumstance and need support.
In a lot of countries today the labour market has not been hit by overgenerous benefits but by a structural shift in the economy away from construction. The supply of jobs no longer matches the supply of workers = Structural Unemployment.