The Changing Contours of Long-Term Unemployment: The Need for a More Radical Policy

Oren Levin-Waldman

Journal of Economic Issues, 2014, vol. 48, issue 3, 849-870

Abstract: Since the financial meltdown of 2007, unemployment has consistently been above 6.0 percent. 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. This study looks at the demographics of the long-term unemployed for the years 2007-2010, and compares them to the years 1991-1994 to see what changes have occurred specifically among the long-term unemployed. The data shows that, in terms of structural changes, the 1991-1994 and 2007-2010 periods were not much different. Rather, the nature of this recession resulted in an altered composition of the long-term unemployed. Because long-term unemployment 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.

Date: 2014
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DOI: 10.2753/JEI0021-3624480312

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