[Joint House and Senate Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 113-38
LONG-TERM UNEMPLOYMENT: CONSEQUENCES AND SOLUTIONS
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HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
APRIL 24, 2013
__________
Printed for the use of the Joint Economic Committee
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
HOUSE OF REPRESENTATIVES SENATE
Kevin Brady, Texas, Chairman Amy Klobuchar, Minnesota, Vice
John Campbell, California Chair
Sean P. Duffy, Wisconsin Robert P. Casey, Jr., Pennsylvania
Justin Amash, Michigan Mark R. Warner, Virginia
Erik Paulsen, Minnesota Bernard Sanders, Vermont
Richard L. Hanna, New York Christopher Murphy, Connecticut
Carolyn B. Maloney, New York Martin Heinrich, New Mexico
Loretta Sanchez, California Dan Coats, Indiana
Elijah E. Cummings, Maryland Mike Lee, Utah
John Delaney, Maryland Roger F. Wicker, Mississippi
Pat Toomey, Pennsylvania
Robert P. O'Quinn, Executive Director
Niles Godes, Democratic Staff Director
C O N T E N T S
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Opening Statements of Members
Hon. Amy Klobuchar, Vice Chair, a U.S. Senator from Minnesota.... 1
Witnesses
Mr. Randy Johnson, Executive Director, Workforce Development,
Inc., Rochester, MN............................................ 5
Hon. Keith Hall, Ph.D., Senior Research Fellow, Mercatus Center
at George Mason University and former Commissioner of the
Bureau of Labor Statistics, Arlington, Va...................... 7
Dr. Harry J. Holzer, Ph.D., Professor, Georgetown Public Policy
Institute, Washington, DC...................................... 9
Dr. Kevin Hassett, Ph.D., Senior Fellow and Director of Economic
Policy Studies, American Enterprise Institute, Washington, DC.. 11
Submissions for the Record
Prepared statement of Mr. Randy Johnson.......................... 32
Prepared statement of Hon. Keith Hall............................ 33
Prepared statement of Dr. Harry J. Holzer........................ 37
Prepared statement of Dr. Kevin Hassett.......................... 41
Prepared statement of Chairman Brady............................. 52
Chart titled ``37 Consecutive Months of Private Sector Job
Growth''....................................................... 54
Chart titled ``Solutions to Address Long-Term Unemployment''..... 55
Chart titled ``State Long-Term Unemployment Rates''.............. 56
LONG-TERM UNEMPLOYMENT: CONSEQUENCES AND SOLUTIONS
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WEDNESDAY, APRIL 24, 2013
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met, pursuant to call, at 10:31 a.m. in Room
106 of the Dirksen Senate Office Building, the Honorable Amy
Klobuchar, Vice Chairman, presiding.
Representatives present: Cummings and Delaney.
Senators present: Klobuchar and S. Murphy.
Staff present: Gail Cohen, Sarah Elkins, Christina
Forsberg, Connie Foster, Niles Godes, Colleen Healy, and Robert
O'Quinn.
OPENING STATEMENT OF HON. AMY KLOBUCHAR, VICE CHAIR, A U.S.
SENATOR FROM MINNESOTA
Vice Chair Klobuchar. Good morning. I would like to thank
everyone for being here today for this important conversation
about long-term unemployment. We have several Members that will
be arriving.
I want to welcome, first of all, the many who are attending
this hearing. Thank you for caring about this really important
topic. I would especially like to thank our distinguished panel
of witnesses who I will be introducing shortly.
My hope is that we can spend the bulk of our time this
morning focusing on solutions for helping more of America's
long-term unemployed get back to work.
There are a lot of good ideas out there to address this
issue, including efforts currently underway in my home State of
Minnesota in areas like skills training and continuing
education. We will be hearing a little bit more about those
efforts today.
The truth is that, for most workers, the job market is
better today than it has been in years. And as this chart shows
right here, private-sector employers have added more than 1.2
million jobs over the past six months alone in virtually every
industry across the board.
At 7.6 percent, the national unemployment rate is the
lowest point in more than four years. In Minnesota, I would
note that our unemployment rate is 5.4 percent. But there is no
question that we still have more work to do, especially for
America's long-term unemployed. Maybe some in the audience
associate long-term unemployed with regular unemployed, but in
fact long-term unemployed means there are 4.6 million people
who now fit this description, meaning they have been out of a
job and searching for work for more than 6 months. So they are
a subset of the unemployed.
We must do more to address the ongoing challenges of long-
term unemployment, because this problem impacts more than
workers who cannot find jobs. It also has consequences for our
economy and requires a national strategy and a national
solution.
In preparation for today's hearing, the Joint Economic
Committee prepared an in-depth report examining the full scope
of long-term unemployment, including state-by-state data.
Among its findings, the report shows that long-term
unemployment disproportionately affects workers at the times
when they are most in need of stable employment. Younger
workers who are just beginning their careers and may have
student loans experience the highest rate of long-term
unemployment.
Meanwhile, the unemployment rate for older workers is low;
but those who do become unemployed are less likely to find new
jobs quickly. Fewer than half of older unemployed workers find
a new job within six months.
For workers of all ages, the report finds that the longer a
person is unemployed the less likely they are to find a job, as
skills atrophy and professional networks dry up.
In addition, as the map shows right here, the long-term
unemployment rate varies by state and by region. I'm going to
see if I have a copy of that so we can go through it. Thank
you.
As you can see by this chart right here, many of the
states, especially in the upper Midwest, the state long-term
unemployment rate is 0.6 in North Dakota where we know they are
doing a lot with energy there; 0.8 percent in South Dakota; 1.8
percent in Minnesota; 1.3 percent in Iowa. This region has a
lower long-term unemployment rate.
We also have in the South, you see a higher long-term
unemployment rate generally, with Florida at 4.1 percent;
Georgia at 3.8 percent. The East Coast is somewhat mixed,
depending on what state you are in, and California and Nevada
are up on the higher end at 4.4 and 4.8 percent.
So you can see the difference in region in terms of long-
term unemployment.
We also know that recent Veterans are experiencing higher
rates of unemployment than the general population. Congress has
taken steps to help them translate their experience in serving
our country into skills required by employers.
Much more needs to be done to help our Nation's Veterans
re-enter the civilian workforce. One of the sad ironies of the
situation is the fact that there are actually job openings out
there, and that is one of the things that I am really focused
on today. Because especially in these states--and you can see
the increasing number of them with somewhat lower unemployment
rates--there is still a long-term unemployment rate that is too
high with some people that just simply do not fit the jobs that
are open. And that is a problem--not with all unemployed, but
with an increasingly significant number.
And that is because the overall unemployment rate has gone
down, but there is still this long-term unemployed rate that
concerns us. Because when we have openings, like I see all over
our State--the town of Benson, Minnesota, the last time I was
there, 60 job openings for welders, for people in tool and die,
with people running robotics equipment; especially in some of
the rural areas that have manufacturing, we actually need
people with those skills, and they tend to be jobs where you
can't just go right out of high school and get the job. You
have to actually have a year or two of training to take on
using this technology.
In a recent poll in my State of manufacturing companies, 60
percent of respondents said it was difficult to attract
candidates with the skills or experience for the jobs they had
open. And believe me, they want them. I cannot tell you how
many managers of plants have told me: We just need someone that
wants to learn these skills, or that has these skills. We will
take them in, because we are starting to turn away work.
In the exact same poll three years ago, only 40 percent of
respondents reported having that problem. So you see in one
state you go from 40 percent have openings that they cannot
find the workers for to 60 percent. It is a good problem to
have, in that we are seeing better employment rates, but it is
a difficult problem to have because you want these jobs in
America instead of having these employers start opening up
plants in other countries.
So we need the skilled workers, and you certainly have
workers that want to have those skills. We just need to match
the skills they are getting in high school--this idea that they
can get community college degrees while they are in high
school, and ramp that up, as well as a direct path that
involves them going into some kind of post-secondary school
where you actually get the skills where the jobs are.
There is a gap between the skills employers want and the
experience the workers have. That raises concerns about how
much of our unemployment is cyclical, and how much is
structural in nature.
If it is largely cyclical, unemployment will continue to
drop as the economy continues to grow. Structural unemployment,
on the other hand, can be a more challenging problem to address
and requires more targeted and more creative workforce training
efforts.
America's industry is changing. Take sectors like
manufacturing. Sophisticated robots have to be run and
maintained and invented. The wrench and hammer that workers
used before are now replaced with skills of engineering and
skills of math.
With smart investments in workforce training, we can help
more workers adjust to the changing landscape. I also believe
we can do more to elevate the role of hands-on real-world
training that I mentioned before.
One of the ways to do this is to encourage partnerships
between schools and employers in their communities. There are
places in Minnesota where I have seen it work incredibly well.
They are kind of mid-sized cities--places like Rochester,
Minnesota, where the Mayo Clinic is. They can go to a community
college and say: you know, we're going to need these many
nurses with these skills. And the people in the community
actually know, because they live there, that if they get those
skills then they are going to be able to go and get a job.
And so you can have this synergy between the schools, the
parents and the kids, or the workers, and the employers. Places
like Thief River Falls, Minnesota, which most people may not
have heard about except in Minnesota, the home of Arctic Cat
which makes snowmobiles and ATVs, and also the home of DigiKey,
a major employer of 2,500 people. They have a community college
called Northland Community College. Those two major employers
use it all the time for management skills, but kids that go
there and their parents go to the high school, know if they get
a degree there, or they go over to Moorehead or Fargo and get a
degree, they are going to be able to come back and have a job.
So it is easy to see how the things match up. It is much
harder to see in the inner cities where you might not have an
employer right next door, or in really small towns where you
might not have that ability. So much more has to be done to
make it easier for kids in high school to gain those skills,
and in the community college.
We also need to continue to work on policies that encourage
job creation and strengthen our economy overall by promoting
exports, by encouraging entrepreneurship and innovation, by
investing in education, research, and development, and by
finding balanced bipartisan solutions to bringing our debt
down.
There is no silver bullet solution that will solve our
long-term unemployment challenge, but I believe that there are
a number of important steps we can take to address the problem
effectively and proactively. That is why we are holding this
hearing today.
So I want to thank our witnesses for coming. I know
Chairman Brady will be joining us later, and he will make a
statement when he arrives. But for now I think it would be
good--and I want to thank Senator Murphy for joining us--to get
started with our testimony from our witnesses.
I am going to introduce them all at once, and then have
people give your testimony.
First we have Mr. Randy Johnson. He is the Executive
Director of Workforce Development, or WDI, based in Rochester,
Minnesota, that I just mentioned. Mr. Johnson has worked for
WDI since 1985, and has served as the Executive Director for
the past 16 years.
Under his leadership, WDI has won numerous awards,
including being named the best rural workforce development
system by the National Workforce Association. In 2012, the U.S.
General Accountability Office recognized WDI's prevocational
health care academics as one of the best practices for
Workforce Development in the Nation.
Mr. Johnson has also led the efforts to have Workforce
Centers co-located on the campuses of the local community
colleges.
Dr. Keith Hall--welcome back, Dr. Hall--Dr. Keith Hall is
the former Commissioner of the Bureau of Labor Statistics. He
currently works as the Senior Research Fellow at the Mercatus
Center at George Mason University. He has served in a variety
of Government positions, including Chief Economist for the
White House Council of Economic Advisers, and Chief Economist
for the U.S. Department of Commerce.
Dr. Harry Holzer is also with us. He is the Professor of
Public Policy at Georgetown University, and a founding director
of the New Georgetown Center on Poverty and Equality in Public
Policy. He is currently a Senior Fellow at the Urban Institute,
and a Senior Affiliate of the National Poverty Center at the
University of Michigan, among his many other affiliations.
Prior to coming to Georgetown, Professor Holzer served as
the Chief Economist for the U.S. Department of Labor.
Finally, Dr. Kevin Hassett is the Director of Economic
Policy Studies and a Senior Fellow at the American Enterprise
Institute. His research areas include the U.S economy, tax
policy, and the stock market. Previously, Dr. Hassett was a
senior economist at the Board of Governors of the Federal
Reserve System, a Professor at the Graduate School of Business
of Columbia University, and a policy consultant to the Treasury
Department during the George H.W. Bush and Clinton
Administrations. He also served as a top economic advisor to
George W. Bush and the John McCain Presidential campaigns.
Thank you, gentlemen, for being here and we will start with
my home town witness, Mr. Johnson.
STATEMENT OF MR. RANDY JOHNSON, EXECUTIVE DIRECTOR, WORKFORCE
DEVELOPMENT, INC., ROCHESTER, MN
Mr. Johnson. Thank you Senator, Members of the Committee.
I would like to start by thanking Chairman Brady and
Senator Klobuchar for calling this hearing on the long-term
unemployed. This population represents a challenge, but in many
ways reflect our local economies and ways we cope as society.
Thirty years ago I found myself unemployed, and my wife out
of work while expecting our first child. That experience made
an indelible impression on me, and I vowed to work toward
building a better public system to help those in similar
situations.
In many respects, I believe that we have succeeded. Back
then, our electronic job matching resources were decades away,
and the Internet and social media systems that now allow people
to network were inconceivable.
We have One-Stop Job Centers with multiple partners present
to provide coordinated services. Yet the economy continues to
change rapidly and can be hard for the unemployed to keep up.
In Southeast Minnesota, we serve an average of 1,500
dislocated workers a year, and regularly post a return-on-
investment of $3 for every $1 invested by getting them back to
work. We have found that the most critical element in getting
people re-employed is early intervention, and to meet people
one-on-one up front for a career planning session to start the
process of rebuilding the relationships.
A good example of this was witnessed recently in our area
with the return of Minnesota's National Guard Unit from Iraq
and Kuwait. Every soldier who had reported a need for
employment was given a career assessment while they were still
in theater, and when they returned they all were connected to a
career counselor from the One-Stop.
We assembled 108 private sector employers, and 60 different
partner agencies to be grounded in the challenges the Veterans
face, and then provided sector-based job information at their
30- and 60-day re-integration events. As a result, Veterans'
unemployment in our area is now lower than the civilian
counterparts and one of the lowest in the Nation at just over 1
percent.
Older workers provide a special challenge. Half of all of
our unemployed folks that we are serving aged 55 and older have
been unemployed for over a year.
In addition, we have found that 25 percent of this group
self-describes as having no real computer or social media
skills. However, the convenient electronic tools that we now
have to seek work can ensure even less human interaction during
the day.
So one way that we have had success is bringing people
together for ``brown bag'' meetings, where people can get
together and share job leads and bolster each other's spirits.
We also use this time to build resumes in group, while
identifying the experiences they have had for which colleges
might grant a ``Credit for Prior Learning.'' One man told us
that if it weren't for these gatherings he wouldn't have any
reason to get out of bed in the morning.
Short-term training also shows good results with older
workers. Just yesterday I learned of a 55-year-old that we are
serving that was an unemployed engineer that had been out of
work for over two years who found work at $6 over his past age
after providing a 6-Sigma quality control training. But I would
note that we need to make sure that the Workforce Investment
Act recognizes this kind of effort as attaining a
``credential,'' which it currently does not.
Good jobs with a solid future are growing, but they often
require the job seeker to take a risk and change careers. To
lessen this risk, we have had great success in providing month-
long prevocational ``Career Academies'' for adults who are
looking to move into Health Care, Advanced Manufacturing, or
Alternative Energy.
Our Academy graduates more than double their completion
rate in subsequent education, and significantly reduce their
turnover rate on the job. One woman shared that attending one
of our Health Care Academies was ``the best thing I have ever
done for myself!'' But note, despite our Academy successes that
were chronicled, as you had mentioned, as a ``Best Practice''
by the General Accounting Office last year, the Workforce
Investment Act does not recognize the expenditures as
``credential training.''
As the economy recovers, we find more employers eager to
add full-time, good-paying jobs. But according to employers,
the only good way to find out if the applicant has the skills
they are looking for is to try them out in an internship, an
apprenticeship, or some other kind of on-the-job training
experience.
We need to make sure that we have the right tools to make
it easier for employers to participate in work-based training
and take a chance on the long-term unemployed. So here are some
examples of work-based learning that I think could help reduce
long-term unemployment:
Assist the States in developing an electronic ``work-based
learning clearinghouse'' that would help employers connect with
individuals across the region seeking an internship or another
on-the-job training experience.
Incent employers to consider the long-term unemployed by
providing ``Adult Try-Out Employment'' experiences in the
private sector that would have the workforce serve provider act
as the employer of record during the initial two months of
work, and then cost-share the wages over the next two months.
And there is a program that has been a pilot known as
``Platform to Employment'' that has accomplished that.
Consider offering a ``wage replacement'' differential
between the job seeker's new starting wage and their past
employment as they start out--especially in the case of long-
term, older workers seeking employment with small employers.
Thank you once again for the opportunity to testify today
on behalf of the public workforce system, and the long-term
unemployed.
[The prepared statement of Mr. Randy Johnson appears in the
Submissions for the Record on page 32.]
Vice Chair Klobuchar. Very good. Thank you, Mr. Johnson.
Dr. Hall.
STATEMENT OF THE HONORABLE KEITH HALL, Ph.D., SENIOR RESEARCH
FELLOW, MERCATUS CENTER AT GEORGE MASON UNIVERSITY, AND FORMER
COMMISSIONER OF THE BUREAU OF LABOR STATISTICS, ARLINGTON, VA
Dr. Hall. Good morning.
Vice Chair Klobuchar. Good morning.
Dr. Hall. Chairman Brady, Vice Chairwoman Klobuchar, and
Members of the Committee:
Thank you for the chance to discuss the current employment
situation and the problem of long-term unemployment. I
appreciate the opportunity to testify today.
In my testimony, I want to make three points.
First, the U.S. labor market is still not strong, and a
full, robust recovery is not yet underway.
Second, the problem of long-term jobless is actually worse
than the long-term unemployment rate data indicates.
And third, as bad as this problem is, its main cause is the
extremely weak economic recovery and not a skills' gap in the
labor market.
We are now a full three years from the labor market trough
of the Great Recession. Over the past two years, we have had
modest job growth. We have averaged about 175,000 new jobs in
2011; 183,000 jobs per month in 2012; and have averaged 16,000
jobs per month so far this year.
While this job growth is welcome, it is far short of what
we need to achieve a full labor market recovery. Two
significant problems have become evident through this lengthy
period of slow job growth.
First, there has been an unprecedented disengagement from
the labor force with current participation at its lowest level
in almost 35 years. This means there are currently 102 million
jobless people in the United States, but less than 12 million
are actively looking for work.
Second, there are over 4.6 million people that are long-
term unemployed, and the long-term unemployment rate at 3
percent is well above historical levels.
One of the problems with this disengagement from the labor
force is that the long-term unemployment rate underestimates
the number of long-term jobless. To be counted as long-term
unemployed, an individual needs to first have no work
whatsoever for six months. Second, this individual must want to
work and be nearly instantly available if offered work. And
third, this individual must be actively looking for work.
By ``actively looking,'' I mean that every month this
individual must send out a resume, contact an employer
directly, engage an employment agency or engage in some other
sort of activity that by itself could result in employment.
Checking for new job openings on the Internet, or in the
newspaper alone does not qualify as ``active job search.''
This sets a high bar for someone to remain unemployed for
long enough to be considered ``long-term unemployed'' as
opposed to just long-term jobless.
In 2011, the average unemployed person who eventually
exited the labor force looked unsuccessfully for work for over
21 weeks. They would not have been classified as ``long-term
unemployed'' and dropped out just six weeks short of being
considered ``long-term unemployed.''
We have no measure of the number of long-term jobless that
are not counted as unemployed. There are certainly millions of
them.
There is a predictable business cycle pattern to long-term
unemployment. The number of long-term unemployed rises months
into a recession, and continues to rise months after the end of
a recession. It continues to rise simply because the process of
a full labor market recovery requires that GDP not just grow
but grow faster than this long-run trend.
Since the end of this Recession, we have had the weakest
economic recovery in at least 60 years. Although job growth has
been slow, the labor market has in fact outperformed GDP
growth. In 2010, we had GDP growth of 2.4 percent. In 2011,
growth slowed to 2.0 percent. In 2012, growth slowed to just
1.7 percent.
Historically, this level of economic growth projects to
just 134,000 new jobs per month in 2011; and 120,000 in 2012,
well below the actual 175,000 and 183,000 jobs per month,
respectively, that we experienced.
Household incomes and Government spending continued to be
greatly affected by joblessness. Government spending on means'
tested programs is now about $1 trillion a year. A remarkable
17.2 percent of total household income now comes from
Government spending on social benefits to persons.
This is spending on the broad range of Government programs
designed to provide for assistance under circumstances of
unemployment, poverty, sickness, and retirement. Social
benefits to persons simply moves with the jobless rate, the
share of the working age population without unemployment.
Currently the jobless rate is a very high 41.5 percent, the
same as it was in October of 2009 when the unemployment rate
was 10 percent.
In closing, the recovery from the effects of the Great
Recession on the labor market has been very slow. One of the
results of this slow progress is the unprecedented growth in
the number of long-term unemployed. And, as bad as this
official data appears, it underestimates the problem. There are
almost certainly millions of people that are long-term jobless
that are not considered ``unemployed.'' Although other factors
may have contributed to this, the main cause is slow economic
growth.
The only real solution to this problem is a significant and
sustained increase in economic growth. Unfortunately, just as
slow as economic growth has created long-term joblessness,
long-term joblessness is helping to hold back economic growth
and has a significant impact on Government spending.
Thank you for inviting me today.
[The prepared statement of Hon. Keith Hall appears in the
Submissions for the Record on page 33.]
Vice Chair Klobuchar. Thank you, very much.
Dr. Holzer.
STATEMENT OF DR. HARRY J. HOLZER, Ph.D., PROFESSOR, GEORGETOWN
PUBLIC POLICY INSTITUTE, WASHINGTON, DC
Dr. Holzer. Thank you, and good morning, Senator Klobuchar
and Senator Murphy.
I would like to make several points this morning about
structural and long-term unemployment and what it means for
different groups of American workers.
Point number one, structural unemployment in the United
States has probably risen about one percentage point during the
labor market downturn and slow recovery since 2007, though it
is unclear how much of this one percentage point increase will
actually last over time.
Most of the increase in unemployment since 2007 does
reflect insufficient employer demand for workers. But the job
vacancy rate at 2.8 percent nationally is somewhat higher than
we might expect with so much unemployment.
Employers in some sectors like health care and advanced
manufacturing do seem to have genuine difficulty filling jobs
requiring specific skills while other employers in other
sectors seem to be moving more slowly to fill jobs because
demand for their products remains very limited and very
uncertain.
Point number two, long-term unemployment should have
negative effects on future employment prospects, at least for
some groups. The long-term unemployed now are being rehired
more slowly than those with short unemployment spells. How well
they will fare when aggregate job creation picks up remains
unclear, but some subgroups among that group, like older
workers, will probably have more difficulty than others finding
new jobs.
Point number three, the high levels of unemployment during
the last five years will likely affect older and younger
workers quite differently as the recovery continues, though
both might be scarred to some extent--and Senator Klobuchar
actually made this point earlier. Long-term unemployment has
increased the most among older workers aged 55 and above--a
definition which I hate because then I fall in that category--
even though the unemployment rates remain quite low and their
work activity has actually risen in the past five years.
Older workers lose and leave their jobs less frequently
than other workers, but they then adapt less quickly to
changing labor market needs--partly because employers are
reluctant to hire them, and reluctant to invest in training
them.
In contrast, younger workers are much more frequently
unemployed for more short-term employment spells. They will
gain jobs more quickly than older workers, but at lower wages
than usual. And their earning levels will be relatively low for
many years as a result. And other groups, less educated
workers, African American workers, and the children of the
dislocated will be scarred in their own ways, as well.
Point number four, besides their effects in the past five
years, imbalances between the skills sought by employers and
those held by workers have also led to growing earnings
inequality over time, and to lower levels of good job creation
in the United States.
While educational attainment among Americans has been
slowly increasing, too many students leave high school with
very few of the general or specific skills that employers seek.
Also, many start college--either at two-year or a four-year
institution--but fail to complete any program or gain any
credential, especially that employers recognize and value.
So the gaps between those who have the skills that
employers seek and those who do not have widened over time, and
employers if they perceive difficulty in filling good-paying
jobs with highly skilled workers will likely create fewer such
jobs in the United States, relying instead on technological
advances or on offshoring production activity to meet those
needs.
So again, the effects of long-term and structural
unemployment might fall well beyond what we see in the
unemployment rates.
Point number five, a wide range of policy responses should
be tried in order to address the problems of skill imbalances
and to improve employment and earnings potential for American
workers. The policies to improve these outcomes of workers hurt
by structural imbalances should include the following:
Number one, strengthen re-employment services to help them
find jobs appropriate to their skill level more quickly.
Category number two: Education and training programs to
create worker skills that better match the jobs that are in
fact available.
Point number three: Wage insurance, very similar to Mr.
Johnson's replacement wage subsidies, for displaced workers
whose earnings are permanently lower because of the loss of a
good job.
And category number four: Carefully targeted job creation
strategies while unemployment remains high.
The exactly appropriate package of benefits and services
may well differ across these groups. Younger workers are more
easily trainable for good jobs that require some technical
skill, especially at community colleges, and especially when
the colleges have links to workforce systems and to employers.
They might also benefit more from a variety of earn and
learn strategies such as apprenticeships, and paid internships
related to their areas of study.
In contrast, older workers when displaced might benefit the
most from wage insurance where the Government provides a
subsidy to partly offset the permanent loss of earnings that
has occurred when the displaced workers take lower-wage jobs.
And of course job creation strategies in the near-term
would also help. Public spending on building infrastructure,
tax credits or subsidies for private-sector employment growth,
and public service jobs could all play some kind of a positive
role in reducing unemployment over the next several years in
different ways for these different groups.
Thank you, very much.
[The prepared statement of Dr. Harry J. Holzer appears in
the Submissions for the Record on page 37.]
Vice Chair Klobuchar. Thank you very much, Dr. Holzer. Dr.
Hassett.
STATEMENT OF DR. KEVIN HASSETT, SENIOR FELLOW AND DIRECTOR OF
ECONOMIC POLICY STUDIES, AMERICAN ENTERPRISE INSTITUTE,
WASHINGTON, DC
Dr. Hassett. Thank you, Vice Chair Klobuchar and Senator
Murphy. It is an honor to be here today.
I think the headline of my testimony is that there really
is a national emergency right now involving long-term
unemployment. And to highlight the importance of this challenge
for all of us, I go into some of the research that has been
done on the impact of long-term unemployment on wellbeing.
A report by Johnson & Feng at the Urban Institute shows
that of workers who were out of work for six months between
2008 and 2011, half experienced declines in per capita family
income of 40 percent or more.
The financial hardships are felt especially by African
Americans and Hispanics, along with workers who did not have
more than a high school education, and unmarried workers who
could not rely on a spouse's income.
In addition, once workers who were previously unemployed
find jobs, their earnings are persistently lower than before
their unemployment spell. Unemployed workers have also been
shown to have an increased risk of death, and potentially
shortened life expectancy, along with a heightened risk of
suicide that increases with the length of unemployment.
Perhaps even unexpectedly there seems to be a link between
long-term unemployment and mortality through cancer, especially
lung cancer. There is also a really troubling literature on the
impact of long-term unemployment on kids and on marriages. You
are more likely to get divorced, and you see a very serious
impact in academic performance of kids. And there is even one
study that surveyed adults whose parents had a serious
unemployment spell when they were kids and found a permanent
negative impact on the wages of grown-ups who had to experience
that in their family when they were growing up.
Now while some of these costs of unemployment are easy to
pinpoint, the causes of the recent increase in the number of
long-term unemployed are hard to disentangle. Understanding the
causes is necessary, however, if we want to choose policies
that we think will be effective in addressing this national
emergency.
Now a few theories have been put forth for the persistence
of the large amount of long-term unemployment in the United
States, and these include skills mismatch; that there is policy
uncertainty that is slowing hiring; and that there is a
scarring of the long-term unemployed.
I go in my testimony into the detailed evidence on these
different explanations. And although it is plausible that all
three causes are influencing the current high rate of long-term
unemployment, the best evidence seems to indicate that the
largest factor is some form of scarring. In other words, it is
something that does not seem to be particularly responsive to
our policy actions.
Tepid growth has certainly kept unemployment high, and
uncertainty certainly has contributed some to that, and the
skills gap might explain a little bit of why it is that there
are a lot of vacancies right now but we still have high
unemployment, but I think the permanent negative effect on the
employability of a worker once they are out of the workforce
for awhile is the crucial challenge for us.
Now public policy discussions--I am listing the challenges,
and then I will go quickly into solutions--public policy
discussions in this area tend to focus on the individuals, as
in fact they should because the individuals are the direct
targets of this terrible problem, but there is also a large
difference in unemployment between geographic regions that we
also have to put on the table.
It may be necessary to seek more concentrated policies that
do not target just people but also geographic areas. For
example, the unemployment rate in the Detroit Metropolitan Area
in February of this year was 10.2 percent, compared to a rate
of 5.5 for the Minneapolis-St. Paul area. Outside of the
largest metro regions, there's sometimes great and persistent
disparities.
The unemployment rate in Yuma, Arizona, in February was
25.6 percent; and it has been near that high for a very long
time. But it was only 6.7 percent in Tucson.
Now the impact of long-term unemployment on the lives of
unemployed Americans and their families is about as negative as
anything that economists study. It is clear that something
terrible happens to individuals as they stay unemployed, but
the negative effect does not seem responsive to the training
programs that we have in place now, and other things that I
mention in my written testimony.
Now I would say that we must act, and that we must
recognize in this action that we need to know more, and that we
need to be creative in thinking about what the appropriate
solution to this terrible emergency is.
And so therefore my recommendation in my testimony is that
we pursue a strategy in a difficult policy space that has been
pursued by Congress before, and consider engaging in very well-
thought-out experiments that try many different ideas in
different parts of the country, and do so in a kind of a
controlled laboratory setting where there are random
assignments so that we can evaluate whether the experiments
work, and try out bipartisan Democratic and Republican ideas to
see what works, and then test them with the data.
I sketched some ideas that might be the kind of things that
we would experiment with, including direct hiring, policies
such as better designed Enterprise Zones that are directed at
geographic mismatches; training programs that are more private.
There have been a lot of positive ``European experiences--for
example, in Germany with--engaging'' private firms more in the
training process. Work subsidies that encourage employers to
hire folks that have been long-term unemployed. And expanded
work-share programs like the law that we just passed.
I think that, absent new knowledge, the fact is that we are
not going to address this national emergency with policies that
we are sure or are confident will succeed, and I think we all
should agree that that is an unacceptable position.
Thank you.
[The prepared statement of Dr. Kevin Hassett appears in the
Submissions for the Record on page 41.]
Vice Chair Klobuchar. All right. Well thank you very much
for your testimony.
Dr. Hassett, I actually liked some of the ideas you brought
up there and I thank you for the concrete ideas. And this
scarring that maybe some of which Mr. Johnson is dealing with
on the front line, you believe some of it is just they are out
of work so long, and so they get to a point where it is hard to
get back into a place where they are going to get hired either
because of the employer's reaction to them, or their
confidence, or their ability to do the job.
I think that is very possibly a piece of this. I also do
know that, just from talking to so many employers in my State
that some of the workers maybe got a degree in anthropology--I
pick that out because my daughter is taking that class right
now in high school--or something else that just does not
translate into what have become really advanced skills in the
workplace in terms of understanding how to run certain
computers, and do certain web-based technology; and that it
just takes them a year or two. They literally have to start
over in their training to get those skills for what the
employers need.
What do you think of that proposition, for a piece of it?
Dr. Hassett. Yes, I think that that's certainly people
making bad choices when they are pursuing higher education is
certainly part of the problem.
I think that the scarring question, that there are two
sides to it that Dr. Holzer and I were discussing, a recent
study that found that if you have been unemployed for say more
than a year, that employers just will not interview you, even
without talking to you, just looking at your CV, just adding
that in an experiment to someone's CV makes the employer
unattracted to you.
Now it could be that that is because there are so many
candidates that are better right now because there is so much
unemployment. But the other thing is that on the individual
side that folks--you know, I have a friend who does pastoral
care, and I was talking about it once, and he said that someone
losing their job is actually often harder on a family than a
death in the family. Because the death, it sort of gradually
goes away, you gradually recover. But if somebody does not have
a job, and a year later they do not have a job, then every
morning they wake up and they are reminded of their failure,
and so you start to see lives fall apart. And that is why it
affects kids when they are grown up even. It has a permanent
effect.
And so I think that there is a lot of stuff that we have to
address. But getting over the scarring, which is why, for
example, one of the things that I think we really need to
consider significantly is giving them jobs, is creating some
kind of either Government jobs programs, or vouchers to get
people into private firms. Because getting them reconnected--if
you are over 60 and you have been unemployed for a couple of
years, the odds of getting a job are getting pretty darn close
to zero. And that is a national emergency.
Vice Chair Klobuchar. Okay. And the idea here, your idea of
experimenting in different areas with different job programs,
you say that was tried before. Was it controversial because
some things worked and some did not?
Dr. Hassett. Well, I don't know if it is controversial,
but----
Vice Chair Klobuchar. Okay.
Dr. Hassett [continuing]. It should not be. I mean, you
could imagine something like, so, for example, if we were going
to see does it help with the scarring problem if we just give
someone a job, or have a private firm give someone a job, well
what you could do is you could have 50,000 people sign up for
the program, randomly assign people to receive maybe a private
job, a Government job, or, you know, not be helped, sadly. And
then see if it has an impact, a different impact on the three
types of people. That kind of experiment has been funded by the
Federal Government. In the 1970s they had experiments of the
negative income tax.
And so there is precedent for this. But I think that when
there is something that is an emergency and we know we do not
understand it, but we can think of things that we can do to
learn what we need to to have smart policies, then we should be
willing to learn----
Vice Chair Klobuchar. Right.
Dr. Hassett [continuing]. And learn more and posture less.
Vice Chair Klobuchar. Right. I agree. And would you agree
with this idea in the high school level of trying--you brought
up Germany. They do a lot more of this. Trying to have these
kids graduate with a skill, and working with maybe one- or two-
year degree programs while they're there?
Dr. Hassett. Yes. There are different--there are more
people in training programs in high school in Germany. They
separate the kids earlier. And then folks who are really drawn
to more physical activities, or technical activities like auto
repair and things like that can get that training in high
school.
Right now, we are kind of putting everyone on a track that
targets them for an academic career. And it could be that for
some people that is not the right choice.
Vice Chair Klobuchar. And I also think, just talking to
superintendents in my areas, and employers, and parents, it's
really hard for them to see this manufacturing as a career. I
just did a Washington Post Panel yesterday on this, and it is
such an issue because they do not see this. They see this as it
is possibly a career that is going to go away, when in fact it
is paying more than a lot of other jobs. And we have to just
put some light on the change, that it is not your grandpa's
factory floor anymore.
Dr. Holzer, what do you think of some of the ideas that Dr.
Hassett has put out here with trying some experiments with what
works, and this scarring issue?
Dr. Holzer. I am sympathetic with most of those ideas. I
think we have to go in with the right expectations.
I mean, first of all I think we should do some of this at
some scale, given the magnitude of the emergency. If you do it
at some scale, it is going to cost some real resources. I think
we should spend those resources. I know resources in the
federal budget right now are very, very tight. There are other
sensible ways to deal with the resource issues, but I think we
should be willing to spend them.
We would be in largely uncharted waters. And so we do not
know a lot right now. And I think our expectations should not
be too high. So let me give one example.
It is sensible to try to create subsidized employment in
the private sector for a lot of these long-term unemployed. For
instance, giving them public service jobs will not do much to
lower the stigma in the eyes of employers. Private-sector
employment would probably do more.
But on the other hand, the take-up by employers might be
limited. Interest might end as soon as the subsidy ends on the
employer's part. That job might substitute for another job that
the employer might otherwise create. It might not be net new
employment.
So I think we have to anticipate some of those
difficulties, and some of those things will come out when we do
these evaluations.
Having said all that, I think we should still do it. And I
think we should still commit the resources, because the human
cost of not doing it is so enormous right now, and getting
worse all the time, that we should take a real whack at this
with some real resources and see what we learn, and then invest
more in the more effective treatments.
Vice Chair Klobuchar. I think we can also look at other
countries. We are competing in this global economy now, and if
we have job openings for skilled jobs, and then we have people
that do not have jobs, we are not going to be able to achieve
what we want for our economy in the global economy.
Mr. Johnson, and then I will turn it over to my colleagues
here, could you just comment on what you have seen on the front
line with these workers in terms of the scarring issue that Dr.
Hassett brought up? And any ideas that you would lend to this
in a practical way of how to deal with this with long-term
unemployed?
Mr. Johnson. Yes. The process of losing one's what we call
``work-fit'' sets in almost immediately. I think, modestly, we
have gone through a process in the 1990s and the early part of
the last decade where it seemed to be much easier to find a job
that paid decent wages by just walking across the street. And I
think people got the notion that that is normal.
That is not normal. Historically, that isn't. And so the
very moment that you find yourself unemployed with a family
trying to figure out how to recover sets a panic in. And how
people deal with that is individual.
This is--if I can make one point in this whole deal, it is
that we can put programs and policies in place to try to meet
the need, and I definitely think we should, but we have to make
sure we understand this is a people-to-people business. You
know, trying to affect people's emotions as they move forward
is critical.
I remember hearing a statistic that made me sit up straight
30 years ago when I was unemployed for all of 3 months, but the
statistic then said that if you are unemployed over 6 months
you are 6 times more likely to never find another job the rest
of your life.
That sobers you up in a hurry saying, wow, something has to
happen soon here.
Vice Chair Klobuchar. Okay. We have that 39 percent of the
unemployed have been, in our country today coming out of this
report, have been out of work for 6 months; 27 percent have
been out of work for at least a year. So you can see the
percentage of the unemployed is nothing to be trifled with. It
is a pretty big percentage.
Okay, Senator Murphy.
Senator Murphy. Thank you very much, Senator Klobuchar.
Thank you for convening this hearing, and thank you to the
panel. You are all wonderful to be here with us.
Mr. Johnson, you mentioned a program that we are really
proud of in Connecticut, and that is Platform To Employment,
P2E, it's been called. It was featured in a pretty long and
robust segment on 60 Minutes about a year or six months ago,
and it is now being expanded and modeled across the country.
The concept is twofold. One, that these are different
workers and they need a level of support service around them
that is just distinct from what shorter term unemployed need,
and that is expensive.
But second, that--and we talked about this across the
panel--that you've got to do something different with
employers; that you actually have to go out and find employers
who are willing to take workers on a temporary basis, a trial
basis, and allow the workers to prove that they can overcome
the stigma that has been associated with the long-term
unemployed.
And so I just sort of wanted to--you mentioned in your
testimony, and I wanted to sort of ask you to sort of expand
upon that model, which is a program both which recognizes the
social necessity of dealing with the emotional issues that come
with being unemployed for a long period of time, but
specifically the project that they have underway in Connecticut
and across the country to do trial periods of employment,
subsidized by the program, with the hopes that at the end of
that trial period the stigma is removed and the employment
becomes permanent.
Mr. Johnson. In our area, a year ago we did an extensive
survey to try to drill into what everyone was talking about as
the skills gap, and contacted quite a number of employers
representing actually about 25 percent of all the jobs in our
area.
We really wanted to drill into the specific technical
skills, and which credential are you looking for, et cetera.
And actually what we got back, despite our best efforts, was
something that we have learned 20 some years ago. It still came
back to the critical set of skills which often has been called
``soft skills.'' And it really boiled down to how they fit
within that organization and their willingness to continue to
learn, and interact, and communicate.
And so, yes, there are specific skills. They were high on
STEM skills. They needed those kinds of things as background.
But how do I judge this person's effectiveness on my job? The
only way they see that is to try them out firsthand, to witness
their work and their relationships.
We have a number of tools currently to work with that: on-
the-job training contracts where that employer becomes the
employer of record; and then we cost-share some of the wages.
We have been able to get some employers to be enticed with
that. But others, they still feel that there is a buyer's
market in terms of number of people that are applying for these
jobs. And so they really just want to sort out before they make
that commitment.
And we felt that--I know I connected to Tom Long, who was
one of the proponents and original developers of Platform To
Employment. This would be a better relationship where we could
start out with that person on the provider's payroll for the
first two months. If that is working, we've got the right
person. Now let's build the skills and cost-share that for the
next several months.
And the reports I have gotten is that that is an excellent
way to build the relationship.
Senator Murphy. Dr. Hall, you are the dissenting voice on
this panel in terms of the skills gap. It is driven for a lot
of us by anecdotal feedback from employers, but there is
certainly data there as well.
Just expand a little bit, if you could, on why you
essentially come to this panel with the conclusion that this is
really a much bigger issue about economic growth and not an
issue about the skills gap?
Dr. Hall. Yes. In my view, the part that dominates the
number of long-term unemployed is simply there just hasn't been
enough economic growth, enough job growth. It does not mean
that there won't be skills gaps that will become apparent once
the economy gets stronger, once the labor market starts to grow
quicker, but the sort of thing that I worry about--and it is
somewhat shaded by my experience I guess at the Bureau of Labor
Statistics--if you are going to spend money training people,
you need to be sure that there are actually jobs there.
I am reminded of the old joke about the atheist at his
funeral: all dressed up and no place to go.
If you are going to train people, you need to be realistic
about the jobs. When I was there, there was a green jobs
training program. They had a half a billion dollars to spend on
green job training. It hit my radar screen because that is
about the entire budget of the Bureau of Labor Statistics.
The Inspector General put out a report after they had spent
about $170 million of that saying, hey, look, people aren't
getting jobs. You should look to see if there really is a need
for green skills, and maybe decide not to spend the rest of
this money if the need is not there.
The BLS spent the rest of the money, and they placed about
30,000 people into jobs. So that is one of my big concerns
right now, that there just isn't a lot of job growth. You need
to be sure that there are going to be jobs out there for people
to get, and you train people for the right----
Senator Murphy. But I guess my--I mean, if I could ask just
one additional question, it is one thing to address the wrong
skills gap, right, and maybe that is the wrong skills gap. It
is another thing to suggest that there is not a skills gap.
So I guess what I am asking is: What is the data that
drives your conclusion that this is not a matter of a
disconnect between skills and job openings?
Dr. Hall. Sure. Well when I look at the data on the number
of long-term unemployed, it is really huge. And in fact it is
actually worse than it appears. You know, there are about 4.6
million long-term unemployed. There are probably millions more
who are long-term jobless, people who are not actively looking
because they have been unemployed for a long time.
So this is a really big problem. But if you look at
something just basic: Have we had enough economic growth to
support enough job growth to really get us into recovery? And
the answer is: No.
At this current rate of job creation, to get back to the
same employment ratio that we had before the Recession, it is
going to be a decade. That is a really long time, and that is
really not strong enough job growth to start to get people back
to work.
Vice Chair Klobuchar. Dr. Holzer.
Dr. Holzer. If I could just comment on this, I don't think
there is a disagreement among us on this issue. Because I also
said in my testimony, if I had to pick one factor that is the
strongest factor, it is joblessness and the lack of GDP growth
to support job creation.
I do think, having said that, there's some significant
piece of the unemployment, maybe a percentage point in the
aggregate, that does reflect the skill imbalance. And in fact I
think the most effective training program, again as Senator
Klobuchar said at the outset, the ones where you are actively
working hand in hand with employers to meet needs, and where
they indicate that the training is for specific jobs, those are
not likely to suffer from the problem Dr. Hall is raising.
So I don't think those are inconsistent views. And I also
think sort of the skills mismatch has so many other effects on
inequality, on wage growth, and even on the willingness of
employers to create jobs in America. If you take that famous
Siemens plant that was built in North Carolina that President
Obama has talked about in his State of the Union, Siemens would
not build the plant until they went to North Carolina and made
agreements with the UNC System and the community colleges to
create a stream of well-trained engineers and technicians to
fill those jobs. So in other words, the job creation may not
happen if the skills won't be there to meet them. But it is a
multi-pronged problem, I think we all agree on that.
Senator Murphy. Thank you, Senator.
Vice Chair Klobuchar. I appreciate that, because I don't
think anyone has said it is not both things. It is both things.
But I like, Dr. Holzer, your last point about sometimes it is
so connected that the employers do not want to add jobs, or
maybe they will go to another place, like we are having right
now happening with the immigration issue with Canada because it
makes it easier for them to get in some technology workers than
it is in America.
So some of our high-tech companies are actually opening up
there simply because at this moment they do not have the people
they can find. And I thought Dr. Hassett's point about the
geographic differences was very true. Because in North Dakota
right now--I know, it's next door--because of energy, it is
different than the tech issue, we cannot get a truck driver in
the Coca-Cola plant in St. Cloud because so many of them are
going over to North Dakota because of the oil. And that is a
good problem to have, for workers, and that is one of the
reasons we have an unemployment rate that is so low in these
states in the Upper Midwest.
But there are targeted areas where you have very high
unemployment, and then there are ones where it just becomes
much more down to the raw levels of the skills and having the
workers in the right place. And I have just found that
frustrating because I know there are people out there that want
to work, who ever do not have the skills, or maybe are in the
wrong place for where the jobs are. But it is clearly very
state by state, which is one of the reasons that with this
report we looked at it state by state. And it was no surprise
what the numbers showed.
So, very good. Representative Delaney, always welcome to
our Committee.
Representative Delaney. Thank you, Senator Klobuchar, for
welcoming.
Vice Chair Klobuchar. And maybe you happen to know a little
bit about creating jobs, yourself.
Representative Delaney. Thank you for welcoming me to the
Committee, and thank you for organizing this terrific panel.
I have a couple of questions. But my first ties into some
of the things Dr. Hall just said. And it is a little bit around
how we think about the unemployment situation from a larger
macro analytical framework.
Because it seems to me the unemployment challenges that we
face as a country right now have probably been with us for some
time. They were somewhat masked by the credit bubble, which
created a fair amount of jobs and kept the headline
unemployment number below what it would have organically been
if we would have seen a more natural financial market.
And the cause of this seems to me to be effectively--again
speaking very macro--globalization and technology, two very
disruptive forces that are enormously positive but have been
very disruptive on a generation of Americans. It happened too
fast. We weren't quite prepared for it. And as a result, there
has just been this enormous disruption, as I say, in a lot of
people's jobs.
And so how much do you think this employment challenge
really needs to be thought about as three distinct challenges?
The first being the trends that have caused the disruption are
continuing and accelerating. And there are very young Americans
right now that we have to make sure are prepared for the world
the way it is, and that ultimately the country has to become
more competitive in terms of creating jobs that have a decent
standard of living. And that is a discrete project and set of
policy tasks that involve delaying gratification. Because a lot
of the things we do there will not have an immediate impact on
unemployment, but we have to do them so that this does not
become a persistent problem in our society.
And then the second issue being the people who have been
disrupted and lost their jobs, but with good policies we could
successfully reintegrate them into the workforce. In other
words, through training and things like that. As a second set
of problems.
And then the third, which Dr. Hassett touched on, and that
Dr. Holzer I think when I came in at least, was this segment of
our population that at this point is very, very difficult to
really successfully integrate them into the workforce without
significant subsidy and help, which for all the reasons that
were identified I think we should be doing.
So how much of this problem really is a problem that has
three dimensions to it, and they require different fixes? And
that we are not really talking about it in those terms? That is
something that I wrestle with when I think about unemployment,
because there are so many different problems and they have very
different solutions, and they affect different segments of the
population.
So if you wouldn't mind, Dr. Hall, or any of the other
panelists?
Dr. Holzer. I like your analysis. I tend to agree with it.
I think there is a piece of this problem that is purely
cyclical. And when you have a recession created by the bursting
of a financial bubble, the recoveries are always slow. A lot of
deleveraging has to occur in the private sector, and they are
not going to pick up demand.
So part of it really is a cyclical problem with a very slow
recovery. And it needs more stimulus and more job creation.
But I tend to agree with your other macro comment. If you
look at the entire business cycle from 2000 to 2007, which was
a peak--to trough to peak cycle--job creation was fairly tepid
through the whole thing, even per-unit of GDP growth. Very
different than the late 1990s when GDP growth was really
translating into jobs.
I am almost certain it is because of technology and
globalization. I don't think we fully understand how to deal
with that problem, but my guess is that that is also slowing
down the recovery.
And then the third piece of the prong you said is true. We
have disadvantaged populations that bring very poor skills and
work experience. They require one set of solutions. The
dislocated, older workers require a different set.
Things in the high school that could be done differently.
Things in community colleges. Building an effective education
and workforce system for all these different groups. But I
think you're right. There are many different pieces that fit
into this puzzle and we will probably have to look at all of
them at some level.
Representative Delaney. Dr. Hassett.
Dr. Hassett. Thank you, Mr. Delaney.
I think that your organization of the problem is a very
competent one. It is really well done; that that is exactly the
way to think about it.
The one thing I would add is that I think part of the
biggest nut to crack is that your groups two and three are not
labeled. And so that from the point of view of the employer,
you know, say there a lot of people in the pool of the long-
term unemployed that would be great employees, but there are
some people that have gone through the terrible changes that we
have discussed that have made them actually bad employees. If
you were to hire them, they would be very disruptive for your
business.
When you look from outside, you can't tell which is which.
And so part of our problem is to help people who are
incorrectly being signalled and stained by this, to identify
themselves as reliable, great employees. And then to provide
help for the people that really, really need it. That is the
way I like to think about it.
But I think the fact that we don't have separate groups two
and three, in some part that's the biggest part of the problem;
that there are people that really can be productive members
right away, but they are in a group of people that employers
are kind of pessimistic about.
Representative Delaney. Dr. Hall.
Dr. Hall. Yes. A lot of my point I think is that the
private sector has got so much more potential, more ability to
create jobs and help people than the Government ever can.
Representative Delaney. Um-hmm.
Dr. Hall. And to some degree, this is such a big problem
you are going to need the private sector to turn around. You
are going to need to see the economy turn around. And that is
going to do more to encourage job growth than anything else.
It doesn't mean that we are not going to have issues, as
you talk about, with people having a skills imbalance. I think
we almost certainly are. But in terms of what is going to be
most important, encouraging growth and getting some strong
growth going I think is by far the most important thing.
Representative Delaney. Mr. Johnson.
Mr. Johnson. Yes. I would echo what is being said here.
There are changes that have happened in the job market that are
responsible--the global economy is responsible for, like Just-
In-Time Inventory, where people do not just keep making things
even though it is down. And so the whole entire process that an
employer has become just-in-time, including I need people just
in time.
And so they need to walk in the door with the skills, where
that wasn't really always the case in the past. But also the
process for looking for work has changed. And so if you are a
person who has not looked for work for quite some time, and you
do the traditional I put my application out at XYZ company and
I sit back and wait for the phone to ring, you are going to
find out that does not ring very often.
And if you listen to the word on the street, you will find
that many of the jobs we are growing certainly are low-wage,
part-time in the service sector. And you get that inundated,
and you give up hope, saying that is what is really going on.
That is not the whole picture. There are good jobs that they
also need to be prepared for. But it is easy to get
disillusioned.
Representative Delaney. So--if I could?
Vice Chair Klobuchar. Go ahead.
Representative Delaney. So if we stay with this notion of
somewhat disaggregating these problems, and if we are to assume
for a second something that is a little hard to assume but
let's assume it for a second that we would do the things we
need to do to reverse some of the structural employment
problems. So in other words let's assume we have immigration
reform. Let's assume we had a national energy policy. Let's
assume we had tax reform, a grand bargain budget deal, we
improved educational outcomes, and we invested in our
infrastructure. Let's assume we did all the things that we talk
about----
Vice Chair Klobuchar. That's what you got elected to do.
Representative Delaney. Exactly.
Vice Chair Klobuchar. Okay.
Representative Delaney. Let's assume we do those things.
And that will help, in my judgment, long term the
competitiveness of the country and create a lot of jobs to
allow the private sector to create jobs--because there is no
question that the private sector creates the jobs; the
Government puts in place policies to level the playing field,
and create a competitive environment so that our country can
create these jobs--but there will still be people left behind
in that, it seems to me, because those things, while central to
what we have to do as a country to reverse these employment
trends over the long term, and are so worthy of our attention
and our efforts, will in fact take some time to produce the
results. Because this is a very big economy, and it takes a
long time to turn the ship, to make our economy more
competitive in sectors that we are not that competitive in is
not a three- or a six- or a nine-month proposition. We have to
change the timeframe that we analyze success on those things.
So the question is: For the people who are inevitably left
behind by this, whom things happen too quickly and all the
things we are doing to prepare ourselves in the future, that
they are just not, for a variety of reasons, socioeconomic
reasons, demographic reasons, whatever it is, they cannot fully
benefit from these good policy changes we hope to do, what is
the opportunity of using things like more direct Government
assistance? Because it seems to me, if we can compartmentalize
Government support to the area where there may be a role for
Government--because long term we should not think of Government
creating jobs; we should think of the private sector creating
jobs--but in the short term, for those left behind, for those
people who do not benefit immediately from all the good policy
things we want to do, what is the opportunity for us in terms
of, you know, just theoretical numbers if Government were more
proactive in subsidizing or matching with employers?
Because I have seen examples at your university, Dr.
Holzer, at the Law Center at Georgetown--I happen to be on the
Board of the University so I know a little bit about the
programs there--the Law Center has been facing these very high,
very difficult environment for lawyers graduating. Now these
are very well trained people. These are not the kind of people
we are typically talking about in terms of this discussion.
But they put in place a program where, through philanthropy
they would subsidize people's entry into jobs. So they would go
to employers and they would basically say you can hire this
trained person, but at a fraction for a period of time, and we
will subsidize it. And they used philanthropy to do it.
And the results, in terms of the number of people who
actually did receive full-time employment, were staggering.
Because when you get someone in your operation and you like
them and they are doing a good job, you tend to work to try to
find a place for them.
So what is the opportunity for getting people who are left
behind with more direct Government intervention into the
workforce in terms of numbers? Does anyone have a sense for
that? I apologize for the long-winded question.
Dr. Holzer. I'll take a little stab at it. I think as more
jobs become created slowly--it will probably take most of the
rest of the decade--as that is happening, I think it is
important for Government to create a more effective education
and workforce system that is tailoring the skills creation to
meet those job requirements.
That can include high quality career and technical
education in high school. Better use of community colleges. All
to make sure that they are--and there's a set of things we can
do to make the skill creation more responsive to the demand
side of the labor market. So that is one important thing for
Government to do.
But you're right. Some people will not benefit from that. I
think we have to be careful about this idea of subsidized jobs
in the private sector. We have some of those programs now, like
the Work Opportunity Tax Credit. The take-up rate is very low.
The employer interest is often very low.
As soon as the subsidy ends, the employment ends. So it has
a role, but I think we have to be careful not to oversell it.
Now in some cases, when the jobs start coming back, some of
these older workers, the best they are going to do is a low-
wage service sector job, a greeting job at Wal-Mart. We can
make those jobs better and more attractive by supplementing
them with wage insurance, where again the Government is
offsetting some of the loss between the old job and the new
job.
So for different groups of people in different parts of
that recovery, I think there are positive roles that the
Government can play to sort of enhance what happens in the
private sector.
Representative Delaney. Mr. Johnson.
Mr. Johnson. Minnesota actually had a program that it
enacted back in the early 1980s when we had one of our last
severe recessions. It was an employment and economic
development program where there was a direct subsidy to
employers for six months. But the issue always came up: What
about if they didn't keep the person on afterwards?
So there was actually a clawback provision for an extra
18--actually it was an 18-month contract; first 6 months
subsidized, the next year that you monitored was unsubsidized
and they had to pay it back. It got a little cumbersome to do,
but it actually did grow jobs at a pretty steady rate. They had
to prove they were new jobs, et cetera, and pay a decent wage.
So it has been done, and other states have replicated that.
Representative Delaney. If I could have one more quick
question?
Vice Chair Klobuchar. Representative Cummings is here now--
--
Representative Delaney. Oh, sorry.
Vice Chair Klobuchar. All right, we are going to go to
Representative Cummings.
Representative Cummings. Thank you.
Vice Chair Klobuchar. Thank you.
Representative Cummings. Thank you, Madam Chairlady.
While the overall unemployment rate has dropped to 7.6
percent as of March, the same is not true for the African
American unemployment rate which hovers at 13.5 percent. I can
tell you in the neighborhood where I live, the African American
male unemployment rate is probably more like about 40 percent.
Further, although long-term and very long-term unemployment
rates for African Americans have slowly decreased since the
height of the economic downturn, African Americans are faring
much worse than Caucasians, and are currently over represented
among the long-term unemployed.
A study released in February by Brandeis University's
Institute on Assets and Social Policy that followed a group of
families over a 25-year time period from 1984 to 2009 found,
and I quote:
``That while wealth grew for African-Americans as they
achieve life advances, that growth is at a considerably lower
rate than it is for Whites experiencing the same
accomplishments.'' End of quote.
The study found a persistent widening of the wealth gap
over that time frame. In planning long-term fiscal policy, what
measures can we take to ensure that all Americans have access
to equal opportunities for employment? And what additional
measures should we take specific to communities of color to
confront the over representation we are seeing in long-term
unemployment among these communities?
And let me just add a note and say that one of the things
that concerns me, among many things, is I watch folks who are
unemployed for long periods of time, and I listen to the
President talk about the chain CPI, and I am just wondering as
they march toward a point of retirement, if they have a job,
then you've got a large group that are say between 53 and 65
who lost jobs, who will probably never get those jobs back,
need retraining. The employers are not that anxious to hire
them because, as you well know, of age. And I would just like
to have your comments.
Because I'm telling you, it is becoming quite a serious
problem for many, many reasons. And I have had so many people
living in the inner city of Baltimore, I have had many people
come up to me, particularly men, and say: Cummings, I don't
know what to do. They don't know where to go. They don't know
how to get a job.
And then, sadly, there is a group that have a criminal
record. And in the book, ``The New Jim Crow,'' which is a very
interesting book, it talks about how there are groups of
African American men in particular who are basically being
completely left out of everything--opportunities, voting,
everything.
And so I am just trying to figure out, when we look at the
policies of this country with regard to unemployment, I would
just like to hear some of your comments on what I just said.
Mr. Holzer.
Dr. Holzer. Mr. Cummings, first of all you're right. So
every time--the unemployment rate of African Americans is
almost always twice the White rate. So if it is 4 percent among
Whites, it is going to be 8 among African Americans. If the
unemployment rate among Whites goes up by 4 points, it will go
up by about 8 points among African Americans.
So in a downturn, they get hit much harder. And
subsequently when things recover, they benefit more from the
recovery. But since the recovery so far in the market has been
so weak, you are absolutely right that that group gets hit the
hardest.
And then separately from that, even in the best of times we
have groups that do not show up at all in the unemployment
rates: less educated Black men more than anyone else. They have
the problems of low education, low work experience, criminal
records, often they're in arrears on child support so they get
hit hard by that system. And a lot of these things actually
drive them underground.
So I think all of the strategies that the four of us have
talked about today, if they work, I think will
disproportionately benefit the African American community. Some
of the job creation, the subsidized hiring that Dr. Hassett
talked about, some of Mr. Johnson's ideas, if they work at all
they will work even more to help in the African American
community.
So I think doing those things will disproportionately
benefit. At the same time, we also need to keep our eye on the
long-term ball. Because even in the best of times, you have
these under-represented groups, and talk about making the
criminal justice system less penalizing in terms of work
experience, reforms in child support that doesn't drive these
men out of the labor market. And major changes in the education
system, certainly starting in high school, that prevent them
from disconnecting in the first place.
So the one set of shorter term policies are very important,
and so are the longer term policies that keep them connected
and prevent them from disappearing and falling into those
cracks.
Representative Cummings. Dr. Hassett.
Dr. Hassett. Thank you for your question, Mr. Cummings. It
is an incredibly important one, and one that I have worked a
lot on lately and thought a lot about, going back to the work
sharing work that I did a couple of years ago.
One of the things that I find most clear in the data is
that hire rates for African Americans are kind of about the
same. It seems like if an African American and someone else
applies for a job, that the hire rate will be about the same.
But the reason we get into this boat where the unemployment
rate is always higher is the job destruction rates for African
Americans are much higher.
So it seems like when employers are laying people off, they
tend to lay African Americans off with a higher rate. And so
that was one reason why I was so optimistic with the work
sharing bill that I know was passed about a year ago that it
would help with this problem, because if we could slow job
destruction then we should disproportionately benefit African
Americans.
And I have been following the data since the law changed
and have been very disappointed with the takeup rates of the
states--except there are some exceptions like Rhode Island. In
a work in progress right now we are sort of checking to see if
the disproportionate benefit that we expected for the places
that have taken the new federal monies to expand their work
sharing programs are having the expected effect.
If they are, I think that it would light an extra fire
under us to try to get states to take advantage of the new
program that just became law.
Representative Cummings. Thank you.
Vice Chair Klobuchar. Thank you, very much.
Dr. Hassett, could you explain again the work sharing
program? You probably did it earlier and I----
Dr. Hassett. Oh, yes. Sure. And the basic idea is that in
many European countries you could say lay off a person, and
then they would get unemployment insurance just like here in
the United States. Or you could reduce five people's hours by
20 percent, and then each of them would get say 20 percent of
their unemployment insurance. And so that you could spread the
pain of labor cost adjustment out across the workforce.
As an employer you have an incentive to do that because
then when times get good again you have got the workers right
there so you can ramp up production right away. And from the
point of view of the employee, you won't have that scarring
effect of not having a job that has been one of the main
focuses of this hearing.
And so I think that it was absolutely prudent to try to
expand programs like this as kind of an unemployment insurance
reform, as recently happened in the United States. But the
problem is that the state Governments all have a lot of say in
how they run, and nobody has really invested in getting this,
we could think of it as kind of a fractional unemployment
insurance program, or work sharing, to getting it off the
ground except in a few places.
And the few places, especially Rhode Island, that have
focused on this have seen a pretty large take-up; that
employers are taking advantage of the fact that they can kind
of hoard their valuable workers a little bit more because of
the work-sharing program.
My guess, again, is that it would disproportionately
benefit African Americans because of this layoff--they
disproportionately bear layoffs--and it is something I think we
need to really focus on as we think about policy actions that
we can take.
The federal monies only last for a couple of years right
now under the current law. And so it is something that we will
definitely be having hearings about soon to talk about
extending that, and thinking about what could be done to make
more----
Vice Chair Klobuchar. And also where it works, it sounds
like, which states are doing it in a way that has the most
positive results.
Dr. Hassett. And whether it works. When I've testified
about this in hearings on this topic, I've done a lot of work
on the programs in Europe and how they work. And there is very
strong evidence that they have the desired goals in Europe.
But we do not have enough data yet in the United States to
be fully sure that they are working the way they do in Europe.
Vice Chair Klobuchar. Oh, Dr. Johnson, did you want to add
something?
Mr. Johnson. A couple of things.
Vice Chair Klobuchar. ``Mister'' Johnson, I elevated your
title.
Mr. Johnson. Pardon?
Vice Chair Klobuchar. I called you Dr. Johnson.
Mr. Johnson. You elevated my title. Call me what you want,
but don't call me late for supper.
[Laughter.]
Vice Chair Klobuchar. That is a Minnesota saying.
Mr. Johnson. Some things we have done with special
populations, because frankly every person has a challenge--and
some populations of people have more--is to work with what we
have noted here as ``prevocational academies.''
It is one thing to teach folks how to find a job that is
generic for any industry, but if you are really, honestly going
to get into an industry that is going to pay a living wage, you
are going to have to get inside that industry and make sure
that your interest and your abilities and your background is
aligned with where you are headed so you do not have surprises
down the road.
And we can link them with employers in mentoring kinds of
relationships, bring them right in. And the whole idea of
background checks, we actually do that up front for the purpose
of having a conversation. Because too often we ask people, for
example, going into health care, do you have any issues that
would come to the attention of an employer because this is
going to be difficult for you, and they'd say no. But we do the
background check and sure enough they do.
So let's talk about this. This may not be the right career
for you. But there are others that are. There are employers
that are much more willing to work with that population than
others, and bonding and things.
One last program, there are things we can do to reach out
to employers, but we want employers to reach out to these
populations as well. Tomorrow night I will have an awards
ceremony that we do every year. We call it the Best Places to
Work. It's an actual study that is done with applicants of
employers who submit their data about how many people they have
working there, their wages, their turnover rate, and how much
money they are putting into their training and professional
development.
And for those employers that do that, they are able to get
a banner. And they are very proud of it and put it on the side
of their building ``They're one of the best places to work.''
Vice Chair Klobuchar. And you do this in the Rochester,
Minnesota----
Mr. Johnson. In Southeast Minnesota. And so I think we need
to find those examples where things are working, and celebrate
them, and try to get other people to follow. And that is very
helpful, too.
Vice Chair Klobuchar. Very good.
Did you want to have any other questions, Representative
Cummings?
Representative Cummings. I know that you all have already
talked about this whole idea that there seems to be some stigma
when you have been unemployed for a long time. I didn't believe
that.
I didn't believe that people felt that way. But I talked to
some of the employers in my District, and one of the things
they said is that they believe that a person who is very, very,
very, very valuable, and who is excellent, would not go without
a job for a long period of time. I heard that over and over
again.
And so they seem to have this assumption that because
somebody has been out of work, even with all the circumstances
that we have in our recessionary time that we are in, they
still have that presumption. And it was just interesting.
I did not expect to hear that. I really didn't. Although I
had read that. So I don't know whether you all have talked
about this or not, but I can follow up.
Mr. Johnson. I just have a comment that of all the
statistics we talk about, when we get caught in a recession
there is the assumption we have this abundance of workers and,
you know, a glut of folks out there.
Demographics, when you look at our birth rates and the
projected retirement rates of those that should be retiring
here very shortly, we actually have a shrinking growth rate of
the population that is eligible for work. And that is one thing
I have to keep telling employers, that this actually is a labor
shortage being masked by a softening in the economy; that,
don't fool yourself into thinking that you are in a buyer's
market. You are going to need to pay attention.
We cannot afford to have anybody sitting on the sidelines.
We never could, but we always had people on the sidelines. We
are not going to get where we need to go if we do not get
everyone in the workforce.
So once you get aware of that, you know, they need to help
us figure out how to get that population worked with.
Representative Cummings. Thank you.
Vice Chair Klobuchar. Anyone?
[No response.]
Well I just want to thank everyone for coming. This has
actually been something of a freewheeling discussion. I think
we have found some common ground on some things, and I guess
the few points I want to make is that we clearly have some
challenges ahead.
We do want to remind ourselves that we have seen
improvement, not anywhere near where we want to be but we have
definitely seen improvement and we have not seen a worsening of
the economy. The unemployment rate at 7.6 percent fell to its
lowest levels since December of 2008, and over 1.2 million
private-sector jobs have been added in the past 6 months.
But what we have focused on here is that the long-term
unemployment rate remains high; 39 percent of the unemployed
have been out of work for over 6 months, and 27 percent have
been out of work for at least a year.
And as our study has shown, and as Representative Cummings
was just discussing, certain groups of workers, including
younger workers, and Black and Hispanic workers, have higher
rates of long-term unemployment. More than 50 percent of older
unemployed workers remain jobless for over 6 months.
While we see these positive signs, I think we showed the
chart that showed that in 2009 there were nearly 7 unemployed
workers for every job opening. Now there are about 3 unemployed
workers for each job opening. That is good, but we also know
that geographically there are issues throughout the country.
And the things that I have taken away from this are that, first
of all, the jobs, as we all know, and I think everyone up here
agreed, come out of the private sector. That is where our best
bet is for increasing our employment, and our role in Congress,
as Representative Delaney has pointed out, is really to put
forward some policies that will encourage that growth, whether
it is bringing down our debt in a balanced way so we do not
cause a sharp contraction to the economy, whether it is making
sure we are getting our part of the game when it comes to
exports, and then of course making sure our policies work in
the tax area that we do some simplification and, reduce the
business tax rate but paying for it by closing some of the
loopholes.
So we have things that we need to do here. At the same
time, I think we have all acknowledged that there are two major
problems going on here. The first is the skills gap, which
affects certain areas more than others. You are right, Dr.
Hall, about the private sector growth. But you just ask any of
my private sector managers in Minnesota and they will tell you,
okay, I have all this growth I want to do but I do not have the
workers to do it.
They are not down on their workers. They just have job
openings in everything from welding at Agco in Jackson, to
people who are able to run the Medtronics equipment that makes
these complicated medical devices that we manufacture in
Minnesota.
So there is clearly an issue in some states that have a lot
of high-tech manufacturing where we need help there. In terms
of the solutions, I think a lot of that is we have bills to
double the STEM schools, to put more research at that high
school level to engage kids in being interested in science,
technology, engineering, and math. And then making a much
better use of our 1- and 2-year degree programs, which I know
the President is devoted to, and having a lot of that occur at
the high school level.
Back when I went to high school, we had VoTech, and kids
would get on a bus and go to VoTech. Now they are no longer
just learning to change tires; it has become much more
complicated. And it is even more of a reason to start at an
early age.
The second thing that I think is difficult are these, what
Dr. Hassett and many of you identified, the same issue that
Congressman Cummings was talking about, is the scars, that
develop with the long-term unemployed. That makes it very hard
for them to get these jobs.
And so I think that is something that is going to be a
harder problem to work on, but that we cannot let go. Because
we look at the fact that we are competing against these
countries that somehow are able to get some of their kids into
jobs right away, and they are functioning and happy and have
jobs that they like. We have got to be doing the same things
here and helping with the long-term unemployed.
I hope that summarizes where people are. I would add one
little sop for a policy that I am excited about. We just had 2
days of hearings in the Judiciary Committee on immigration. We
had 23 witnesses on Monday, for the bill, including everyone
from the head of the Migrant Workers to Grover Norquist,
testifying in favor of moving forward with comprehensive
immigration reform.
One of the things in there, which has attracted some
attention, are the H1B visas and reasons to lift that cap
somewhat, while at the same time making sure that we are not
rewarding pure outsourcing and things like that.
One little nugget in that, which I am getting to, which
goes to some of our training issues, is that Senator Hatch and
I in our original bill, and the Chamber supported it, added
$1,000 to every H1B visa. That money was going directly to
STEM. It came to $3 to $5 billion directly to our schools for
science, technology, engineering, and math.
The Gang of 8 proposal actually did not increase those visa
fees, and out of the hearings the general counsel for Microsoft
said they would actually agree to go more than $1,000 in
increases, that they would double. And I think this is an
acknowledgement that companies--there are companies that want
to employ more people in the United States.
Some of this temporary problem can be bridged with some of
the workers that can come in. But beyond that, we really need
to train our own. And so that is a major problem, in addition
to the long-term unemployment issues that we have been
discussing.
And then of course at its core is economic growth, which we
have seen some of but not enough. And I am still hopeful that
we are going to be able to come to some kind of a compromise.
There is so much interest in the Senate right now--you might
not be able to tell on TV, but there is--in terms of trying to
get a major deal, so that we can give companies that are
holding onto money the incentive to invest, and that we can
really have an even playing field going forward so we are not
playing red light/green light with our tax codes and other
things.
So that is our job. But I want to thank you for lending a
lot of light, and doing so in a civil manner, which Congressman
Brady and I have worked really hard to maintain in this
committee, so that we actually use this as a way to get some
ideas that people can use and make points and reach out in
ways. And you have supported that.
I want to thank all of you for that. And with that, we will
conclude the hearing. And I will put Congressman Brady's
statement in the record.
[The prepared statement of Chairman Brady appears in the
Submissions for the Record on page 52.]
Thank you, and the hearing is adjourned.
[Whereupon, at 11:58 a.m., Wednesday, April 24, 2013, the
hearing was adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Randy R. Johnson, Executive Director, Workforce
Development, Inc., Rochester, MN
I would like to start by thanking Chairman Brady and Vice-Chair
Klobuchar for calling this hearing on the Long-Term Unemployed. They
represent a special challenge, but in many ways they reflect our local
economies and ways we cope as society.
Thirty years ago I found myself unemployed, and my wife out of work
while expecting our first child. That experience made an indelible
impression on me, and I vowed to work toward building a better public
system to help those in similar situations. In many respects I believe
we have succeeded. Back then, our electronic job matching resources
were decades away, and the internet and social media systems that now
connect people to jobs were inconceivable. We now have One-Stop Job
Centers with multiple partners present to provide coordinated services.
Yet the economy continues to change rapidly and can be a challenge for
the unemployed to keep up.
In SE MN we serve an average of 1,500 dislocated workers a year,
and regularly post a return-on-investment of $3 for every $1 dollar
invested by getting them back to work. We have found that the most
critical element in getting people re-employed is early intervention,
and to meet people one-on-one up front for a career planning session to
start the process of rebuilding relationships. A good example of this
was witnessed recently in our area with the return of Minnesota's
National Guard unit from Iraq and Kuwait. Every soldier who had
reported a need for employment was given a career assessment while they
were still in theater, and when they returned they all were connected
to a career counselor from the One-Stop Workforce Center. We assembled
108 private sector employers, and 60 different partner agencies to be
grounded in the challenges veterans face, and then provided sector-
based job information at their 30 and 60 day re-integration events. As
a result, veteran's unemployment in our area is now lower than their
civilian counterparts and one of the lowest in the nation at just over
1%.
Older workers provide a special challenge. Half of all our
unemployed age 50 and older have been unemployed for over a year. In
addition, we've found that 25% of this group self-describes as having
no real computer or social media skills. However, the convenient
electronic tools we now have to seek work can ensure even less human
interaction during the day. One way we have had success is bringing
people together for ``brown bag'' meetings, where people can get
together and share job leads and bolster each others' spirits. We also
use this time to build resumes in group, while identifying life
experiences they've had for which colleges might grant a ``Credit for
prior Learning.'' One man told us that if it weren't for these
gatherings, he wouldn't have any reason to get out of bed in the
morning. Short term training also shows good results with older
workers--just yesterday I learned of a 55 year old unemployed engineer
that had been out of work for over 2 years who found work at $6/hr over
his past wage after we provided 6-Sigma quality control training. Note:
we need to make sure the Workforce Investment Act recognizes this kind
of effort as attaining a ``credential.''
Good jobs with a solid future are growing, but they often require
the jobseeker to take a risk and change careers. To lessen the risk, we
have had great success in providing month-long pre-vocational ``Career
Academies'' for adults who are looking to move into Health Care,
Advanced Manufacturing or Alternative Energy. Our Academy graduates
more than double their completion rate in subsequent education, and
significantly reduce their turn-over rate on the job. One woman shared
that attending one of our Health Care Academies was, ``the best thing I
have ever done for myself!'' Note: despite our Academy successes that
were chronicled as a national ``Best Practice'' by the GAO last year,
the Workforce Investment Act does not recognize the expenditures as
training.
As the economy recovers, we find more employers eager to add full-
time, good paying jobs--but according to employers, the only good way
to find out if the applicant has the skills they are looking for is to
try them out in an internship, an apprenticeship or some other kind of
on-the-job training experience. We need to make sure we have the right
tools to make it easier for employers to participate in work-based
training and take a chance on the long-term unemployed. Here are some
examples of work-based learning services that could help reduce long-
term unemployment:
Assist the States in developing an electronic ``work-
based learning clearinghouse'' that would help employers connect with
individuals seeking an internship or another on-the-job learning
experience.
Incent employers to consider the long-term unemployed, by
providing ``Adult Try-Out Employment'' experiences in the private
sector that would have the workforce service provider act as the
employer of record during the initial 2 months of work, and then cost
shared in the next 2 months (reference--``Platform to Employment''
pilot).
Consider offering a ``wage replacement'' differential
between a jobseeker's new starting wage and their past employment as
they start out--especially in the case of long-term, older workers
seeking employment with small employers.
Thank you, once again for the opportunity to testify today on
behalf of the public workforce system and the long-term unemployed.
__________
Prepared Statement of Hon. Keith Hall, Senior Research Fellow, Mercatus
Center at George Mason University\1\
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\1\ The ideas presented in this document do not represent official
positions of the Mercatus Center or George Mason University.
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Chairman Brady, Vice Chairwoman Klobuchar, and Members of the
Committee: thank you for the chance to discuss the current employment
situation and how long-term unemployment has affected and will continue
to affect economic growth. I appreciate the opportunity to testify
today.
We are now a full three years from the labor market trough of the
Great Recession. Job creation has been relatively steady but modest
since 2011. We averaged about 175,000 new jobs per month in 2011;
183,000 per month in 2012; and 168,000 jobs per month so far this year.
While this job growth is welcome, it is far short of what we need to
achieve a full labor market recovery. Two significant problems have
become evident through this lengthy period of slow job growth. First,
there has been an unprecedented disengagement from the labor force with
current participation at its lowest level in almost 35 years. This
means there are currently 102 million jobless people in the United
States, but less than 12 million are still actively looking for work
and therefore counted as unemployed. Second, the number of long-term
unemployed is at a record high. They currently represent over 4.6
million people, and the long-term unemployment rate (the share of the
labor force unemployed for over six months) remains well above
historical levels at 3.0 percent.
Comparing the current situation with that of October 2009 helps put
the effects of the disengagement from the labor market into
perspective. In that October, the unemployment rate was at the
recession high of 10.0 percent, and 41.5 percent of the working age
population were without jobs. Today, the unemployment rate has fallen
to 7.6 percent, but labor force participation has declined so much that
the jobless rate remains the same 41.5 percent. By this latter measure,
we've made little progress towards a full labor market recovery. I
estimate that there are over 5 million people missing from the
unemployment rate because of the disengagement from the labor force
caused by the Great Recession and slow recovery.
The other significant problem is that we currently have 4.6 million
long-term unemployed. Although the long-term unemployment rate of 3.0
percent is down from the record high of 4.3 percent from early 2010, it
remains well above the previous record high. Furthermore, two-thirds of
these people have been jobless for over a year and might be classified
as very long-termed unemployed. Large as these numbers are, they
dramatically underestimate the long-term jobless problem. The same
disengagement from the labor force that has driven down the
unemployment rate without reducing joblessness has led to a serious
underestimation of the problem. To be counted as long-term unemployed
(as opposed to long-term jobless), an individual needs to:
Have no work whatsoever for at least six months
Want to work and be nearly instantly available if offered
work
Be actively looking for work. By ``actively'' looking, I
mean that every month this individual must send out a resume, contact
an employer directly, engage an employment agency, or engage in some
other sort of activity that, by itself, could result in employment.
Checking for new job openings on the internet or in the newspaper alone
does not qualify as active job search.
This sets a high bar for someone to remain ``unemployed'' for long
enough to be considered as long-term unemployed. In 2007, the average
unemployed person who eventually exited the labor force looked
unsuccessfully for work for just under nine weeks. In 2011, this had
risen to over 21 weeks. That means the average person that left the
labor force did so before even being classified as long-term unemployed
and almost certainly could eventually be called long-term jobless.
Consequently, millions of people have dropped from the labor force over
the past five years who perhaps should be counted as long-term
unemployed but are not.
We can make a simple calculation to get some idea of the actual
number of long-term jobless. Every two years the Bureau of Labor
Statistics (BLS) projects the size of the U.S. labor force. BLS first
examines the future size and composition of the population as affected
by the trends in births, deaths, and immigration. Then it analyzes the
trends in labor force participation rates of different age, gender,
race, and ethnic groups in a total of 136 separate categories and makes
its projections.
In 2007, just prior to the Great Recession, BLS estimated that
labor force participation would decline slowly (about 0.1 percent per
year), due mainly to the aging of the U.S. population. Using this as an
estimate of what would have happened in the U.S. labor market if the
recession had not occurred, we can calculate the number of people that
unexpectedly dropped out of the labor force, presumably due to the
recession [see graph 1 below]. If these people had not stopped actively
looking for work and dropped out of the labor force, they would be
counted as unemployed. It is impossible to know how many have been
jobless for over six months, but considering that the average time
spent searching before becoming inactive is about 22 weeks, this number
could be as high as 5 million. Since there were 5.1 million people
counted as long-term unemployed in 2012, the long-term jobless rate
could be as much as twice as high as its current 3.0 percent [see graph
2 below].
Over time, the incidence of long-term unemployment has likely been
increased because of the aging population in the United States and
because of the higher level of labor force participation by women. The
former creates higher levels of long-term unemployment because older,
longer-tenured workers who are less likely to move in and out of
employment are declining as a share of the labor force. Also, during
the current recession and its aftermath, the extension of unemployment
insurance benefits has likely contributed to the number of long-term
jobless. Designed to ameliorate the negative financial impact of
unemployment, unemployment insurance makes workers more willing to
reject job offers in the hope of receiving a better offer in the
future. This delays the movement from unemployment back to employment
and raises the number of long-term unemployed. Although the size of the
estimated effect varies, virtually every study on the effects of
unemployment insurance finds that it has a negative influence on
reemployment.
Despite these other influences, the main reason for the current,
unprecedented level of long-term joblessness is weak economic growth.
Since the end of the recession over three years ago, we have not had
sufficiently strong economic growth to strengthen the labor market and
trigger the rehiring of the long-term unemployed.
There is a predictable business cycle pattern to long-term
unemployment. The number of long-term unemployed rises well after a
recession begins and continues to rise well after the official end of a
recession. The latter is simply because the process of full labor
market recovery requires that GDP grow faster than its long-term trend.
After the 2001 recession, this did not happen until mid-year 2003. The
economic expansion between the 2001 and 2007 recessions was too mild
and too short to result in a full rehiring of the long-term unemployed
from the previous recession. As a result, when the Great Recession
began, we already had a historically high long-term unemployment rate
for a recession onset. But the primary reason is that the current
economic recovery appears to be the weakest in 60 years. The recession
officially ended in 2009; economic growth has been weak since then,
though consistently positive, and the trend is not encouraging. The
recovery began in 2010 with GDP growth of 2.4 percent, but rather than
strengthening, it has steadily slowed--with growth falling to 2.0
percent in 2011 and to just 1.7 percent last year. This is too slow to
support strong job growth. In fact, this level of slow growth has
historically resulted in much slower job growth than we've actually
seen. Economic growth alone would have predicted just 134,000 jobs per
month in 2011 and 120,000 jobs per month in 2012 [see chart 3 below].
This effect can also be seen in the very weak labor productivity growth
that we've experienced over the past two years.
The challenges for the long-term unemployed and jobless are
daunting. Joblessness is costly, particularly for high-tenure workers
who have invested time and resources in job-specific knowledge and
skills. Studies consistently show that the longer someone is
unemployed, the less likely they are to find new work. They may have
lost job skills over time, have less connection with informal job
networks, or face potential employers more reluctant to hire the long-
term jobless. And because those with job skills in shortest supply will
be reemployed first, the ranks of the long-term jobless may accumulate
those that worked in permanently declining industries and those that
have job skills that don't translate well to new employers or
industries.
Even after being reemployed, the permanent lost earnings for the
jobless will likely be significant. Studies have shown that it can take
as long as 20 years for reemployed workers to catch up on lost
earnings, largely due to skill mismatches between the jobs lost and the
new jobs created in the economy. These losses occur for workers with
different lengths of previous job tenure, in all major industries, and
for workers of any age. Recent estimates of the permanent earning
losses range from 1.4 years of earnings in good times to 2.8 years
during times of high unemployment (above 8 percent). After such an
unprecedentedly deep recession and extended period of weak job growth,
the job mismatch both now and in the future is likely to be the cause
of even larger permanent earnings losses.
While the rate of economic growth affects the labor market, the
high level of long-term unemployment also affects economic growth. For
example, the Congressional Budget Office routinely estimates
``potential'' GDP as a measure of what level of national income could
be generated if the economy were at full employment. The CBO's most
recent estimate suggests we are still losing about a trillion dollars a
year from the effects of the Great Recession, five years after it
ended. There is also concern that we will have a permanently higher
level of unemployment going forward. Although it is, in my opinion, far
too early to have a good idea if this will happen, a permanently higher
level of joblessness will result in lower income growth.
Finally, the number of long-term unemployed also has significant
impact on the level of Government spending. Estimates place the annual
expenditure on means-tested Government programs at a trillion dollars a
year. More broadly, spending on the whole range of Government programs
designed to provide for assistance under circumstances of unemployment,
poverty, sickness, and retirement has surged in recent years. This
spending, called Government Social Benefits to Persons, is estimated
every quarter by the Bureau of Economic Analysis. Their data shows that
American households now have an unprecedented dependence on these
Government programs. A remarkable 17.2% of total household income now
comes from Government social benefits, and such spending tracks pretty
closely to the jobless rate (the share of the working age population
without employment) [see Graph 4 below].
In closing, the recovery from the effects of the Great Recession on
the labor market has been very slow. One of the results of this slow
progress has been the unprecedented growth in the number of long-term
unemployed and, as bad as this official data appears, it underestimates
the problem. There are almost certainly millions of people that are
long-term jobless that are not considered unemployed. Although other
factors may have contributed to this, the main cause is slow economic
growth. The only real solution to this problem is a significant and
sustained increase in economic growth. Unfortunately, just as slow
economic growth has created long-term joblessness, long-term
joblessness is helping to hold back economic growth and has had a
significant impact on Government spending.
I thank you again for inviting me here today and I would be happy
to take any questions.
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about the mercatus center at george mason university
The Mercatus Center at George Mason University is a research,
education, and outreach organization that works with scholars, policy
experts, and Government officials to connect academic learning and
real-world practice.
The mission of Mercatus is to promote sound interdisciplinary
research and application in the humane sciences that integrates theory
and practice to produce solutions that advance in a sustainable way a
free, prosperous, and civil society.
about the author
Keith Hall is a senior research fellow at the Mercatus Center at
George Mason University. From 2008 until 2012 he served as the
thirteenth Commissioner of the Bureau of Labor Statistics. In this
role, he headed the principal fact-finding agency in the Federal
Government in the broad field of labor economics and statistics. The
BLS is an independent national statistical agency that collects,
processes, analyzes, and disseminates essential statistical data to the
American public, the U.S. Congress, other Federal agencies, State and
local Governments, business, and labor.
__________
Prepared Statement of Dr. Harry J. Holzer, Professor of Public Policy
at Georgetown University
Good morning. I would like to make the following points about
structural and long-term unemployment, as well as the future earnings
prospects of various groups of U.S. workers.
1. Structural unemployment in the United States has probably
risen by about 1 percentage point during the labor market
downturn and slow recovery since 2007, though it is unclear how
much of this increase will persist over time.
Most of the increase in unemployment since 2007 reflects
insufficient employer demand for workers. But the job vacancy rate (now
at 2.8%) is higher than we might expect with so much unemployment.
Employers in some sectors (like health care and advanced manufacturing)
seem to have genuine difficulty filling jobs requiring specific skills,
while others are moving more slowly to fill jobs when demand for their
products remains limited and uncertain.\1\
---------------------------------------------------------------------------
\1\ Job vacancy rates are available every month from the Bureau of
Labor Statistics' Jobs Opening and Labor Turnover Survey (JOLTS) news
release. Vacancy rates in manufacturing and health care are routinely
higher than the new hire rates observed in those sectors, where the
opposite is true in most others. This indicates relatively longer
vacancy durations in these two sectors, consistent with other
descriptions of employers who have difficulty filling jobs there (such
as Barnow et al., 2013 for health care and Fletcher, 2011 for
manufacturing). Elsby et al. (2012) show that job vacancy rates have
grown relative to unemployment rates in the past few years, suggesting
an outward shift of the ``Beveridge Curve'' over time. But Peter
Cappelli (2012) and Catherine Rampell (2013) describe lengthy vacancy
durations among some employers who do not seem too eager to fill these
jobs. Regarding ``structural'' unemployment, Estevao and Tsounta (2011)
show evidence of growing skill mismatches generating such unemployment
differences across states, while Elsby et al. (op. cit.) and Daly et
al. (2012) attribute growing structural unemployment to temporary
factors, such as longer periods covered by Unemployment Insurance and
also employer uncertainty.
2. Long-term unemployment should have somewhat negative effects
---------------------------------------------------------------------------
on future employment prospects, at least for some groups.
The long-term unemployed are being rehired more slowly than those
with short unemployment spells, though not by as much as some might
expect.\2\ How well they will fare when aggregate job creation picks up
remains unclear, and some subgroups among the long-term unemployed
(like older workers) should have more difficulty finding new jobs than
others.
---------------------------------------------------------------------------
\2\ See Elsby et al. (2012) and Valletta (2013) for evidence that
those with longer unemployment spells tend to find new jobs more slowly
than those with shorter spells. Both studies show that reemployment
rates stop declining with longer unemployment spells at some point; in
the latter (more recent) paper, this occurs after about 20 months of
unemployment. Also, see Ghayad and Dickens (2012) for evidence that
only long-term unemployment drives the shifting out of the Beveridge
Curve noted above.
3. The high levels of unemployment during the past 5 years will
likely affect younger and older workers quite differently as
the recovery continues, though both might be ``scarred'' to
some extent. Other groups--such as African-Americans and also
---------------------------------------------------------------------------
the children of the dislocated--may be scarred as well.
Long-term unemployment has increased the most among older workers
(ages 55 and above), even though their overall unemployment rates
remain low and their work activity has risen during the past 5 years.
Older workers lose and leave their jobs less frequently than other
workers; but they also adapt less quickly to changing skill needs in
the labor market, partly because employers are reluctant to hire them
and invest in their training on the job. In contrast, younger workers
(ages 24 and below) are more frequently unemployed but for much shorter
spells.\3\ They will gain jobs more quickly than older workers but at
lower wages than usual, and they will have more difficulty achieving
wage growth by changing jobs. As a result, their earnings levels will
be relatively lower for many years.\4\ Black workers also have fairly
lengthy unemployment spells which could impede their progress during
the recovery.\5\ The children of less-educated workers who suffer job
loss and extended spells of unemployment bear some costs as well, since
their own educational attainment suffers (presumably because of the
stress experienced at home).\6\
---------------------------------------------------------------------------
\3\ In the first quarter of 2013, the unemployment rate (not
seasonally adjusted) was 8.1% nationwide but 24.2% for teens, 14.1% for
youth aged 20-24, and only 6.1% for those 55 and older. But median
durations of unemployment (in weeks) throughout 2012 were 19.3 for all,
and 9.5, 14.2 and 30.5 for the three age subgroups, respectively.
\4\ See Kahn (2010) and von Wachter (2010) for evidence on the
relatively lower wages for many years of young workers who enter the
job market during a recession.
\5\ Median durations of unemployment are 17.6 and 24.7 weeks for
whites and blacks, respectively.
\6\ See Von Wachter (2010).
4. Besides their effects in the past 5 years, imbalances
between the skills sought by employers and those held by
workers have also led to growing earnings inequality over time
and to lower levels of ``good job'' creation in the United
---------------------------------------------------------------------------
States.
While educational attainment among Americans has been slowly
increasing, too many leave high school with very few of the general or
sector-specific skills that employers seek. Also, many start college
(either 2-year or 4-year) but fail to complete any program or gain any
credential. Thus the gaps between those who do and do not have the
skills employers seek has widened over time.\7\ And employers who
perceive difficulty in filling good-paying jobs with highly-skilled
workers will likely create fewer such jobs in the United States,
relying instead on technological advances or offshoring production
activity to meet their needs.\8\
---------------------------------------------------------------------------
\7\ Goldin and Katz (2008) provide an overview of how educational
attainment among American workers has failed to keep pace with growing
skill demands among employers in the past three decades. Symonds et al.
(2011) show that American high school graduates are much less prepared
for the labor market than those in many OECD countries. Holzer and
Dunlop (2013) provide evidence of low completion rates at 2-year and 4-
year colleges, especially among minorities and low-income students at
the latter. Holzer and Lerman (2007) show that employer demand in the
United States over the past few decades has been fairly strong in
``middle-skill'' jobs (i.e., those requiring some postsecondary
education or training below the B.A. level) as well as in higher-skill
jobs (requiring a B.A. or higher).
\8\ See Holzer et al. (2011) for evidence that employers providing
``good jobs''--i.e., those paying wage and salary premia above market
levels in their industry--have sought workers with growing skill levels
over time. Holzer (2013) also discusses employer job creation patterns
and their sensitivity to the availability of skilled workers.
5. A range of policy responses should be used to address the
problems of skill imbalances and to improve employment and
---------------------------------------------------------------------------
earnings potential for American workers.
Policies to improve employment outcomes of workers hurt by these
structural imbalances might include:
Reemployment services, to help them find jobs appropriate
to their skill level more quickly;
Education and training programs, to create worker skills
that better match newly available jobs;
Wage insurance, for displaced workers whose earnings are
permanently reduced by their loss of a good job; and
Carefully targeted job creation strategies while
unemployment remains high.
The appropriate package of benefits and services may differ across
groups. Younger workers are more easily trainable for good jobs that
require some technical skill, especially at community colleges. They
might also benefit from a variety of ``earn and learn'' strategies,
such as apprenticeships and paid internships related to their areas of
study. In contrast, older displaced workers might benefit the most from
``wage insurance,'' where the Government provides a subsidy to partly
offset the permanent loss of earnings that occurs when displaced
workers take low-wage jobs.
And, of course, job creation strategies in the near-term would also
help. Public spending on the building of infrastructure, tax credits or
subsidies for private sector employment growth, and public service jobs
could all play a positive role in reducing unemployment over the next
several years.
references
Barnow, Burt; John Trutko and Jaclyn Schede Piatak. 2013.
Occupational Labor Shortages. Kalamazoo, MI: W.E. Upjohn Institute for
Employment Research.
Cappelli, Peter. 2012. Why Good People Can't Get Jobs. Wharton
Digital Press.
Daly, Mary; Bart Hobijn, Aysegul Sahin, and Robert Valletta. 2012.
``A Search and Matching Approach to Labor Markets: Did the Natural Rate
of Unemployment Rise?'' The Journal of Economic Perspectives, Vol. 26,
No. 3.
Elsby, Michael; Bart Hobijn, Aysegul Sahin, and Robert Valletta.
2012. ``The Labor Market in the Great Recession--An Update to September
2011.'' Brookings Papers on Economic Activity. Fall, 353-71.
Estevao, Marcelo and Evridiki Tsounta. 2011. ``Has the Great
Recession Raised U.S. Structural Unemployment?'' International Monetary
Fund paper.
Fletcher, Michael. 2011. ``Why Does Fresno Have Thousands of Job
Openings--and High Unemployment?'' The Washington Post, February 11.
Ghayad, Rand and William Dickens. 2012. ``What Can We Learn by
Disaggregating the Unemployment-Vacancy Relationship?'' Public Policy
Brief, Federal Reserve Bank of Boston.
Goldin, Claudia and Lawrence Katz. 2008. The Race Between Education
and Technology. Cambridge, MA: Harvard University Press.
Holzer, Harry. 2012. ``Good Workers for Good Jobs: Improving
Education and Workforce Systems in the U.S.'' IZA, Journal of Labor
Policy, 1:5.
Holzer, Harry and Erin Dunlop. 2013. ``Just the Facts, Ma'am:
Postsecondary Education and Labor Market Outcomes in the U.S.'' CALDER
Working Paper, American Institutes for Research.
Holzer, Harry and Robert Lerman. 2007. ``America's Forgotten
Middle-Skill Jobs: Education and Training Requirements in the Next
Decade and Beyond.'' Washington, DC, The Workforce Alliance.
Holzer, Harry; Julia Lane, David Rosenblum and Fredrik Andersson.
2011. Where Are All the Good Jobs Going? New York: Russell Sage
Foundation.
Kahn, Lisa. 2010. ``The Long-Term Labor Market Consequences of
Graduating from College in a Bad Economy.'' Labour Economics, Vol. 17,
No. 2.
Rampell, Catherine. 2013. ``With Positions to Fill, Employers Wait
for Perfection.'' The New York Times, March 6.
Symonds, William; Robert Schwartz and Ronald Ferguson. 2011.
Pathways to Prosperity: Meeting the Challenge of Preparing Young
Americans for the 21st Century. Cambridge, MA: Harvard Graduate School
of Education.
Valletta, Robert. 2013. ``Long Term Unemployment: What Do We
Know?'' Economic Letter, Federal Reserve Bank of San Francisco.
Von Wachter, Till; Phil Oreopoulos and Andrew Heisz. 2012. ``The
Short-Term and Long-Term Career Effects of Graduating in a Recession:
Hysteresis and Heterogeneity in the Market for College Graduates.''
American Economic Journal: Applied Economics, Vol. 4, No.1.
Von Wachter, Till. 2010. ``Long-Term Unemployment: Causes,
Consequences and Solutions.'' Testimony before the Joint Economic
Committee of Congress, April 29.
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Prepared Statement of Hon. Kevin Brady, Chairman, Joint Economic
Committee
The Joint Economic Committee is operating during this Congress with
both the Chairman and Vice Chair selecting hearing topics. I
congratulate Vice Chair Klobuchar for selecting today's topic: Long-
Term Unemployment. This is an acute problem for our country, and I'm
confident that today's hearing will be a bi-cameral, bi-partisan search
for solutions.
The United States suffers from a growth gap. This recovery is the
weakest since World War II. Compared with an average post-war recovery,
our economy is missing 4.2 million private sector jobs and $1.3
trillion in real GDP. Every American is short nearly $3,000 in real
disposable income and since the recession bottomed out, more Americans
have been forced onto food stamps than have found a job.
Moreover, many economists fear that our anemic recovery has created
a ``new normal''--a reduced potential for economic growth in the
future. The Congressional Budget Office (CBO) recently lowered its
estimate for potential real GDP in the future by one percentage point
to 2.3 percent.
One percent may not seem like much, but its consequences are huge
over time. Our economy would be $31 trillion smaller in 2062, and the
Treasury would collect $97 trillion less in tax revenues over the next
half-century.
The growth gap is a major contributor to the significant problem of
long-term unemployment. While the official unemployment rate has fallen
from a cyclical high of 10.0 percent in October 2009 to 7.6 percent in
March of this year, this improvement is deceiving.
Much of this improvement is due to workers leaving the labor force.
The labor force participation rate has fallen from 66.0 percent at the
start of the recession in December 2007 to 63.3 percent last month--a
low not seen since Jimmy Carter was president. Without the decline in
the labor force participation rate since President Obama took office,
the unemployment rate would have actually increased to 11.0 percent.
The CBO expects the official unemployment rate to remain above 7.5
percent through 2014, which would be the sixth consecutive year with
the unemployment rate exceeding 7.5 percent, and the longest period of
high unemployment in the past 70 years.
According to the President's recently released budget, the
unemployment rate will not return to its pre-recession levels before
2023. Let me repeat that: according to the White House it will take at
least a decade before America's unemployment rate returns to its level
before the recession. That's more than disheartening.
One of the characteristics of our weak labor market is a very long
average period of unemployment for workers who lose their jobs.
The average number of weeks for unemployment is currently 37.1--
very close to the all-time peak of 40.7 weeks in November and December
of 2011. In contrast, the previous peaks in the average number of weeks
of unemployment were much shorter: 16.9 weeks in June 1976 after the
severe 1973-75 recession, and 21.2 weeks in July 1983 after the equally
severe 1981-82 recession.
According to Dr. Janet Yellen, vice chairman of the Board of
Governors of the Federal Reserve System, three million Americans have
been looking for work for one year or longer, comprising one quarter of
all unemployed workers. Long-term unemployment not only causes economic
distress but may cause deterioration in workers' skills and the
prospects for future jobs and earnings.
Worse still, those categorized as long-term unemployed mask a
larger problem because the category excludes discouraged workers,
marginally attached workers, and those working part-time for economic
reasons.
Policymakers should address the problem of long-term unemployment
in two ways. First, this Committee has shown the close relationship
between new jobs along Main Street and business investment in
buildings, equipment and software. Washington must resolve the policy
uncertainty that has deterred job-creating business investment during
this recovery.
This means enacting pro-growth tax reform; giving the Federal
Reserve a single mandate for price stability; gradually bringing our
federal budget into balance by reforming our unsustainable entitlement
programs; returning common sense and balance to our regulatory process;
and opening new markets around the world for American exports.
Second, we must identify structural problems with our labor market
that make some unemployed workers difficult to re-employ--even if our
economy were booming. In particular, we must identify whether a
significant gap has emerged between the skills that some of the long-
term unemployed possess and the skills that employers are seeking.
Congress funds numerous job training programs. Some appear to be
working more successfully than others. Let's identify the programs that
succeed, fund them, and then save taxpayer dollars by eliminating the
inefficient and wasteful programs.
Our witnesses include three noted economists: Dr. Harry Holzer,
Professor of Public Policy at Georgetown University; the Honorable
Keith Hall, former Commissioner of the Bureau of Labor Statistics; and
Dr. Kevin Hassett, Senior Fellow and Director of Economic Policy
Studies at the American Enterprise Institute. Our other witness in the
field is Mr. Randy Johnson, Executive Director of Workforce
Development, Inc.
With that, I look forward to their testimony.
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