[Joint House and Senate Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 113-38
 
           LONG-TERM UNEMPLOYMENT: CONSEQUENCES AND SOLUTIONS

=======================================================================



                                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





                  U.S. GOVERNMENT PRINTING OFFICE
81-227                    WASHINGTON : 2013
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001



                        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

                              ----------                              

                     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

                              ----------                              


                       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\
---------------------------------------------------------------------------
    \1\ The ideas presented in this document do not represent official 
positions of the Mercatus Center or George Mason University.
---------------------------------------------------------------------------
    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.
[GRAPHIC] [TIFF OMITTED] T1227.001

[GRAPHIC] [TIFF OMITTED] T1227.002

[GRAPHIC] [TIFF OMITTED] T1227.003

[GRAPHIC] [TIFF OMITTED] T1227.004

          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.
[GRAPHIC] [TIFF OMITTED] T1227.005

[GRAPHIC] [TIFF OMITTED] T1227.006

[GRAPHIC] [TIFF OMITTED] T1227.007

[GRAPHIC] [TIFF OMITTED] T1227.008

[GRAPHIC] [TIFF OMITTED] T1227.009

[GRAPHIC] [TIFF OMITTED] T1227.010

[GRAPHIC] [TIFF OMITTED] T1227.011

[GRAPHIC] [TIFF OMITTED] T1227.012

[GRAPHIC] [TIFF OMITTED] T1227.013

[GRAPHIC] [TIFF OMITTED] T1227.014

[GRAPHIC] [TIFF OMITTED] T1227.015

   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.
    [GRAPHIC] [TIFF OMITTED] T1227.016
    
    [GRAPHIC] [TIFF OMITTED] T1227.017
    
    [GRAPHIC] [TIFF OMITTED] T1227.018
    
  

                                  
