America’s “New Class”: A Profile of the Long-Term Unemployed

For more than two years, the rates of long-term unemployment have been historically high. Even as the overall unemployment rate inched down at the end of 2011, more than 40 percent of the thirteen million unemployed had been out of work for six months or longer. To put this in perspective, the previous all-time peak in the long-term unemployment rate—in June 1983—was just 26 percent.

Even so, this standard long-term unemployment rate conceals an important part of the story of long-term hardship in the labor market. Using the terminology of the Bureau of Labor Statistics, in 2011, almost one million people were “discouraged” workers, another 1.5 million were “marginally attached” to the labor force, and many millions more had left the labor force altogether. Over eight million workers were stuck in part-time jobs because they could not find full-time work or because their previously full-time hours had been cut. Two million more were among the nation’s prison and jail population, and are not counted, by design, in official labor-market statistics. Many of the people in these circumstances had been there for six months or longer, but none were included in the official tally of the long-term unemployed.¹

Whatever its form, long-term, involuntary joblessness takes an enormous toll on those who experience it. In recent congressional testimony, Columbia University economist Till von Wachter summarized research connecting unemployment with: substantial and longlasting earnings losses,² enduring employment and earnings instability,³ a higher incidence of poverty,⁴ higher rates of divorce,⁵ reduced physical and mental health,⁶ increased rates of disability,⁷ declines in life expectancy,⁸ and adverse impacts on the children of the unemployed (including poor educational outcomes⁹ and lower adult earnings¹⁰). “All of these costs,” von Wachter noted, “are likely to be larger for workers unemployed for a longer period of time.”¹¹

Long-term joblessness also inflicts a substantial cost on the rest of society. In addition to the loss of goods and services caused by leaving productive economic resources idle, unemployment—and especially long-term unemployment—also imposes other direct and indirect costs on the economy, including unemployment insurance payments and a deterioration in unemployed workers’ job skills.

In this essay, we attempt to paint a demographic portrait of long-term hardship in the labor market.¹² We display various measures of long-term hardship by race and gender, education, and age using data from the official monthly Current Population Survey for 2011. In addition to the conventional long-term unemployment rate, we also show a broader measure that captures further dimensions of long-term hardship. This additional measure is the “U-6” alternative unemployment rate of the Bureau of Labor Statistics (BLS), which adds “discouraged” workers, the “marginally attached,” and workers who are “part-time for economic reasons” to the official unemployment rate.

“Discouraged workers” are people who are currently not in the labor force, but want a job, are available to work, and have looked for work in the last year but have since stopped looking because they don’t think any work is available. Discouraged workers are a subset of the “marginally attached,” a group that also would like to work, is available to work, and has searched for a job in the last year, but has stopped searching without specifying a lack of jobs as the reason for giving up. Discouraged workers made up about one-fourth (26.2 percent) of the marginally attached workers in 2007, before the recession, and more than one-third (37.8 percent) of the marginally attached workers in 2011. Those who are “part-time for economic reasons” worked fewer than thirty-five hours per week because their employers cut their hours (due to a lack of demand) or because they were not able to find a full-time job.

We include the U-6 data here because we believe that, under reasonable assumptions, a large share of those fitting this expanded definition of unemployment are experiencing...