Teaching Macroeconomics: the long-term unemployed

From NY Times:

The long-term unemployment rate, which soared in 2009 to heights not seen since the Great Depression, is finally declining rapidly. The proportion of the work force that has been unemployed for at least 27 weeks has fallen to 1.98 percent, less than half the record high of 4.4 percent reached in 2010.

via A Drop in the Long-Term Unemployed.

A recent paper on long-term unemployment is “Are the Long-Term Unemployed on the Margins of the Labor Market?” Alan B. Krueger, Judd Cramer, and David Cho

This paper explores the plausibility of a unified explanation for the recent shifts in the price and real wage Phillips Curves and Beveridge Curve in the U.S.: namely, that the long-term unemployed, whose share of overall unemployment rose to an unprecedented level after the Great Recession, are on the margins of the labor force and therefore exert very little pressure on the job market and economy. The hypothesis we seek to test is that the long er workers are unemployed the less they become tied to the job market, either because, on the supply side, they grow discouraged and search for a job less intensively (e.g., Krueger and Mueller , 2011 ) or because, on the demand side, employers discriminate against the long-term unemployed, based on the (rational or irrational) expectation that there is a productivity – related reason that accounts for their long jobless spell…

About mkevane

Economist at Santa Clara University and Director of Friends of African Village Libraries.
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