Katz, F. L., Kroft, K., Lange, F. & Notowidigdo, M. (2014) “Addressing long-term unemployment in the aftermath of the Great Recession“, VoxEU Organisation, 03 December.
In the aftermath of the Great Recession, there remains a large number of long-term unemployed across countries. This column argues that policies targeting the long-term unemployed, if effective, may have substantial benefits for the aggregate labour markets. However, evidence of the effectiveness of active labour market policies varies across policies and populations. It is, therefore, crucial to add an evaluative component to new and existing labour market policies.
As 2014 draws to an end, the US labour market finds itself in an unusual situation. The unemployment rate has fallen from its peak of 10% in October 2009 to under 6%, but an unusually large share of the unemployed has been out of work for a long time. In October 2014, the share of long-term unemployed (unemployed for more than 26 weeks) among the unemployed remains above 30%, down from its peak of about 50% in 2010, but still well above 17% observed in 2007 prior to the Great Recession. Western European economies have either experienced similar run-ups in long-term unemployment rates in recent years (the UK) or have experienced high long-term unemployment rates for many decades already (Germany, Italy, France). The presence of large numbers of long-term unemployed represents a fundamental challenge to policymakers in designing labour market institutions that help reintegrate the long-term unemployment into the labour market.
Relevant posts:
- Dolls, M., Fuest, C., Neumann, D. & Peichl, A. (2014) “An Unemployment Insurance Scheme for the Euro Area? A Comparison of Different Alternatives using Micro Data“, Centre for European Economic Research (ZEW), Discussion Paper No. 14-095, 28 October.
- Dullien, S. (2014) “Why A European Unemployment Insurance Would Help To Make EMU More Sustainable“, Social Europe Journal, 03 October.
- Arpaia, Α., Kiss, A. & Turrini, A. (2014) “Is unemployment structural or cyclical? Main features of job matching in the EU after the crisis“, European Economy, European Commission Economic Papers 527, September.