The crippling return of long-term unemployment


  • Economy
  • Monday, 24 Aug 2020

If those who are unemployed now continue to go without a job for longer periods, more people will suffer from depression, anxiety and other psychological problems. (People queing for forms to apply for unemployment benefits in the US. - Filepic)

MORE than 10% of Americans say they have recently given serious consideration to suicide. Among younger adults, that figure rises to over one in four. Thirteen per cent of people have reported starting or increasing drug or alcohol use to cope with pandemic-related stress. Nearly one in three say they have symptoms of anxiety or depression.

These alarming statistics, based on a survey from late June, come from a report released this month by the Centres for Disease Control and Prevention (CDC), and show that the nation’s mental health has significantly deteriorated during the pandemic.

Unfortunately, there’s no end in sight to the economic uncertainty, closed schools, cramped quarters and social unrest, let alone the fear and risk of illness and death. And if those who are unemployed now continue to go without a job for longer periods, more people will suffer from depression, anxiety and other psychological problems.

The CDC report, which is based on a web survey and may not be fully representative of the US population, did not find that employment status played a large role in people’s assessment of their mental health. And there is plenty to be stressed about regardless. A lot of people who still have jobs – including me – are surely in that 13% who are drinking more to cope with pandemic-related stress.

But in the discussion of the economic emergency facing the United States, we need to pay more attention to how long-term unemployment affects people’s health, including mental health.In a 2012 paper, economists Timothy J. Classen and Richard A. Dunn studied the effect of job loss and the duration of unemployment on suicide risk in the US. Using mass layoffs – when more than 50 workers from the same employer apply for unemployment benefits in a 30-day period – they found that the probability of suicide does not increase in the period immediately after workers lose their jobs.

Instead, the primary factor pushing up suicide rates is longer spells of unemployment. Specifically, they document one additional suicide death for roughly every 20,000 workers who have been unemployed between 15 and 26 weeks.

As the current economic weakness continues, longer periods of unemployment are becoming more common. In March, when the pandemic recession began, 808,000 workers had been unemployed between 15 and 26 weeks. In May, this measure, at 1.1 million, had not risen significantly because the downturn was only two months old. But in July the number of workers who had been unemployed between 15 and 26 weeks shot up to 6.5 million. The evidence suggests that a large increase in the number of workers suffering from poor mental health will soon follow.

Unemployed workers’ physical health is likely to deteriorate as well. Economists Daniel Sullivan and Till von Wachter estimate that male workers in the 1980s who had long tenures with their employers saw their mortality risk increase by 50% to 100% in the years immediately after job losses that were part of mass layoffs or similar events. Over the long run, the annual probability of dying for these workers increased by 10% to 15% per year for at least the following 20 years.

The challenge for the US right now is to prevent the shorter spells of unemployment currently experienced by millions of workers from becoming a long-term unemployment crisis.

To address this, public officials and citizens need to do at least three things.

First, Congress should be acting quickly to support the economy. I still expect a deal to be struck on another recovery package by mid-September, but the lack of progress in late July and so far in August is not encouraging. The sooner additional support arrives, the stronger the economy will be and the faster it will recover. This will result in less long-term unemployment.

An important component of that deal should not be to extend the US$600 weekly federal supplement to standard, state-provided unemployment benefits. As the economy continues to recover and the labour market strengthens, benefits that generous will keep the rate of unemployment higher and lengthen its duration. Instead, Congress should find other ways to support consumer spending and to help low-income and vulnerable Americans, including one-time re-employment bonuses for those who are jobless and more generous federal earnings subsidies.

Second, it is not too early for Congress to consider measures to help unemployed Americans who will face a harder time getting back into paid work. For example, it will be more difficult for unemployed movie-theater workers to find jobs because many will have to change industries, perhaps becoming home-delivery drivers. The pandemic recession will cause some industries to shrink and other industries to expand. Congress should consider skills and training programs that would help unemployed people who will need to change sectors.

Another group of workers who could face a relatively tougher time with re-employment are those who live in places with worse job markets. As the recovery continues, labor markets will return to normal in some states faster than in others. A policy that offers long-term unemployed workers in high-unemployment areas assistance to relocate would help the overall economy, as well as mitigate the destructive impact of long-term joblessness on individuals.

Finally, note that the spread of the virus will continue to play a large role in the economy’s performance. And the decisions individuals make – say, whether to go to a large party, or to wear a mask in public – help determine how fast and far the virus spreads. In this sense, there is a direct link between individual prudence and the health of workers: the stronger the epidemic, the weaker the economy, and the greater toll on workers’ lives.

The pandemic affects physical and mental health in many ways. All the more reason to slow the spread.

Michael R. Strain is a Bloomberg Opinion columnist. The views expressed here are the writer’s own.

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unemployment , economy , CDC , mental health ,

   

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