The Long Slog: Out of Work, Out of Hope

From the Wall St Journal | 09/28/09

By CONOR DOUGHERTY

As
Bill Jacobs hunted fruitlessly for work nine months after his layoff,
it dawned on him that those nine months might, themselves, be part of
his problem.

One clue was the conversation the computer specialist had with a job
recruiter this summer. "The first question was, 'When did you get laid
off?' The next one was, 'How come you haven't had a job since then?'"

Nearly 15 million Americans are jobless, and the number is widely
expected to remain high even as the economy slowly begins to recover.
Part of the problem many of the unemployed face: the very fact that
they have been out of work a long time.

Stephen McGee for The Wall Street Journal

General Motors retiree Jerry Brower phones unemployed workers in Michigan to prod them to keep trying.

 

About
five million of the jobless are what economists class as "long-term
unemployed," people who have been out of work for 27 weeks or more. As
challenging as it is for anyone to find a good job in this economy, it
can be even harder for people out of work a long time.

Skills atrophy. Demoralization sets in and can become permanent. Some potential employers shy away.

Discouraged, some workers who have spent many months on the
sidelines simply fade out of the work force, applying for union
pensions or Social Security benefits they didn't intend to take until
much later, or trying to get in on other government programs such as
Social Security disability benefits.

The probability that a laid-off worker will find a job grows smaller
the longer people have been out of work, according to studies in the
1980s by economists Lawrence Katz of Harvard University and Bruce Meyer
of the University of Chicago. "Someone unemployed for six months is
much less likely to find a job in the next month than someone
unemployed for one month," Mr. Katz says.

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The
problem today: The proportion of the unemployed who have been out of
work for over 26 weeks, at one-third, is the highest since World War II.

Mr. Katz, Mr. Meyer and other researchers also have found that wages
the laid-off can expect when they do find a new job also tend to be
lower the longer they were without work.

Scott Thompson has an on-the-ground view of their prospects. He is
president of Lexicon Staffing, a technology recruiting firm in
Portland, Ore. Employers he deals with don't ever explicitly say they
are less interested in people who have been out of work for an extended
period, "but their actions tell me exactly that," Mr. Thompson says.
"We will send two or three candidates for a job. More often than not,
the guy who has recent experience up to last month is the guy that gets
the interview."

A growing number of long-out-of-work adults facing these odds appear
to be giving up. The labor-force participation rate -- the proportion
of working-age people who either have jobs or are actively looking for
one -- was 65.5% in August. That was the lowest in 22 years, according
to the Labor Department.

James Plumlee for the Wall Street Journal

Paul Harrison, jobless in Oklahoma since spring, has applied for Social Security disability benefits.

 

Increasing
numbers are filing for Social Security disability, available to people
who can show they have a medical condition that is likely to keep them
out of work for at least a year. While the program's rolls were already
rising before the recession, as baby boomers aged, the pace of
applications sped up with the economy's downturn. The Social Security
Administration received 1.9 million applications for disability
benefits in the first eight months of this year, up 23% from a year
earlier.

"Having a very severe recession is going to cause a lot of people
who would have stayed in the labor force to apply for disability," says
David Autor, an economist at the Massachusetts Institute of Technology.
"It's a one-way ticket out of the work force and into public
assistance."

Paul Harrison worked for years manufacturing cables for oil rigs,
working in the Tulsa, Okla., area. Early this spring, he was laid off.
Since then, he has applied without success to big nationwide retailers,
a burger-and-ice-cream place and a host of other employers, nearly
always for jobs that would have paid much less than the roughly $60,000
a year he earned before.

As the family's finances deteriorated, his wife's car was
repossessed. The couple pawned an exercise machine for $200. They
haven't gone to see a 2-year-old granddaughter since July 4 because of
the cost of gasoline to drive the 85 miles to where she lives.

Many mornings, Mr. Harrison goes around collecting cans and scrap metal to sell to recycling centers.

He says pride compels him to continue applying for jobs. "I can't
see myself not working," he says through tears. "I feel emotionally
hurt to not be able to provide for my family after doing it for so
long."

Years of lifting during his former manufacturing job left Mr.
Harrison with two ruptured and bulging spinal discs, which required
surgery last year. His employer accommodated him for a time, keeping
him on but with a 50-pound limit on what he could lift on the job.

Recently, Mr. Harrison applied for Social Security disability, which
pays recipients an average of about $1,000 a month and puts them on a
path to become eligible for Medicare before they are 65.

He is 57. Given his back problems, his age and the difficulty of his
job search, if he gets into the disability program, he says, "that
would be retirement for me."

One thing this kind of move affects is federal spending. Last year,
the Social Security Administration paid out about $106 billion in
disability benefits, equal to nearly 4% of the federal budget. The
payout was up about a third from four years earlier.

The agency projects it will receive roughly a million more
disability applications from 2009 through 2011 than it would have
without the recession, says Stephen Goss, its chief actuary. If
acceptance rates stay the same, this would add roughly 500,000 more
people to the rolls by the end of 2011.

So far, much of the government's response to long-term unemployment
has been to extend jobless benefits, a support that keeps workers off
the streets but can lead some to languish in unemployment instead of
searching for work as if it were a full-time job.

The federal government extended the standard 26 weeks of benefits by
20 weeks, and to as much as a total of 79 weeks for some workers in
high-unemployment states.

Phillip Lawrence, a Maine electrician who has been out of work for
15 months, has had his final extension, and is running out of options.

Mr. Lawrence spent most of his career at a paper mill in Brewer,
Maine. He was working at a boatyard for $16 an hour when he was laid
off in June 2008. Like Mr. Harrison in Oklahoma, he has applied for
jobs with retailers, as well as hospitals and schools, trying for work
in heating, plumbing or other trades.

Through much of Maine, health care has replaced manufacturing as the
dominant industry. "You look for work and it all has to do with
medical," he says. At 59, he feels too young to retire but too old to
learn a new skill. "At my age, I can't see going back to school for
four years," he says.

Mr. Lawrence receives $340 a week in unemployment benefits and also
has some home-equity cash he took out in a refinancing last year. He
saves on expenses by heating his home with wood. To keep busy, he does
projects like renovating a bathroom and building a new porch. "Just
trying to keep my sanity," he says.

If he were to retire, Mr. Lawrence could collect $340 a month in a
union pension, but he would incur a penalty for collecting it early.
The money from his home refinancing "is the only thing keeping me going
right now," he says.

Says Mr. Katz, the Harvard labor economist: "The big worry is even
after the economy recovers, we are going to see a huge group of
individuals who are disconnected from the labor market."

Retraining is the remedy being tried by many states, such as California, where the unemployment rate is 12.2%.

"If you're unemployed, at this point the likelihood is that you may
be unemployed for a significant period of time," says Geneva Robinson,
a division chief for the state's Employment Development Department.
"We're trying to encourage them to get training so that when the labor
market does come back, they'll be prepared."

In Michigan -- jobless rate 15.2% -- a state-supported nonprofit
organization has started a peer-to-peer networking program, which pays
laid-off and retired workers to call up old colleagues and prod them to
make use of state education and training services.

"It's not part of people's nature to take advantage unless there is
someone pushing them," says John Kreucher, who manages the program for
Human Resources Development Inc., the nonprofit. "There is just so much
inertia built in. It's easier to sit home rather than go out and pull
things together for themselves. They need mentoring, and [the mentors]
can't be bureaucrats."

In a shuttered General Motors metal-stamping plant in Grand Rapids
the other day, Jerry Brower and Gary Haskell, both once employees at
the plant but now paid by the nonprofit, sat at desks calling other
laid-off workers to coax them to keep applying for jobs or to sign up
for retraining programs.

"You get your tractor running?" Mr. Haskell began one phone call to
a former colleague, before segueing into: "The last time I called, you
were interested in getting some training..."

To get through to other laid-off workers, he talks about things like
fishing, in the voice of an old friend. One program he pushes is called
"No Worker Left Behind," which helps eligible workers with
community-college tuition and other training. "We don't want anybody
opting out for the easy way," Mr. Haskell said. "You put a bug in their
ear."

Long-unemployed people who do find jobs often spend years working to
get back to their old wages. In the early 1990s, Tom Stillman lost a
good job at a Duluth, Minn., tool company. He spent a year out of work,
eventually finding a job at an outdoor-equipment retailer, where he
still works.

It took Mr. Stillman about 12 years to get his inflation-adjusted
compensation back to what he had in his final year at the tool company.

"That's where you're losing money. When you start off [in a new job] you're making a lot less," says Mr. Stillman, 57.

He is far from impoverished. But after the uncertainty of a
year-long layoff and spending over a decade climbing back up the
financial ladder, he says his expectations have been diminished. When
he finally retires, it will probably be in the same two-bedroom house
he and his wife bought in 1977. Back then, they called it a starter
home.

Write to Conor Dougherty at conor.dougherty@wsj.com