The Rising Stakes of Job Loss

No one wants to lose his or her job. Families face grave difficulties when a worker is jobless, especially for an extended period. Workers receiving unemployment insurance (UI) benefits receive less than 40% of their prior wages.1 Typically, after six months out of work, the worker has exhausted unemployment benefits and has significantly or completely depleted savings. It is at this point that unemployment can have lasting effects such as elevated levels of debt, diminished retirement and savings accounts (tapped to meet daily expenses), or relocation from secure housing and communities to unfamiliar places in order to find employment.

Recent research has examined how unrelenting high rates of long-term unemployment were spawned by the lack of job creation that followed the 2001 recession. In this report, we examine this unprecedented period of long-term unemployment and compare it with the most recent economic downturn of the 1990s. We conclude that a different picture of long unemployment spells has emerged.

  • Three and a half years into the recovery, one in five of the unemployed have been out of work for six months or more. Never before has the overall unemployment rate (ranging from 5.2% to 6.3% from October 2002 to March 2005) been this low while so many of the jobless have been out of work for such long periods of time. Languid employment expansion has simply not provided those who lost their jobs during the downturn with opportunities to become reemployed during the recovery. The patterns of job creation following the last two recessions have raised the stakes of job loss for a broadening segment of American families.
    • Women represented 43% of long-term jobless workers, on average, from 2001-04, up from 35% compared to the 1990-93 period. Such long-term unemployment has a direct impact on children and families, especially families with single mothers.
    • After experiencing historic labor market gains during the late 1990s, African Americans represented a greater share of the long-term jobless in this economic cycle.
    • Long-term unemployment is expanding beyond blue collar workers: higher levels of education and white collar jobs are no longer providing insulation against severe joblessness.

These consequences make the recent and persistent problem of long-term unemployment a critical labor market problem requiring policymakers’ attention, and assistance for the long-term unemployment was a major issue in the 108th Congress. Changing dynamics should cause law makers to rethink how policy can more effectively support family income while helping those who experience long-term joblessness return to work.