- The Washington Times - Friday, May 11, 2012

ANALYSIS/OPINION:

The official unemployment rate is 8.1 percent, but the turmoil in the American labor market is worse than that number suggests. Bad policy and economic circumstances are combining to create a European-style permanent underclass on our shores.

It’s telling that the Bureau of Labor Statistics (BLS) recently revised the definition of long-term unemployment. Previously, the longest term measured was two years. Now, BLS will have a category for Americans who have been without a job for as long as five. This change reflects the reality that the average length of long-term unemployment has continued to increase even though the economy is technically in a “recovery.”

In November 2009, the average length of unemployment was just over 29 weeks. In April 2012, that number was 34.5 weeks. Almost a third of the more than 13 million unemployed Americans - that is, almost 4 million people - have been idle for more than year, according to the most recent Pew Trust report. As Pew noted, the problem of long-term unemployment is worse now than it was in 2008, the official start of the Great Recession.

Long-term unemployment has generally been a European problem more than an American one. That’s why it’s especially troubling that we have mounting evidence of an increase in structural unemployment as well. That is, there’s a mismatch of positions available and the number of individuals qualified to fill them. Startups in California are desperately searching for engineers, with one firm going so far as setting up an office in China to look for skilled recruits. Manufacturing companies cannot find enough high-tech machinists, and they are subsidizing tuition at local community colleges in a desperate effort to fill vacancies.

To the extent the unemployment problem is structural, monetary policy isn’t a solution. Some of the blame for this state of affairs falls on our dysfunctional K-12 educational system and the push to send everyone to college without regard for ability, employability or capacity to pay. As the Cato Institute’s Andrew Coulson has documented, we spend - in real terms - almost twice as much per student in a public school today as we did in 1970. Despite this, academic achievement has remained flat or worsened. Vocational training, another path to gainful employment, has been pushed aside in favor of taking on nondischargeable debt to go to college. A significant number of students never graduate, leaving them with no degree and a whole lot of debt. Many of these find themselves in unemployment lines today.

Congress is making the situation worse by continually extending the length of unemployment benefits. When people are paid not to work, they don’t work. Pew projects spending for jobless compensation for 2012 at $99 billion, which is a big number even by profligate Washington standards.

There are no easy fixes, but if this nation doesn’t address the root causes of unemployment, it’s only going to get worse. America can’t afford to lose 4 million people to learned hopelessness.

The Washington Times

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