Two CFR Reports Show How U.S. Government Can Create New Opportunities for the Unemployed Workers

Long-term unemployment has become a chronic problem in the United States despite an improving job market, and the country needs a jobs policy overhaul, according to two new reports from the Council on Foreign Relations’ Renewing America initiative.

January 13, 2015

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Long-term unemployment has become a chronic problem in the United States despite an improving job market, and the country needs a jobs policy overhaul, according to two new reports from the Council on Foreign Relations’ Renewing America initiative. In a Policy Innovation Memorandum, CFR Adjunct Senior Fellow for Business and Globalization Matthew Slaughter and former World Bank President Robert Zoellick call on the new Congress to pursue a bipartisan jobs program focused on opportunities for getting the long-term unemployed into private sector jobs, including by removing barriers to work, easing transition costs, and offering incentive payments.

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A decade ago the United States had the lowest share of long-term unemployed workers among developed nations. But today U.S. long-term unemployment levels are nearly as high as those in Europe, despite stronger overall U.S. economic performance, according to a new Renewing America scorecard and progress report. In 2000, 11.4 percent of unemployed American workers had been out of work for more than six months, compared to 51.9 percent in the rest of the Group of Seven (G7) countries. Throughout the recession those numbers were converging. In 2013, 37.6 percent of unemployed workers in the United States had been out of work for more than six months; that rate was 53.8 percent in the rest of the G7.

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 Percentage of unemployed workers out of work for more than six months

U.S. federal employment and training programs that assist job seekers do little to help the long-term unemployed prepare for different careers, the progress report explains.

“Ineffective worker-adjustment policies undermine economic recovery, lead to skills shortages for employers, and hurt U.S. competitiveness,” Research Associate Robert Maxim explains in the progress report. “Other advanced economies invest more in worker adjustment and use innovative programs to minimize unemployment.”

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The United States spends far less on programs that directly help people find work than other developed countries do, in part because past U.S. unemployment was mostly short-term, and the unemployed tended to be rehired for similar jobs. In 2011, the most recent year for which comparable data is available, the rest of the G7 spent five times as much on active labor market measures as the United States did. Nations with a lengthier history of long-term unemployment, such as Germany and Denmark, have taken a more proactive role in equipping the unemployed with new skills and identifying available jobs.

 Public expenditure on active labor-market policies as a percentage of GDP

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Although the United States has nearly fifty employment and training programs across nine federal agencies, this system fails to provide adequate assistance for most eligible Americans, and allocates its limited resources unequally among the unemployed. During a recent five-year period the Government Accountability Office found that only five of these programs had undergone impact studies to determine whether workers’ success could be attributed to the programs.

In their memo, Zoellick and Slaughter call for closer scrutiny of program effectiveness. “Taxpayers may be more willing to support public innovation if the government rigorously evaluates the results of new jobs programs and ends those that do not work,” they write. “An accountable government is more likely to be permitted and encouraged to adapt to changing needs.”

Congress has shown some willingness to work across the aisle on jobs. A compromise bill, the Workforce Innovation and Opportunity Act, passed the previous Congress with bipartisan support in July 2014. But the bill leaves the existing system largely intact, and more innovative approaches are still needed.

Read the Renewing America report and scorecard at cfr.org/NoHelpingHand. Read the Policy Innovation Memorandum at cfr.org/Work_Plan_PIM.

This is the sixth progress report and scorecard from CFR’s Renewing America initiative. Previous reports and scorecards have evaluated U.S. debttransportation infrastructurefederal education policytrade, and corporate tax.

This scorecard is part of CFR’s Renewing America initiative, which generates innovative policy recommendations on revitalizing the U.S. economy and replenishing the sources of American power abroad. Scorecards provide analysis and infographics assessing policy developments and U.S. performance in such areas as infrastructure, education, international trade, and government deficits. The initiative is supported in part by a generous grant from the Bernard and Irene Schwartz Foundation.

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