Unemployed? Get a job fast, or else.

Skills erode over time, and firms are hesitant to hire those who have been unemployed for a significant duration

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Despite many economic indicators improving since the start of the recession, Canada has a significant long-term unemployment problem that is not improving.

Statistics Canada’s Table 282-0047 contains detailed monthly data on the number of Canadian unemployed for a specific period of time. While there have been improvements in some labour market indicators, the number of people who have been unemployed for over a year has remained frustratingly high since the end of the recession, as shown in the graph below.

Long Term Unemployment

Though there has been improvement in the number of people who have been unemployed for only 27-51 weeks, it has not returned to pre-recession levels.

27 to 51 weeks

Table 282-0047 also contains data on the average number of weeks that an unemployed person stayed unemployed. This measure remains relatively unchanged since the recession.

Unemployment Duration

Skills erode over time, and firms are hesitant to hire those who have been unemployed for a significant duration. Economists Kory Kroft, Fabian Lange and Matthew J. Notowidigdo studied the issue by sending fictitious resumés to companies that differed by length of unemployment duration. Not surprisingly, they found an inverse relationship between the length of time a person is unemployed and how often a candidate is called in for an interview:

At eight months of unemployment, callbacks are about 45% lower than at one month of unemployment, as the callback rate falls from roughly 7% to 4% over this range. After eight months of unemployment, we find that the marginal effect of additional months of unemployment is negligible.

The paper believes that much (but not necessarily all) of the cause of the reduced callback rate is due to employers believing that long durations of unemployment indicate unobservable negative qualities about the worker, which makes them ill-suited to work at the firm.

It is difficult to integrate people back into the workplace after they have been unemployed for a year or longer, so ideally we want to ensure that unemployment durations are as short as possible. There is room here for activist public policy aimed at assisting people as soon as they become unemployed—including very fast interventions to have resumés updated, interview skills improved and much shorter-duration job training programs (rather than ones that last months or years).

One common policy prescription is that employment insurance benefits be made less generous and shorter in duration, with the idea that these benefits, while well intended, provide incentive for people to remain unemployed longer. Dahl (2011) studied the possible disincentive effects from extending U.S. unemployment insurance (UI) and found:

… only a modest behavioural response in weeks 26 to 39 due to the extension in benefits. The results suggest the long-term unemployed have a difficult time re-entering the labor force, with UI benefits serving as an important income maintenance program for these workers.

Given the economic and human-cost to long-term unemployment, governments (both federal and provincial) need to examine if their labour policies are returning the unemployed as quickly to work as they could.




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Unemployed? Get a job fast, or else.

  1. “Given the economic and human-cost to long-term unemployment, governments (both federal and provincial) need to examine if their labour policies are returning the unemployed as quickly to work as they could.”

    Well, it’s hard to deny that, the gov’t has long known that this has existed, for the last few years, and getting much worse daily.
    But then again, how can a gov’t, which “blesses” Corps,…, that leave Canada’s manufacturing sectors for cheaper alternatives in asia,
    but at the same time, they blindingly attempt to pretend that the spiraling UN-employent is NOT their fault ?!
    Instead, Feds, (and their lobbyist Corps’) …, are hoping that the “bread-crumb” jobs that they scatter around here and there, will appease the canadian mindset, young or old ?

    wow, we really must appear to be “lemmings”, to harper and his cons’?. :(

  2. Another “fact” that gov’t, corps,…, deny, is the obvious one where “they” don’t want you to work (full-time) to the golden Pension age (at 65,… or whatever).
    You see, because obviously if you work full-time ’till 65, then you get a BETTER pension upon retirement. Otherwise, you’ll get less, much less in many cases.
    You see again, that this is advantageous for the Gov’t (to get out of paying decent pensions to Canadians), AND, most definitely advantageuos for the cheap Corps,…
    and no, this is NOT such a little-unknown-fact as most canadians, these days, already instinctivly know.
    I mean, why “pretend” this fed gov’t is on “our”-canadian taxpayers’ side?

    Why oh why, can’t Macleans dig a little deeper and bring out these “real” truths. …, instead of buttering it up with non-informative half-truth articles such as this ?

    I’m sorry, but this one rubs to the bone with me.

  3. “It is difficult to integrate people back into the workplace after they have been unemployed for a year …”

    We know that that statement is such a non-Truth, especially for older people with many years of work experience under their belt.

    • To Rickster69

      I totally agree with you regarding your last statement “especially for older people with many years of work experience under their belt”.

      Absolutely TRUE!!

  4. I know quite a few people that were all given the axe in their 50s before full retirement age, it is systemic in the private sector because you save a huge amount of money by not having to pay out the full pension benefits. All of a sudden you start getting the worst assignments or poor performance reviews, if you don’t take the hint after 6 months or so they give you a package and boot you out. The big bank I worked for had zero people left over age 55 in a department of 200 people. Younger people don’t care, they think ageism won’t impact them, I guess they will all die young and stay pretty. It’s the last remaining acceptable prejudice.

    • @Vera
      You said that better than i did ;)

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