Imagine you lost your job when the economy was in free fall, and six months later it was still in free fall. You sent out resumés every day, and every day you heard nothing back from companies too scared to hire. Then things finally started to look better. Companies finally started to think about hiring again. But you still heard nothing. See, you’d been out of work for so long that employers wouldn’t even look at your resumé. That’s what Rand Ghayad, a PhD candidate at Northeastern University, found when he sent out fictitious job applications. Companies would ignore all-but-identical resumés if they showed longer unemployment. There’s a perverse logic to it: if other employers have passed on you, why should they spend time finding out why? They don’t. They have software programs that cut you out before you even have a chance.
This long-term unemployment trap has nothing to do with long-term benefits. Indeed, Ghayad looked at the labor markets for unemployed people who areand aren’t eligible for benefits, and found they’ve been equally dysfunctional. No, this long-term unemployment trap has to do with our great recession, and not-so-great recovery. With a labor market that doesn’t work for people who made the mistake of losing their job at the wrong time. If anything, unemployment benefits have kept people from giving up; remember, you have to be actively looking for a job to qualify for them. The San Francisco Fed, for one, estimates that unemployment would have been 0.4 percentage points lower without extended benefits, mostly because more people would have stopped trying to find work.