Flabby Skills Are Latest Worry For Unemployed

The economy may be growing again, but not fast enough to bring down the unemployment rate. Long-term unemployment — those without jobs for more than six months — remains very high. And that has many economists worried about the effect on workers' skills. Host Liane Hansen talks with NPR's John Ydstie about an upcoming NPR series on the slow-growth economy and the effect on human capital.

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LIANE HANSEN, host:

Any bout of unemployment can be painful, hurt your finances and derail a career. But long-term unemployment is particularly damaging, both to the individual and the economy. One thing that can happen is that the skills workers possess, their human capital in economics jargon, begins to erode.

This week, NPR will examine the dangers to human capital posed by our struggling economy.

NPR's economics correspondent John Ydstie will be reporting some of those stories. He's here to set the stage for us. Welcome, John.

JOHN YDSTIE: Hi, Liane.

HANSEN: First a definition. How long is long-term unemployment?

YDSTIE: Long-term unemployment defines anyone who's out of work for six months or more.

HANSEN: And elaborate on why long-term unemployment is so threatening to skill level.

YDSTIE: Well, you know, this is one of those economics issues thats pretty straightforward. If you're out of work for a long time, your industry can basically leave you behind. Think of an information technology worker. Both the hardware and the software change so fast in that field that if you're out of work for, let's say, six months or a year, it's likely some of your skills have become obsolete. And the losses can be significant and real harmful for both individual and economies.

European countries found this out in recent decades when they had very high levels of long-term unemployment, according to an economist named Jacob Kirkegard.

Mr. JACOB KIRKEGARD (Research Fellow, Peterson Institute for International Economics): We are now at levels of long-term unemployment in the United States, where I think that concern really needs to be taken very seriously.

YDSTIE: Kirkegard is a fellow at the Peterson Institute for International Economics, and we'll hear more from him in our series.

HANSEN: How close is the United States to those dangerous European levels of long-term unemployment?

YDSTIE: Well, in past decades, about half of Europe's unemployed were considered long-term unemployed. In the U.S., the number ran between 10 and 20 percent. But in recent months, more than 40 percent of unemployed Americans have been out of work for six months or more. Thats 6.2 million people.

And one of those people that we talked to was Mike Hall(ph). He's a highly-trained systems engineer from California who's been out of work for more than two years. And he says he's been rejected from over a thousand jobs.

Mr. MIKE HALL (System Engineer): Really feels like society wants you to voluntarily walk out onto the ice flow. And Im not ready for that. Im too young...

(Soundbite of laughter)

Mr. HALL: ...to pack it all in. Ive got a lot yet to offer.

YDSTIE: Mike Hall says he's now hearing from some hiring managers that they won't even consider someone who's unemployed. And we'll hear more about that in our series.

HANSEN: What happened to Europe's economy? And what might happen to this country if long-term unemployment isnt reduced?

YDSTIE: Well, what happened was that Europe grew more slowly than the U.S. and slower than its potential. Part of Europe's problem was its labor rules made it harder to fire workers, so companies were less likely to hire workers, so getting a job was difficult.

Now, we dont have that problem in the U.S. But we have developed a form of the European lack of mobility. They weren't as willing as Americans to move to get new jobs. Now, of course, because of falling home prices, many Americans can't afford to move to get a new job. So they remain unemployed or trapped in jobs that aren't taking full advantage of their skills.

HANSEN: What can the U.S. do to deal with this problem and really make sure that this doesnt damage the economy for the long-term?

YDSTIE: Well, we could get the economy growing at a much healthier pace and that would reduce unemployment. But most economists think that'll take years, not months.

One effective thing that some European countries have done is to get unemployed people into training quickly, so their skills dont erode. But that costs lots of money, it takes lots of time.

HANSEN: NPR economics correspondent John Ydstie. Thank you, John.

YDSTIE: You're welcome.

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