MNI INTERVIEW: US Labor Shortage to Help Long-Term Unemployed

A shortage of U.S. workers some say is hampering the labor market's recovery may end up benefitting the nation's more than 4 million long-term unemployed as applicants with longer gaps in their work histories receive a second look from eager employers, former Bureau of Labor Statistics Commissioner Katharine Abraham told MNI.

"This should be helpful for people who have been out of work for a long time," she said in an interview. "When labor markets are tight, employers get more flexible about who they consider."

Policymakers through the pandemic have voiced concerns about scarring in the labor market as workers drop out or lose valuable skills. But some researchers say the job market is much tighter than it appears in official employment data, and temporary factors like childcare issues, enhanced unemployment benefits, and lingering virus fears are keeping workers at home. That's creating a shortage of available workers as businesses reopen closer full-capacity as more of the population gets vaccinated against Covid-19.

The number of long-term unemployed, or individuals who have been out of work for at least six months, dipped slightly to 4.2 million in April, but still accounts for 43% of the total unemployed population, according to the Bureau of Labor Statistics' latest jobs report. Long-term joblessness peaked at 45% of total unemployment following the Great Recession.

Despite employers' increased willingness to hire these individuals, Abraham said she doesn't see the rate of long-term unemployment falling by any large margin in the coming months, in part because the measure lags by so much and short-term unemployed are likely to return to the market even more quickly.

"I would expect to see it to stay high for a while," she said. "Even though employers having trouble filling jobs are going to be more willing to consider these people, they're not going to be at the front of the queue," and applicants who haven't been unemployed more than five months may still be given priority in some cases.

Abraham added that the employment prospects of the long-term unemployed will "always" be damaged -- even in times of extreme labor market tightness.

"It is always true that people who are long-term unemployed have a lower chance from any one month to the next of finding a job," she said. "The data are very clear on that."

WAGE PRESSURES

Higher vacancies should lead employers to offer higher wages for available jobs, Abraham said, particularly in the high-contact services sector, which traditionally has a high concentration of lower paying jobs. Many of these businesses are also offering incentives like hiring bonuses to stay competitive and get workers in the door.

Signs of upward pressure on wages existed even before the pandemic, Abraham said, when the unemployment rate was at a mid-century low of 3.5%, and employers were starting to consider more long-term unemployed candidates for higher paying roles. Long bouts of unemployment typically cause one's earnings potential to suffer.

"So there is some indication that a tight labor market is really helpful" for the earnings potential and employment prospects of Americans who have gone without a job for six months or more, she said.

"It's hard to know how this is going to play out because unemployment is still relatively high," she added. "But I think that the trouble employers are having filling their jobs should lead them to do both of these things."