Hard-Core Unemployed

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Hard-Core Unemployed

THEORIES AND EXPLANATIONS FOR THE EXISTENCE OF STRUCTURAL UNEMPLOYMENT

POLICY DEVELOPMENTS AND THEIR IMPACT ON OUR UNDERSTANDING OF THE PROBLEM

The term hard-core unemployed was popularized in the late 1960s to refer to persons facing multiple barriers that appeared to block them from active, consistent participation in the job market. The term has largely fallen out of favor, though the concept—now termed structural unemployed —still has utility in today’s policy debates, particularly regarding economic disadvantages related to race.

HISTORY

Policymakers, economists, and historians have long been interested in the problem of chronic joblessness. Much of this interest has corresponded to periods of market failures, like the Great Depression of the 1930s, when huge swaths of working-age persons were unable to find gainful work due to the collapse in aggregate demand.

However, policymakers, civil-rights leaders, and social critics noted a different, though related, phenomenon beginning in the 1960s. Significant numbers of persons were experiencing chronic unemployment even in economic “good times,” that is, periods of solid overall growth and low national unemployment. Moreover, there was a set of identifiable characteristics among these jobless persons.

First, they were generally disconnected from the labor market. Though some worked intermittently, they experienced long spells of joblessness that lasted anywhere from six months to numerous years. Second, they tended to have lower levels of education, at most a high-school diploma. Third, they were disproportionately, though by no means exclusively, minority. Fourth, in part due to their lack of employment, they were often poor or near-poor urban residents, and typically received some form of government assistance. Finally, some members of this group were alleged to have physical or mental handicaps; more recently, a criminal history has also been associated with long-term joblessness.

In his fifth State of the Union address (1968), President Lyndon Johnson (1908–1973) used the term hard-core unemployed, referring to approximately 500,000 Americans with these characteristics. Johnson also dubbed them the “last in line … the hardest to reach.”

THEORIES AND EXPLANATIONS FOR THE EXISTENCE OF STRUCTURAL UNEMPLOYMENT

There are three somewhat competing theories for the existence of chronic unemployment: these theories are based on productivity/skills mismatch and cultural explanations.

The first theory maintains that some persons, though willing to sell their labor at the going wage, simply lack the productivity to justify even the lowest wage on offer. Employers thus have no motivation to hire such persons, since their contribution to the firm’s output will be less than their pay, making them a net cost to the employer. As discussed below, policymakers motivated by this reasoning created tax credits to lower the labor cost to the employers associated with such hires.

The second theory stresses structural barriers: forces beyond the control of the individual that preclude him or her from active participation in the job market. These barriers include racism; exclusion from opportunities available to the majority, such as a decent education; and economic changes that have reduced job opportunities to non-college-educated workers and those in particular geographical areas. In this explanation, the chronically unemployed have the necessary skills and attitudes to maintain a lasting connection to the job market. But forces outside their control, such as employers’ aversion to hiring minorities or the disappearance of jobs for which they are qualified, leave them without work for extended periods.

The third theory stresses personal shortcomings having more to do with attitudes, habits, and personal preferences than with skill limitations. The argument here is that the chronically unemployed have failed to internalize the dominant work ethic common among the majority. The result is that they devalue work in the paid job market, preferring outside sources of support, such as government assistance or the black market.

Of course, these theories overlap, and subsequent research has revealed that no single theory suitably explains the phenomenon. Relative to the other two theories, attitudinal explanations have less salience, as events and research have revealed that skill enhancement, policy interventions, and periods of strong labor demand have at times proven to diminish long-term joblessness among disadvantaged workers. That said, the problem is still very much with us.

POLICY DEVELOPMENTS AND THEIR IMPACT ON OUR UNDERSTANDING OF THE PROBLEM

The explanations discussed above, particularly the first two, led to various policy interventions designed to break the cycle of chronic joblessness in the United States. Presidents since Johnson have introduced and extended policy sets of training initiatives and tax credits to raise the skills of the hard-core unemployed and to lower their labor costs to employers (under such a credit, the government will pay some portion of the wage of workers who meet certain criteria).

Most of these programs remain in place today. The Targeted Jobs Tax Credit introduced in 1978, an employer-side credit of the type just noted, became the Work Opportunity Tax Credit in 1996. Numerous training programs for the least advantaged also remain in place under the rubric of the 1998 Workforce Investment Act. The welfare reform legislation of the mid-1990s also extended some of these programs.

The evidence of their effectiveness is mixed. The research on employer-side tax credits shows that while these programs sometimes have their intended effect, they are just as often used as an unnecessary windfall to employers who would have hired the same workers in the absence of the subsidy. Worker training programs also have a checkered history in terms of their effectiveness in offsetting the skill mismatch, but more recent, localized initiatives have shown greater success.

To some extent, the full employment period of the latter 1990s proved to be a potent antidote to structural unemployment, suggesting that depressed labor demand has been one factor responsible for chronic joblessness. During this period, the employment rates of many populations that had formerly been left behind grew sharply. Public policy interventions, including a higher minimum wage, an expanded Earned Income Tax Credit (an employee-side wage subsidy for low-wage workers in low-income families), and a set of work supports associated with welfare reform (e.g., subsidized child care or health care for working families), also played a role.

But the pull of the strong labor market, characterized by the lowest overall unemployment rates in three decades, was likely the dominant force in play in these years, and the employment rates (the share of the population at work) increased significantly for many, though not all, disadvantaged groups. Even some of the most disconnected groups benefited. For example, young African American males without a high-school diploma experienced a gain in employment rates from 32 percent in 1995 to 38 percent in 2005. Of course, even with this six point gain, such a low rate of employment is indicative of the problem of structural unemployment, but the positive trend is still notable evidence of the importance of very tight job markets.

CONCLUSION

Though the term hard-core unemployed is rarely used in contemporary discussions, compelling evidence reveals that certain groups of persons still face high barriers between them and the employment opportunities they need to raise their living standards. Unemployment rates for African Americans are consistently twice that of whites; the employment rates of young workers with less education, particularly minorities, remain far below overall averages.

Even in 2000, when national unemployment was 4 percent, the employment rate for young, African-American, male, high-school dropouts was 38 percent, far below the national average of 64 percent. Other research has shown that over 70 percent of young men with these characteristics were jobless or incarcerated in the mid-2000s.

Numerous explanations for this damaging phenomenon have been articulated and explored by researchers and policymakers. The findings generally show that these workers face both skill deficits that hurt their employment prospects and a set of structural barriers, including weak labor demand, discrimination, and the absence of sustainable jobs where they live. Public policy and positive macroeconomic trends have been shown to make a helpful difference in the lives of these workers, but steep barriers remain in place.

For example, as economic inequality has grown and public budgets have become ever more strained, investments in public education have often lagged, particularly in disadvantaged areas where they are needed most. Rising inequality and poverty rates that are less responsive to economic growth have also meant that too many poor and near-poor families are unable to provide the necessary opportunities and advantages for young children, and these early disadvantages have lasting, negative consequences. Correcting these inequities, in tandem with pursuing policies to chip away at the deficits and barriers facing the structurally unemployed will help to diminish their numbers and connect them to the growing economy.

SEE ALSO Discouraged Workers; Employment; Full Employment; Inequality, Racial; Labor Force Participation; Lumpenproletariat; Unemployment