What happens to people when their unemployment insurance runs out and they still can't find a job?

What happens to people when their unemployment insurance runs out and they still can't find a job?

What happens to people when their unemployment insurance runs out and they still can't find a job?

Commentary about business and finance.
Dec. 30 2010 3:31 PM

Depression Economics

What happens to people when their unemployment insurance runs out and they still can't find a job?

People looking online for employment.
What happens after unemployment insurance runs out?

If 2008 was the year of the financial crisis, and 2009 the year of the recession, then 2010 was the year of unemployment. The good news is that things are starting to look up, if modestly. The number of workers making initial unemployment claims—a good indicator of where the unemployment rate is heading— fell to its lowest level since July 2008 this week. Employers have started filling more available positions. And economists expect December's unemployment rate, to be released next week, to be lower than last month's.

But none of this changes the fact that, by most yardsticks, 2010 was the worst year for jobs since the Great Depression. The year's average unemployment rate will clock in at about 9.7 percent—higher than last year's 9.3 percent and tied for the highest annual rate since the government started keeping official counts in 1948. For all of 2010, in any given month, about 15 million Americans—the population of New England—were looking for work. And, really, in any given month, more needed work. Underemployment—that's the "official unemployed," plus people in part-time or temporary positions looking for full-time work, plus people discouraged from the labor market and no longer looking—totaled as many as 25 million.


And the recession has not meant just more joblessness. It has also meant longer joblessness. The average length of a spell of unemployment now sits at 30 weeks, after hitting a high of 35 weeks in July. About 6.3 million people, 42 percent of all unemployed Americans, have been out of work for more than six months. And more than 1 million have exhausted their unemployment benefits. They're called 99ers. (The term, coined this year, refers to the maximum weeks of benefits in the states with the highest unemployment rates.) There are about 1.6 million of them, according to the Department of Labor. And they raise the question: What happens when unemployment insurance ends?

There is no reliable way to measure what happens to 99ers, whether they find work, return to school, remain unemployed, or move on to programs such as disability and welfare. (The Department of Labor does not follow the same individuals longitudinally.) But economists know with a reasonable amount of certainty that their unemployment does not end when their unemployment insurance does.

The Department of Labor has shared data with the New York Times showing that the shorter the duration of unemployment, the more likely a person is to get a new job. People who have been out of work for five weeks have a monthly re-employment rate of about 31 percent. People who have been out of work for a year have a monthly re-employment rate of 8.7 percent. Presumably, people who have been out of work for more than 99 weeks have a re-employment rate somewhat lower than that.

In some states, there are special programs to help keep the 99ers afloat. But for the most part, they are on their own. Government assistance becomes thinner, more brief, and more patchwork—food stamps, assistance with heating costs, welfare for parents with children, temporary aid. For many people receiving unemployment insurance, it is the only thing keeping them above the poverty line. The Economic Policy Institute calculates that unemployment insurance kept 3.3 million people out of poverty in 2009.


Consider the case of 44-year-old Boston native Rochelle Sevier. After eight years with Fidelity Investments, mostly as a marketing executive, she was laid off in October 2008. Given her bachelor's and master's degrees, longtime work experience, and connections in Boston, she did not anticipate being unemployed for long. But since then, she has had only a few temporary positions, including an $8-an-hour gig selling sweaters for the holidays last year. In September, her unemployment insurance ran out.

"Literally, from October of 2008 until the fall of 2009, I got no bites at all," Sevier explains. "I started off applying for good jobs, but then just started applying for anything—part time, temporary. I applied for jobs in my field, jobs that were reaches, all the way down to jobs I never in my life thought I would have to work."

At first, Sevier fell victim to her experience: She was overqualified for the jobs she was applying for. "I started applying for minimum-wage jobs, but they said they wouldn't hire me, because when the economy gets better, I'd leave them." Then, she fell victim to her own joblessness: Employers just don't like to hire people who have been out of work for long, she says. "I need a job now, and I just think that these companies have to stop prejudging us [99ers]. If anything, they should be hiring us because we have experience—I mean, I've got a master's—and we'll work harder." So Sevier, like millions of others, has applied for the aid she can get: food stamps ("I'm so embarrassed. I never thought I'd have to do that") and heating-fuel assistance ("It's cold").

Unemployment, she and others explain, eventually becomes more than a financial issue. The spell of joblessness has strained her marriage. It forced her to declare bankruptcy, to clear credit-card debt she felt she would never be able to pay back. She managed to keep her house after a loan modification, but otherwise might have faced moving back in with her family.

Like so many other 99ers, Sevier's joblessness has taken a toll on her health. "I'm going through a really deep depression," she admits. She wakes up often with panic attacks and has lost weight, "but I'm under the care of a doctor, at least." Sevier's situation is not unusual: Unemployment tends to be bad for people, because of increased stress and reduced consumption of vegetables. And economists have found not only that unemployment tends to increase the rate of suicide, but that the loss of unemployment insurance actually has a stronger impact on an individual's likelihood of committing suicide than the loss of a job does.

And the depressing truth is, though 2011 should be a better year for jobs generally, there seems to be little help on the horizon for the long-term unemployed. That is not necessarily due to a lack of possible solutions. The federal government could create broad retraining programs or even guaranteed work schemes, as a few European nations have. But congressional will is weak, and such programs are expensive. Though 2010 was the year joblessness was the highest, 2011 may prove to be the year that joblessness became intractable—with a large pool of unemployed, and sometimes unemployable, workers remaining just outside the otherwise sunnier labor market.

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