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Unemployment: Itís Not Personal

Paul Krugman, The New York Times

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May 18, 2014

Matt O’Brien has an interesting if depressing piece on long-term unemployment, making the point that long-term unemployment is basically bad luck: if you got laid off in a bad economy, you have a hard time finding a new job, and the longer you stay unemployed the harder it becomes to find work.

Obviously I agree with this analysis – and I’d add that O’Brien’s results more or less decisively refute the alternative story, which is that the long-term unemployed are workers with a problem.

You can see how this story might work. Suppose that workers have some quality – sticktoitiveness, or something – that doesn’t show up in official skill measures but which potential employers can intuit. Then workers lacking this ineffable quality would tend to lose their jobs and have trouble getting new jobs; the difficulty the long-term unemployed have in job search would reflect their personal inadequacy.

Read between the lines of a lot of commentary on the unemployed – especially from those eager to slash benefits – and you’ll realize that something like this is the implicit underlying theory.

But here’s the thing: the association between worker quality and unemployment should be much stronger in a good economy than in a bad economy. In 2000, with labor scarce, there probably was something wrong with many people who got laid off; in 2009, it was just a matter of being in the wrong place. So if unemployment was about personal characteristics, being unemployed should have mattered less for job search after the Great Recession than before. What we actually see, of course, is the opposite.

In other words, it’s nothing personal; it’s the economy, stupid. And as O’Brien said, it’s one more reason failure to provide more stimulus is a crime against American workers.