The American economic expansion is finally accomplishing one of the country’s most needed social improvements: getting the long-term unemployed reattached to the labor market. Income inequality gets much of the press today, but as Harvard economist and Manhattan Institute senior fellow Ed Glaeser points out, long-term joblessness is the more serious problem. The unemployed face a heightened risk of serious ills ranging from physical maladies and mental health problems to divorce.
Rising long-term joblessness, particularly among prime, working-age men (25 to 54), has been a corrosive trend. A Kansas City Federal Reserve study found that the number of men in that key demographic not in the labor force increased from 4.6 million in 2006 to 7.1 million in 2016. We’re now seeing early signs that this trend may be reversing. Reports describe how a tightening labor market is finally tearing down employer-erected barriers to hiring. The Wall Street Journal recently noted, for example, that firms are increasingly adopting a “no experience required” policy to try to fill jobs, even eliminating the requirement for a college degree in some cases.
Up to now, observers had pointed to the rise in state-mandated occupational licensing as a factor in slow economic growth. Without help from government, though, the private sector itself had become prey to creeping credentialism. Online job postings frequently include a long list of detailed requirements, with most applicants summarily rejected by algorithms or offshore résumé reviewers. Nearly two decades of a recessionary or anemic jobs economy allowed companies to become prima donnas of hiring, and a generation of human resources and hiring managers were marinated in this environment.
Now marketplace discipline is forcing them to change. Anything that reduces an unhealthy fixation on the length of a CV is positive for economic dynamism. The marketplace is also helping those who found themselves with situations that previously rendered them all but unemployable. Anyone with an employment gap was effectively exiled from the job market, for example. Someone who fell prey to drugs but then conquered addiction, or who simply had a run of bad luck, found it all but impossible to get a foot back on the job ladder. People with other negatives—such as criminal records—had it even worse.
Indications suggest that this is starting to change, too. “As workers become scarcer, employers are looking further and wider for talent,” the Wall Street Journal reported earlier this year. “That includes tapping a pool of former prisoners.” The New York Times devoted a front-page story to the trend of employers giving ex-offenders a second chance. They cite examples in markets such as Madison, Wisconsin. “In Dane County, Wis., where the unemployment rate was just 2 percent in November, demand for workers has grown so intense that manufacturers are taking their recruiting a step further: hiring inmates at full wages to work in factories even while they serve their prison sentences.”
Progressives, including former President Obama, have pushed for regulations such as “ban the box,” which would prohibit employers from asking about criminal history on an initial job application. But it’s the economy, not federal mandates, that is forcing employers to give ex-offenders a second chance, so critical to reducing recidivism and helping them rebuild their lives.
Beyond anecdotal reporting, the data show positive signs as well. In particular, applications for long-term disability, which serves as a kind of shadow long-term unemployment benefit, have plummeted recently, falling to their lowest level since 2002, and extending the program’s solvency by several years. Traditionally, those on disability rarely exit the program, but the total number of recipients has fallen by more than 300,000 since its peak in late 2014, according to the New York Times. Prime working-age labor-force participation is also up slightly. It bottomed out in November 2015 at 88 percent but has averaged 89.1 percent for the first six months of 2018.
A strong job market can’t solve every problem, of course. Some people have legitimate disabilities or health problems; some still struggle with drugs; some offenders haven’t reformed. But for the many who want to get back to work, the current economy offers a more promising path forward than any government intervention. Whether the job growth will continue remains to be seen; a Fed-induced recession, for instance, could halt such progress in its tracks. Policymakers need to balance traditional economic considerations, such as inflationary concerns, with the unique needs of our time. Millions of Americans face a bleak future unless they can reenter stable employment. Prematurely truncating economic growth would be a mistake we cannot afford.