Dec. 10 (Bloomberg) -- More than four years into the U.S. economic recovery, extraordinary federal support for the long-term unemployed should no longer be necessary.
Sadly, it still is.
Meager growth since 2009 has done far too little to lift the misery caused by the recession. As of November, 4.1 million people, almost 3 percent of the labor force, had been looking for work for more than six months. That’s down from more than 4 percent in 2010, but still higher than anything the U.S. experienced in even the worst crises of the previous six decades.
These people are employable. At the end of last year, about four-fifths of the long-term unemployed had at least a high-school education, and almost half had some college, according to a study by the Urban Institute. About one in five had previously worked in professional or management positions. As time goes on, though, the chances of finding a new job declines and idleness erodes motivation and skills -- a loss that could permanently impair the economy’s productive capacity.
Rather than helping to remedy the problem, Congress has made it worse. The labor market is suffering most of all from a lack of demand. Instead of supporting the recovery by keeping fiscal stimulus in place until the economy was stronger, legislators cut public spending abruptly. The squeeze does little to address the longer-term health-care and social-security liabilities that really do threaten the government’s creditworthiness. Its main effect is to slow the recovery and keep more people out of work for longer.
Efforts to reduce long-term joblessness more directly have been inadequate. The federal government said states could pay unemployment benefits to workers whose hours are cut -- a “work-share” policy to help keep people in their jobs. That was a modest proposal but worth doing. So far, only about half the states have such a program in place.
Other ideas would be worth a try. The U.K. reports some initial success with programs (first suggested by U.S. scholars) that aim to build confidence and encourage the unemployed to keep looking for work. Washington should pay attention. The U.S. could make its mess of separate retraining programs -- there are dozens -- more effective through streamlining and better coordination. Helping people meet the expense of moving to take a job would make it easier for qualified workers to connect with companies that need them.
Some 1.3 million people are still receiving extended unemployment benefits paid for by the federal government, and Congress is considering allowing those benefits to expire at the end of this year. That would be a cruel mistake, compounding the other errors of omission and commission.
The Congressional Budget Office has estimated that extending federal benefits for another year would cost less than $20 billion in 2014, adding about half a percent to government spending. It would directly relieve the distress of those involved and as a byproduct, by giving a modest boost to demand, increase economic output and -- according to the CBO -- add about 200,000 jobs by the end of next year.
When the U.S. has a tight labor market and jobs for all who want them, the case for extended unemployment benefits can be dismissed. The U.S. isn’t there yet, not by a long way. Congress should extend the benefits for another year.
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