White-collar joblessness widens

More in middle class see longer stretches without paychecks
MICHAEL A. FLETCHER, Washington Post,, Jan. 22, 2008

WASHINGTON --An unusually large share of workers have been out a job for more than six months even as overall unemployment has remained low, a little-noted weakness in the labor market that analysts said threatens to intensify the impact of the unfolding economic downturn.

In November, nearly 1.4 million people -- almost one in five of those unemployed -- had been jobless for at least 27 weeks, the juncture when unemployment insurance benefits end for most recipients.

That is about twice the level of long-term unemployment before the 2001 recession.

The problem is ensnaring a broader swath of workers than before.

Once it was concentrated among manufacturing workers and those with little work history, education or skills.

Now long-term unemployment is growing most rapidly among white-collar and college-educated workers with long work experience, studies have found, making the problem difficult for policymakers to address even as it grows more urgent.

"What has happened is a polarization of the labor market. It was very strong at the very top and very strong until recently at the bottom," said Lawrence Katz, a labor economist at Harvard University. "But in the recent weak recovery, and now recession, demand has been very weak" for jobs in the middle.

With the economy sliding toward a possible recession and the jobless rate having spiked to 5 percent last month, the already high rate of long-term unemployment is likely to grow, as it has during past slowdowns, a prospect that has spawned calls in Congress and on the presidential campaign trail to extend unemployment benefits and expand tax cuts to protect jobs and fuel the economy.

The growth in long-term unemployment has occurred even as displaced workers have taken bigger pay cuts to re-enter the job market.

A 2004 study found that workers who lost a job in 2001 to 2003 took an average pay cut of 17 percent in their new jobs, more than double the average cut of those displaced in the late 1990s.

"When people are losing good jobs these days, they have a very hard time getting back to the type of job they had before," said Andrew Stettner, deputy director of the National Employment Law Project, an advocacy group that presses for more-generous unemployment benefits.

While strong corporate profits, low inflation and record manufacturing output characterized the extended recovery that followed the 2001 recession, some economists call that period of expansion a "CEO's recovery."

Real wages were mostly flat, poverty ticked upward and an unusual number of people had a hard time finding work -- a fact masked by relatively low overall unemployment rates.

"This tells you that this has not been as good an economy as the overall unemployment rate would make it seem," said John Schmitt, a senior economist at the Center for Economic and Policy Research. "This dynamic causes anxiety among people even if they still have a job. It is very important to understanding the level of anxiety that the work force feels as a whole."

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