Unemployment To Cost Young Americans $20 Billion Over Next Decade

Young Americans make up nearly half of America’s unemployed workforce, according to a study released Thursday, and the unemployment rate for Americans between the ages of 18 and 24 is a staggering 15.1 percent. But the bleak job prospects for young Americans isn’t just contributing to the nation’s persistently high unemployment rate. According to a study from the Center for American Progress, the long-term effects will hurt young Americans for years to come.

The negative effects of unemployment, in fact, will cost young Americans more than $20 billion over the next decade, CAP’s Sarah Ayres found:

Not only is unemployment bad for young people now, but the negative effects of being unemployed have also been shown to follow a person throughout his or her career. A young person who has been unemployed for six months can expect to earn about $22,000 less over the next 10 years than they could have expected to earn had they not experienced a lengthy period of unemployment. In April 2010 the number of people ages 20–24 who were unemployed for more than six months had reached an all-time high of 967,000 people. We estimate that these young Americans will lose a total of $21.4 billion in earnings over the next 10 years.

It isn’t just unemployment that is depressing wages for young workers, though. College graduates and young workers are increasingly being pushed in to low-wage jobs as better opportunities aren’t available to them because of a slacking job market. Low-wage jobs have made up a majority of the jobs added since the end of the recession, and there are now 13.4 million college graduates occupying them — a 19 percent increase since the start of the recession.

These losses also hurt the broader economy, as young Americans are less able to spend money. Reports have already shown that unemployment for young Americans is holding back the housing recovery and thus the overall economic recovery, and other reports paint an even worse picture. As Ayres noted, this unemployment will cost young Americans $1.6 trillion over their lifetimes, which will also reduce revenues for the federal government.

But even as youth unemployment remains in crisis, the government has cut more than $1 billion from youth job programs and continues to focus on reducing the deficit instead of policies that will create jobs and help young Americans — and the country as a whole — finally recover from the Great Recession.

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Sequestration Cuts Soon To Hit Long-Term Unemployment Insurance

The automatic budget cuts that went into effect on March 1 will soon begin to affect a new subset of Americans: the long-term unemployed who have been out of a job for more than six months and are dependent on the federal government’s unemployment assistance program.

The federal Emergency Unemployment Compensation program aids workers after they exhaust their state-level unemployment benefits, which typically last 26 weeks. The benefits are modest — about $300 a week on average — and will become even more so this month and later, when sequestration forces cuts of up to 10.7 percent on all benefit checks, as National Journal reports:

These checks—which average $300 a week, without the cuts—go to roughly 2 million people who have already exhausted their regular unemployment benefits, meaning they’ve been out of work for a while. The Bureau of Labor Statistics defines the long-term unemployed as people who have not held a job for 27 weeks.

Moreover, they are people whom the political establishment has largely forgotten. There are no new stimulus programs on the horizon for the long-term unemployed, nor is there anything new to help train them or connect them to jobs. Those still receiving benefit checks will see them whacked by as much as $450 in total between now and the end of the fiscal year in September, according to Labor Department estimates—all due to spending cuts that both parties consider ill-advised and indiscriminate.

The cuts, as National Journal explains, will come at different times based on how they are implemented by states. But in some states, the cuts will carry an even bigger punch to the guts of jobless workers. Eight states have recently made substantial cuts to their own unemployment compensation programs, shortening the amount of time jobless workers are eligible for benefits. That, in turn, reduces the amount of time they are eligible for federal benefits as well, since the federal program is tied to state programs.

The average unemployed worker has been out of work for 35 weeks; 40 percent have been jobless for 27 weeks or longer, meaning they rely on the federal program. But instead of stimulus programs to help create jobs, Congress has focused on cutting the budget, and given that unemployment insurance is good for both workers and the overall economy, these cuts are another misguided policy that won’t just make it harder to be unemployed, but harder to find a job too.

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Fed Chairman: Unemployment To Remain Above 6 Percent For Three More Years

Unemployment is likely to remain above 6 percent for at least three more years, Federal Reserve Chairman Ben Bernanke said during testimony in front of the House Financial Services Committee today. Responding to questions from Rep. Michael Fitzpatrick (R-PA), Bernanke said a “reasonable guess” for when unemployment will finally come down to 6 percent is 2016:

FITZPATRICK: The Fed has indicated it believes long-term unemployment rates will settle at around 5.2 percent or 6 percent.

BERNANKE: That’s our best guess.

FITZPATRICK: An understanding I heard your testimony earlier about predicting the future. When would you say we might get to around 6 percent? And also, the American people, they believe natural unemployment is actually much lower than that given what we experienced in the 1990s. Maybe your suggestion as to how we address that expectation.

BERNANKE: Again, it’s hard to predict. But a reasonable guess for 6 percent would be around 2016.

Watch it:

That unemployment remains high and will continue to do so for at least three more years would seem yet another argument against sequestration, the automatic budget cuts that will begin taking effect Friday. Indeed, Bernanke was outspoken in his opposition to further fiscal contraction during his testimony, repeatedly saying the budget cuts could damage the economic recovery and that the Federal Reserve, which has been acting to stimulate the economy through monetary means for months, could use help from Congress.

Instead of offering that help, Congress remains focused on deficit reduction, even as evidence mounts that the only spending problem America has right now is that the government isn’t spending enough. But Republicans have repeatedly blocked efforts to further stimulate the economy, choosing instead to push spending cuts that have held back the recovery. The looming round of cuts will only make that worse: the Congressional Budget Office projects that sequestration will knock 0.6 percentage point off economic growth while resulting in the loss of more than 700,000 jobs.

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North Carolina Governor Signs ‘Unprecedented’ Gutting Of Unemployment Insurance

North Carolina Gov. Pat McCrory (R) today signed a law that imposes severe cuts to his state’s unemployment insurance program, a change that will also cost jobless workers in the state access to the federal unemployment compensation program.

McCrory’s signature earned him a rebuke from the National Employment Law Project, which said in a release that the law will result in “the most severe cuts to both state and federal unemployment insurance of any state in the nation”:

These heartless cuts, in the state with the fifth-highest jobless rate in the nation, at 9.2 percent, show a shocking disregard for 400,000 unemployed North Carolinians and their families, many of whom will now go from struggling to barely make ends meet to outright struggling to survive. The immediate pain of these cuts will fall on North Carolinians unfortunate enough to lose work through no fault of their own in a weak economy where jobs are scarce. But the entire state will take a hit from the loss of hundreds of millions of dollars in spending at local businesses that would’ve boosted the local and state economies.

The law reduces the maximum benefit allowed from $535 a week to $350 while cutting the number of weeks an unemployed worker is eligible for the program from 26 to 20. As a result, 170,000 jobless North Carolinians will also lose access to $780 million in federal unemployment funds. The average unemployed worker in the United States has been off the job for 35 weeks, meaning many jobless workers will now face the prospect of searching for a new job without access to a safety net program.

Republican state senators have touted the law as “re-employment” program, even though research suggests that workers who receive unemployment benefits search harder for jobs than those who don’t. McCrory, meanwhile, praised the fiscal responsibility of the law, which will allow North Carolina to pay back money owed to the federal government a measly three years earlier than it would have under the old program.

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7 States Cut Unemployment Insurance, Costing Jobless Workers Federal Benefits Too

A combination of federal and state unemployment insurance programs kept 2.3 million Americans out of poverty in 2011, mitigating some of the negative effects the Great Recession had on jobless workers. But even as unemployment remains stubbornly high, several states are taking the axe to their unemployment programs, and the result is that recipients are losing federal unemployment insurance too.

Seven states have reduced the length of their unemployment programs from 26 weeks, the standard since the 1950s, by as much as 14 weeks, according to a new policy paper from the National Employment Law Project. But because federal benefits depend on the number of weeks offered at the state level, those cuts are also costing workers access to the federal program. In those states, five of which have unemployment rates higher than the federal level, those cuts are costing individual recipients as much as $5,000, according to NELP:

The average jobless worker has been unemployed for 35 weeks, and 40 percent of unemployed workers have been out of a job for at least 27 weeks, meaning the cuts will hammer large numbers of the unemployed in these states. While opponents of unemployment insurance decry the “culture of dependency” the program creates, research shows that recipients work harder to find a new job than those who don’t have access to the program.

America’s unemployment program, stingy as it is, also has benefits for the economy: the Congressional Budget Office estimated that failure to extend the federal program at the beginning of the year would have cost the country 300,000 jobs.

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Federal Unemployment Benefits Expire Due To Congressional Inaction

Sen. Dianne Feinstein (D-CA) urged lawmakers to embrace a package that could avert the so-called fiscal cliff, noting that 2.1 million Americans have already lost federal unemployment benefits as a result of Congressional inaction. “From this point on, it is lose-lose,” Feinstein explained, during an appearance on Fox News Sunday. “My big worry, is, a contraction of the economy. The loss of jobs, which could be well over 2 million in addition to the people already on unemployment.”

Indeed, the National Employment Law Project, a worker advocacy group, projects that “more than 2 million Americans will stop receiving benefits after Dec. 29, when the federal Emergency Unemployment Compensation program will cease to exist.” The benefits have kept 2.3 million out of poverty last year alone, and the Congressional Budget Office projects that a full, year-long extension would lead to the creation of 300,000 new jobs.

The initiative requires recipients to search for a job while receiving payments, and one study found that unemployment recipients search harder for jobs than those who are not receiving money from the program.

Earlier this week, Senate Minority Leader Mitch McConnell (R-KY) demanded spending cuts to pay for the program, which would cost $30 billion. Democrats have been pushing for a full extension of benefits.

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McConnell Demands Spending Cuts To Offset Unemployment Insurance Extension

House Speaker John Boehner (R-OH) yesterday punted negotiations over how to avert the so-called “fiscal cliff” back to the Senate, but in that chamber, Minority Leader Mitch McConnell (R-KY) is now demanding spending cuts to pay for an extension to the federal unemployment insurance program that expires at the end of the year.

Without an extension, 2 million Americans will lose unemployment insurance on January 1; another million will fall out of the program in the early months of 2013. But with the Senate rushing to act before the end of the year, McConnell is again asking for spending cuts to offset the program’s extension, the Associated Press reports:

For the Senate to act, it would require a commitment from Senate Republican Leader Mitch McConnell not to demand a 60-vote margin to consider the legislation on the Senate floor. McConnell’s office says it’s too early to make such an assessment because Obama’s plan is unclear on whether extended benefits for the unemployed would be paid for with cuts in other programs or on how it would deal with an expiring estate tax, among other issues.

More than 500,000 have already lost unemployment insurance because Congress restricted eligibility the last time the program expired, and America’s unemployment program is one of the world’s stingiest. Still, it kept 2.3 million out of poverty last year alone, and the Congressional Budget Office projects that a full, year-long extension would lead to the creation of 300,000 new jobs.

Opponents of the federal unemployment program, which George W. Bush signed into law in 2008 (unemployment insurance is generally handled by states), have argued that it creates a culture of dependency and laziness. But the federal program requires recipients to search for a job while receiving payments, and one study showed that people on unemployment search harder for jobs than those who are not receiving money from the program.

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