Beveridge Curves

Tuesday, April 23, 2013 | 0

Long-term unemployment is one of the curses of the workers' compensation system.

Anyone deeply involved in the system has seen how long-term disability affects individuals and their families.

Economic research now shows that long-term unemployment makes it less likely that a worker will be hired. In a way that's not surprising, as most of us realize that it's easier to get a job if you have a job.

These sorts of issues are studied by economists, some of whom study Beveridge curves, an index that correlates job openings with unemployment. The classic relationship is an axis where when unemployment increases, job openings decrease.

But recent research by economists Rand Gayhad and William Dickens of Northeastern University in Boston show that workers out of work for more than six months have a very different pattern on the Beveridge curve.

As summarized by Matthew O'Brien in an excellent piece in The Atlantic titled, "The Terrifying Reality of Long-Term Unemployment":

"Employers prefer applicants who haven't been out of work for very long, applicants who have industry experience, and applicants who haven't moved between jobs that much. But how long you've been out of work trumps those other factors."

Call-back rates are significantly lower for workers unemployed for more than six months.

O'Brien's article documents that long-term unemployment is more of a handicap in finding employment than "work churn", i.e. where a worker has switched jobs frequently.

O'Brien says that:

"Long-term unemployment is a terrifying trap. Once you've been out of work for six months, there's little you can do to find work. Employers put you at the back of the jobs line, regardless of how strong the rest of your resume is. After all, they usually don't even look at it."

In an era when many economists believe that high unemployment is structural and not merely cyclical, long-term unemployment constitutes a great challenge.

With the demise of vocational rehabilitation, California's workers' comp system provides little assistance to the long-term unemployed.

It's little wonder that workers choose to hire attorneys, fighting for any scrap they can.

Here is a basic introduction to Beveridge Curves.

This is the link to The Atlantic article.

And here is an interesting piece by Thomas Edsall in The New York Times, "Are the Good Jobs Gone?"


Julius Young is a claimants' attorney for the Boxer Gerson law firm in Oakland. This column was reprinted with his permission from his Workers' Comp Zone blog.