More points on long-term unemployment

By Matt Nolan 26/04/2013

A while ago I touched on the issue of long-term unemployment, and youth unemployment, from the persistent recession in NZ.

This isn’t an issue we can yell at the RBNZ to fix, so what exactly could we do if we think this situation is leading to specific costs?  Costs that we fear the market will not deal with, given firms unwillingness to look at long-term unemployed, and concerns about skill-mismatch.

Well Via Noah Smith we spotted this by Kevin Hassett, with five policy suggestions at the end.

  1. Government hiring of long-term unemployed (Note:  A “working for the dole” scheme would fit into this – it is also unclear how much of the “signalling this gets rid of”)
  2. Policies to deal with geographical mismatch (Note:  It isn’t clear whether this is really the case for long-term unemployment in NZ – but separating the Auckland (bad), Canterbury (tight) and rest of the nation (meh) labour markets is useful).
  3. Privatised training (Note:  This is interesting in the NZ context, as we already have wide scope for people to “choose training”.  The key question is whether people have good information on the returns to skills)
  4. Work subsidies
  5. Work share programs

This isn’t to agree with any of these – just to point out that we need to ask where issues in the labour market have appeared that are due to the persistence of the slowdown, and how government policy actions can improve outcomes given this.  The long-term unemployed are the people in society that have experienced significant bad luck due to this unfortunate event, there is a rationale to help people out given this – or even better, to help form institutions (such as WINZ) who are set up to automatically provide assistance given the perceived drivers of long-term unemployment.

Note:  Paul Walker has also discussed these points here and here.