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      Paula KleinCreated by Paula Klein on Aug 29, 2012 in Featured Content

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      As Labor Day approaches in the U.S., many explanations for long-term unemployment–that is, unemployment lasting more than 27 weeks--continue to be discussed, especially as jobs go unfilled and automation becomes more pervasive.


      Some economists, such as EPI Research and Policy Director Josh Bivens and economist Heidi Shierholz write that these rates are a normal “sign that there is still a great deal of slack in the economy.” That may be, but many see the continuation of the trend—where about 3 million Americans have been unemployed for more than six months, and the percentage of the unemployed who are long-term unemployed remains at the highest level since 1948--as a huge cause for concern.





      At the MIT Sloan School of Management, Assistant Professor Ofer Sharone, is studying employment trends from the human perspective asking how job seekers approach unemployment and what cultural and personal beliefs shape their attitudes and influence their success or failure in attaining work. Sharone received a Ph.D. in sociology from the University of California, Berkeley, and a J.D. from Harvard Law School.


      U.S./Israeli Contrasts

      Sharone's research specifically focuses on career transitions, job searching and unemployment. His recently published book, Flawed System/Flawed Self: Job Searching and Unemployment Experiences (University of Chicago Press) contrasts the job searching experiences of white-collar workers in Israel and the United States, and challenges many long-held cultural explanations. (The book is gaining traction, by the way, and just won two best book awards at the American Sociological Association).Ofer-Sharone.jpg


      Despite searching for work under similar economic conditions, Sharone finds that “long-term unemployed white-collar workers in Israel and the United States come to different subjective understandings of their difficulties in finding work.”

      Based on cross-national, in-depth interviews with unemployed job seekers and at job-search support organizations, he says that many labor-market institutions generate distinct job search “games” which in turn, create unique unemployment experiences.


      At a recent MIT IDE lunch seminar, Sharone discussed his research including two key conclusions:

      • Israelis blame the system, while Americans blame themselves for long-term unemployment.
      • The nature of a job-seekers’ subjective responses has profound individual and societal implications.


      The Perfect Fit Versus an Imperfect System

      Sharone says that U.S. attitudes are not just the result of individualism; “it’s structural.”  Israeli white-collar job requirements are very rigid and applicants compete on objective skill assessments, pre-job testing, rankings and resumes.

      In the U.S., however, intangibles like networking, likability and interpersonal ‘soft skills’ are often key, and those who don’t excel think “something is wrong with me.”

      U.S. hiring agents consider skills, of course, but they also value credentials, background and “fit” –wanting to know the “person behind the skills,” emotions, and so on.


      The application process also plays a big part. In the U.S., online job boards “are a black hole,” so networking, self-promotion and follow-up are standard and can be decisive in hiring.  Israelis take pride in their merit-based system and frown on networking, which is usually viewed as “pulling strings” or currying favor.


      As a result, those who don’t get the job in Israel see the system as unfair or arbitrary, but they don’t take it personally. In the U.S., when your life is an open book, rejection can be very hard and personal. Understanding these differences and offering appropriate coaching and support may lead to more successful outcomes, Sharone says. Realizing the differences, “is a first step in mobilizing for social change.”


      To bolster his research, Sharone is piloting a new initiative to help the long-term unemployed and to gather valuable research on both job-seeking and hiring practices.


      The Institute for Career Transitions, (ICT) operates from the assumption that not only does long-term unemployment continue, it is having hugely debilitating effects on those caught in its grips. ICT is a non-profit organization whose mission is “to generate effective strategies, offer practical support, and increase public understanding of the challenges facing professionals in career transitions.” It offers five key areas of focus:

      1. Fostering collaboration
      2. Generating research
      3. Increasing awareness
      4. Engaging professionals
      5. Providing assistance


      The first ICT initiative aims to provide free and effective job search support for unemployed job seekers. Longer term, it would like to provide data-driven strategic guidance and policy recommendations for professionals undergoing career transitions.


      In the words of Bivens and Shierholz:

      It's too soon to give up on the long-term unemployed. We found no evidence that today's high long-term unemployment rate is due to anything other than the weak economy. For example, were we facing skills mismatches, there would be evidence of tight labor markets relative to 2007 for workers in at least some occupations, industries, education levels, or demographics. However, the long-term unemployment rate is elevated across the board. There just aren't enough jobs for everyone who's looking.


      Regardless of whether the elevated long-term unemployment is structural or due to the weak economy, Sharone,  who is the Mitsubishi Career Development Professor and an Assistant Professor of Work and Organization Studies at the MIT Sloan School of Management, wants to offer relief to those who are hardest hit.

      It’s been a while since I posted data on US employment trends, so here’s a chart created with FRED’s snazzy new graphing interface. It shows the employment rate (in other words, 100 – the standard unemployment rate) in blue, the employment-to-population ratio (the % of working-age people with work) in green, and the labor force participation rate (the percent of working-age people who have work or are actively looking for it) in red.




      This graph clearly shows a very steady up-then-down trajectory in the red line — of the labor force participation rate. It’s affected very little by recessions (the gray bars in the graph), and instead appears to be responding to deeper forces.


      The most obvious of these forces are the demographics of the American labor force. Labor force participation went up a lot in the last two decades of the 20th century largely because women entered the workforce in large numbers. It’s pretty clear that one of the reasons it’s going down now is that lots of baby boomers are retiring.


      So is retirement the main reason that the red line is going down these days? There’s a lot of debate and discussion on this topic, nicely summarized in this WaPo Wonkblog post by Brad Plumer, and not much agreement. One study estimated that retirement accounts for about 25% of the drop in the labor force participation rate since the recession’s end, while another says that it’s more than 50%.


      I’m more persuaded by the lower figure. As Plumer points out, for example, the participation rate for workers 25-54 years old has been declining steadily in the new century, and these folk are clearly not retiring yet:




      Also, disability claims started spiking right around the year 2000, and have almost doubled since then:




      So it feels to me like something else is going on, in addition to the graying of the US workforce — some other forces that are causing more and more people in recent years to go to school, stay in school, go on disability, get discouraged and stop jobhunting, stay home to raise kids or take care of a sick or elderly loved one, or do any of the other things that means they’re no longer categorized as ‘working or looking for work.’


      As I’ve argued many times, here and (with Erik Brynjolfsson) in The Second Machine Age, I believe progress in all things digital is one of these forces, and one that will only become more powerful over time. The evidence is pretty clear that tech progress has been hollowing out the middle class for a while now, and has recently started to affect an even broader set of workers. As computers, software, and robots can do more and more we need some kinds of workers less and less. This is something that would cause more people over time to stop participating in the workforce, and so make the red line up top continue to trend downward over time even if the blue one heads up.


      It would be great if the red line reversed its course in the coming months, but I don’t see that happening. Do you?



      This post first appeared in The Business Impact of IT blog August 14  here.


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