In February, there were 6.4 million Americans who wanted jobs but weren't considered unemployed. That's because their job searching either ceased entirely or slowed to a level that didn't qualify as being considered technically unemployed, even though they had no job and wanted to work. A new study reveals how and when people reach this level of discouragement. As you may hypothesize, the longer a person is unemployed, the tougher the job search gets.
The study (.pdf) was done by economists Alan B. Krueger from Princeton University and Andreas Mueller from Stockholm University. It is featured at a Brookings Institution spring economics conference. They surveyed 6,025 unemployed workers for 24 week periods in 2009 and 2010 to try to determine how job searching changes in a brutal job market as time goes on. They provide six central findings. Let's consider three related to the job search:
The amount of time devoted to job search declines sharply over the spell of unemployment
This may be surprising. Doesn't the urgency with which one pursues a job increase over time? The longer you're out of work, the more desperate you should be to find a new job, right? According to this study, the opposite is true. Here's one chart showing how job searching changed over the 24 weeks within the various groups they surveyed across the spectrum of unemployment duration:
Their other charts look similar, and show the job search shortening with time. This suggests that discouragement over job prospects have an adverse effect on the time spent looking for work.
The economists do note the surprisingly parallel lines for each group. They say that this could result from reporting bias, in which those surveyed exaggerate time spent searching for jobs at first, but eventually get more honest about their search. They push aside this possibility for a number of reasons, including difficulty in respondents manipulating responses to produce this result. But even if there is some reporting-bias phenomenon here, it's pretty unlikely that it's so strong that job searching is rising, instead of falling, as time moves forward.
We do not observe a rise in job search or job finding around the time Unemployment Insurance (UI) benefits expire
In fact, the economists further find that job searching doesn't suddenly rise at or near the expiration of government unemployment payments. Those who argue that unemployment benefits should be cut complain that people don't search for work as aggressively as long as they're getting paychecks. The data by Krueger and Mueller suggests otherwise:
You can see that the time spent searching doesn't change much as benefits run out and then drops even more drastically once they end. One potential explanation for this is that anyone receiving unemployment payments must be actively job searching. Once the benefits end, perhaps the time spent is lower, as there's less motivation to try to find work if you are discouraged and feel that there aren't any jobs out there at that time.
The amount of time devoted to job search and the reservation wage help predict early exits from Unemployment Insurance (UI)
This is a result that you might expect: a more aggressive job search produces better results. In particular, the study found that those who searched 20 hours more per week were 20% more likely to exit unemployment insurance early. What's interesting, however, is that the correlation doesn't hold as strongly with job offers. The conclusion one might draw from this is that aggressiveness in a job search is more related to the desire to find work, not just to get job offers. Those who search harder want to work more, as they're less picky.
A several conclusions can be drawn from these findings. First, prolonged unemployment has a very discouraging effect. Second, ending unemployment insurance earlier might not encourage people to work; in fact, it appears to discourage their search. Finally, the harder someone searches, the less time they spend receiving unemployment insurance. From a policy standpoint, these results imply that current policy has it about right. Full-time job searching should remain a requirement to receive unemployment benefits. And while work is hard to find, they should be extended for a prolonged period.
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