Does anyone remember the Employment Insurance psychodramas of last spring and summer? Threats were made, deadlines given, and lines were drawn in the sand. It all ended up in a temporary extension of benefits, and the issue went away.
Although almost all of the noise was made about reducing the EI eligibility requirements, the real issue was the prospect of increased long-term unemployment. Not only might they see their EI benefits exhausted, there's also the risk that their chances of finding a job that made full use of there skills would diminish with the time spent out of work.
So maybe it's time to revisit this issue. Between October 2008 and March 2009, SA employment fell by 389,000 and SA unemployment rose by 354,000. So by March 2009, there were 1.6m unemployed on a NSA basis. How many were still unemployed a year later?
The answer is below the fold.
According to the March 2010 LFS survey there were 96,000 who had been unemployed for 53 weeks or more. Some 94% of the people who were unemployed in March 2009 had either found work or had left the labour force a year later. (I can't break it down further. One of the more frustrating things about trying to figure out what's going on in the Canadian labour market is that Statistics Canada doesn't have the budget to track gross flows, only net changes. The US has the JOLTS.)
Here is a graph of unemployment over time, sorted according to the length of time spent in duration, and scaled by the working-age population. The data are NSA, so there are seasonal swings for shorter durations (click for a larger image):
Unsurprisingly, the rate of long-term unemployment increased during the recession. Moreover, it has increased faster than total employment: 20% of those who are unemployed have been so for more than 26 weeks, up from 15% at the beginning of the recession. Half of these – 10% of total unemployed – have been out of work for more than a year.
But by the standards of previous recessions – or of the current US recession – this increase is fairly modest. During the worst of the recession of the early 1990's, some 35% of the unemployed had been so for more than 26 weeks, and 18% had been out of a job for more than a year.
In the past, the decline in long-term unemployment coincided with increase in employment rate:
So far, the recovery hasn't been strong enough to increase employment rates: employment growth has simply matched that of the working-age population. But to the extent that we can expect employment rates to rise in the near future, the outlook for long-term unemployment rates is fairly promising.
In the US, there's an ongoing debate about the merits of another extension of unemployment benefits. But at this point, there doesn't seem to be much reason to revisit the question here in Canada.
Worthwhile Canadian Initiative 
Typo: “During the worst of the recession of the early 1990’s, some 35% of the unemployed had been so for more than 66 weeks, and 18% had been out of a job for more than a year.”
66 should be 26?
Neat graphs. Again, I am surprised by how “well” we have fared compared to 1983 and 1993. This is not what I expected when the financial crisis hit.
Gah – typo fixed; thanks.
And yes, yet another bullet dodged. Long-term unemployment was something worth worrying about, and worth doing something about, just in case.
While it is surprizing that the financial crisis did not cause further hardship, I don’t think that it should be all that surprizing that Canada fared relatively better in this recession than in the past two, or that Canada fared better than most advanced economies.
I realize that hindsight is 20/20, but Canada entered this recession with a strong fiscal position, an intact banking system, a housing sector that hadn’t collapsed, and with interest rates already low (i.e., the recession wasn’t induced by high interest rates in response to inflation, meaning interest-sensitive sectors were still profitable). Admittedly, commodity prices collapsed, but once they rebounded, it should have been obvious that Canada would recover relatively quickly.
Of course I say this without noting the extraordiarily low central bank rates around the world.
Once again we were dupped into spending our tax dollars supporting extended vacations for unionized auto workers, and extended benefits for others who would have found work anyways.
Happy to support, but not happy knowing I’ll never get the benefit of EI, just of privilege of paying for it.
Man, the slime trails that show up on this blog.
The short term issues with EI are not terrible, but we still have the long term issues.
EI takes in more than it pays out. The government uses the difference to finance its expenditures. This makes EI an employment tax. Does anybody here think this is a good idea?
Which way do you fix it? Given the awful maldistribution of income, wealth, and power in Canada I am all for increasing the payouts since they will strongly tend to go to people close to the bottom of the heap (not the bottom, since they are frozen out of jobs).
I think Canada made out fine because there was a concerted effort by the world generally, but the US in particular to aggressively pursue fiscal expansion. With a lot of money given directly to banks and investors coupled with low interest rates wouldn’t it be a logical step to assume that that money made its way into commodities markets. The TSX can benefit because we have low corporate tax, specifically on direct capital investment, so there is money to be made there.
Since a significant portion of our population is employed by the government, which collects a fair bit (I actually don’t know how much) of its revenue from taxes on direct investment and commodities, weren’t we sort of fortunate???
What would happen tomorrow to unemployment if interest rates in the US increased to 5%, the fed began to contract its balance sheet and money started to get pulled out of commodities? How would we handle the budget deficits that arose form lost tax revenues? Cutting public sector jobs?
I don’t think we should be patting ourselves on the back just yet, we still need a long term plan for growth (one that includes employment) and I don’t think that foreign direct investment is it? Isn’t that precipitated the US mess?