The recent recession, which lasted from December 2007 through June 2009, brought attention to the plight of the long-term unemployed (those unemployed for 27 weeks or more), as many of the unemployed entered their ranks.  By May 2010, well after the recent recession ended, the long-term unemployed peaked at 46 percent of the unemployed (Bureau of Labor Statistics, September 2010).  In contrast, in 1983, after the 1981-1982 recession, the long-term unemployed peaked at 26 percent of the unemployed (Allegreto and Lynch, 2010).

            Researchers find persistent subsequent earnings losses, earnings volatility, and later periods of job loss associated with job displacement (Jacobson, Lalonde, and Sullivan, 1993; Stevens, 1997, von Wachter, Song, and Manchester, 2009), although none specifically look at the long-term unemployed.  When a household member is unemployed, household finances suffer in that savings are often depleted, debt increases, and households may have trouble making rent or mortgage payments (Morin and Kocchar, 2010).  In addition to negative financial impacts, long-term unemployment may adversely affect physical and mental health of the unemployed (Morin and Kocchar, 2010, Sullivan and von Wachter, 2009) and negatively impact their children’s schooling outcomes (Oreopoulos, Page, and Stevens, 2008; Stevens and Schaller, 2011).

            We don’t know what proportion of individuals enter into a long-term unemployment spell over their labor market career, not just at a fixed point in time, how long it takes to find a job after a long-term unemployment spell, or how the spell affects wages over time.  This paper provides a starting point for answering these questions.  It uses the employment history of men in the National Longitudinal Survey of Youth 1979 (NLSY79) to estimate the hazards for entry into and exit from long-term spells of unemployment.  It then estimates the wage costs over time associated with having had a long-term unemployment spell.  The analysis focuses on respondents’ employment histories from their mid 20s, after initial labor market churning occurs, until their mid to late 40s and early 50s.

            In my sample of NLSY79 men, over 25 percent experience at least one long-term spell of unemployment from their mid 20s through 2009.  On average, the first spell lasts over a year.  Hazard estimates show that being black, having lower educational attainment, and having lower cognitive test scores are associated with increased odds of entering into a first long-term spell of unemployment in any given month.  Black men also have decreased odds of ending their first long-term spell in any given month through reemployment.  Having a higher cognitive test score and having worked full-time at a job prior to the long-term spell are associated with increased odds of reemployment.  The wage costs of a long-term spell are quite persistent, with large wage losses found 5 or more years after the 27^th week of the long-term unemployment spell.