Author: Peter Cappelli

One of the very bad things about the Great Recession is that those who were not doing well already got hurt the worst, and that also seems to be the case for the economic recovery. Hiring has picked up, but not for the long-term unemployed, those out of work for more than more than 26 weeks. We’ll get a new look at the data when July jobs numbers are released Friday.

The revelation last year that many job requirements for open positions mandated that candidates already be employed seemed a bit like a joke, but the evidence that employers screened out unemployed applicants was so widespread that the Equal Employment Opportunities Commission began investigating it.

A couple of interesting studies examined the extent of discrimination against the unemployed. These studies are unusual in that they involved real efforts to find real jobs. One created 3,000 pretend candidates and sent their resumes to a random sample of job openings. They varied one item among otherwise identical applications: whether the individual was currently unemployed and, if so, how long they had been unemployed.

Only about 4.5% got callbacks, which suggests that the typical unemployed applicant has to apply to a little more than 20 jobs to just get a positive response from an employer indicating that they are still being considered for the job.

Surprisingly, the call-back rate was slightly higher for those who had just been laid off than for those who currently had a job. What happens after you are unemployed for more than a month? At that point, the probability of getting any positive response from employers falls sharply and declines further with each month, hitting a plateau after about eight months. A person with an otherwise identical set of skills and experiences is about half as likely to get a positive response from employers after eight months of unemployment as compared to a person just being laid off.

The other study (PDF) is similar, with an important twist. They compared applicants on two dimensions: How long they were unemployed and whether they had relevant job experience. This study also found a sharp drop-off in employer interest for candidates with around six months of unemployment, but it also found that recently unemployed candidates with no relevant experience for the position were more likely to get employer interest than were those with relevant experience who were unemployed for six months or more.

What’s going on here? At least at present — and perhaps because of the depth of the recession — there doesn’t seem to be much stigma associated with being unemployed per se. But there is a really big reluctance to hire those who have been unemployed for a while. It’s so big that it trumps the concern about having the relevant skills, which news reports constantly suggest is the big challenge employers face.

Here’s the point: Hiring managers are only human. They don’t have much support in doing their jobs. If you think hiring decisions are based on careful evidence about what attributes make the best hires, think again. Few employers have the time or resources to do any studies of what predicts a good hire, let alone looking at the specific evidence concerning prior unemployment. There is no evidence that I have seen anywhere suggesting that the long-term unemployed make worse candidates.

Hiring managers are going with their gut feel or what they think are “sensible” ideas about what makes a good candidate when the resist hiring the long-term unemployed. We know that going with your gut in hiring decisions means going with all kinds of unstated and in many cases unconscious prejudices. That’s what kept women and minorities out of many jobs and now keeps older workers out of them as well. How about these sensible ideas? “If they were good, someone else would have hired them” — not when other employers think like you do and when there are so few jobs to go around. “Their skills are rusty” — one doesn’t forget how to do a job in six months, and all new hires require some time to learn how your operation works.

What we do know about job candidates who are long-term unemployed, which is related to job success, is that they are persistent. Millions of other unemployed facing this job market gave up looking and dropped out of the labor force. We also know that they will likely be very grateful to have a job, and gratitude is associated with many aspects of good job performance. They are also likely to be cheaper and easier to hire because you don’t have to woo them away from their current employer.

The way to get hiring of the long-term unemployed started is to recognize that there is no objective case in this economy for not considering a candidate who has been out of work for a while. Therefore, excluding them out of hand is a form of prejudice. The people at the top of organizations need to point out that excluding such candidates is likely costing us money because we are ignoring potential good hires, just as it costs us money to exclude women, minorities, older individuals, and anyone else who has the potential to do the job.

It’s the right thing to do in terms of our social impact, it’s the right thing to do to make our organization inclusive and looking like our society, and it’s also the financially sensible thing to do.

There are many signs that the US economy is improving, but the most important one, the unemployment rate, remains stubbornly rooted in recession territory. We had jobless recoveries coming out of the last recessions in 2001 and 1992, but this one put the budget squeeze on recruiting and has gone on for a very long time. Does it mean there is something really different this time?

One way to answer this question is to see whether the level of hiring now is different than one would expect given unemployment rates this high. This ratio of job openings to unemployment when calculated over time is known in economics as the Beveridge Curve, named after the British economist William Beveridge. Several studies during this recession seemed to indicate that the situation was similar to previous recessions, but a recent study points to one big anomaly: Job openings are not being filled nearly at the rate they have been in previous recoveries. In other words, vacancies are staying vacant for a very long time.

If so, then the next question is, why? Why aren’t employers filling those jobs? The popular explanation that there is something wrong with the applicants has no support. There is no “mismatch” between the industries and occupations where people were laid off and where hiring is taking place, for example. Jobs have not changed over the last couple of years in any way that changed skill requirements substantially. The “failing schools” notion, even if it was true, couldn’t explain the continued unemployment of the majority of job seekers, who graduated years ago and had jobs just before the recession.

The better answer comes from the ways in which contemporary practices have made hiring more difficult. Companies regained profitability during the recession with a relentless squeeze on costs, and most of that squeeze was associated with labor. We know, for example, that employers are spending far less to recruit and hire a candidate than before the recession, which may make it harder to find the right person.

Line managers with profit-and-loss responsibility also have a big financial incentive to avoid adding new employees and the associated costs, so the pressure to hire often comes from overworked employees who demand more help when business and the workload picks up. But even when managers give permission to hire, they may drag their feet about actually bringing someone on. With all those people looking for jobs, why not be picky? Candidates routinely report that companies now take months to make hiring decisions, putting the candidates through round-after-round of interviews with long pauses in between, as the employer picks through the many worthy candidates.

Some of the cost-cutting took out recruiters. They used to be the people pushing back on hiring managers, asking “do you really need someone with a graduate degree to do this job?” or telling them, “you aren’t going to find someone with 10 years of experience at that salary.” Outside recruiters report that they often have to bring in many candidates who turn down a client company’s job offers before the client is persuaded to raise its pay. And some of the cost-cutting also took out training and development capabilities, so that hiring managers have no choice but to wait for candidates who already have all the skills needed to do the job.

Finally, part of the explanation may also be that this recession has gone on for so long that it changed what hiring managers think they can find in the labor market. Early on in the recession, when literally millions of people were being laid-off, it was easy to find someone fresh out of a job with the experience and skills needed to step right into your vacancy. Now in the fifth year of the downturn, unemployed candidates have often been out of work for quite a while. The candidates with current work experience that hiring managers want are working for someone else, and they aren’t desperate to take a new job.

So where does this leave employers — and the unemployed? The reason markets adjust is because the participants, in this case the employers, eventually learn that they either have to raise their pay or lower their expectations in order to get the workers they need. That process of learning and adjustment slows down a lot, though, once companies have cut the recruiters, who used to do the learning for them, and the trainers, who could turn imperfect candidates into credible workers.