Some Jobless Pay a Bigger Penalty

Aug 5th, 2010 | By businessnews | Category: Business

Workers in technology, telecom, and finance are at greatest risk because skills in the fast-changing industries can quickly become obsolete

Timothy R. Homan and
Zachary Tracer

To understand the potential consequences of long-term unemployment, consider the job prospects of Sheldon Fisher and Douglas Lawson. In January, Fisher, 53, was dismissed from a software company in Washington State. Lawson, 34, lost his job in October with a builder in South Carolina. Now the technology industry is bouncing back while construction remains in the dumps, and Washington’s jobless rate is 8.9 percent, vs. South Carolina’s 10.7 percent. Still, Lawson’s prospects may be better than Fisher’s.

That’s because being jobless for a long time hurts workers in some industries far more than in others. The technology sector is known for such rapid change that those out of work for even a few months can find themselves with out-of-date skills. Construction skills are far less likely to grow stale. “I never forget what I know. … I’m not worried about doing the work once I get it,” says Lawson, who has applied for about 30 jobs so far. Fisher, by contrast, is considering leaving information technology altogether, though he says he’s not sure what else he’s qualified to do. After applying for about 100 jobs in his first half-year out of work, Fisher began to worry that employers might think he was getting rusty. “Then everything after six months just makes it worse,” he says.

The average duration of unemployment in the U.S. jumped to a record 35.2 weeks in June, up from 16.5 weeks when the recession began in December 2007, according to the Labor Dept. Today, almost half of unemployed Americans have been out of work for 27 weeks or more (the official definition of long-term unemployment), vs. 30 percent in June 2009.

Perishable Skills

Industries with highly perishable skill sets include health-care technology, telecommunications, and finance, where regulations have changed dramatically in the past year. The toughest, though, may be information technology. Companies in that sector have cut payrolls for 32 of the last 33 months, through June, for a cumulative loss of some 312,000 jobs, or about 10 percent. In technology, “if you’ve been out of work for a year or two, you’re probably somewhat outdated,” says Shami Khorana, president of HCL America, the U.S. arm of New Delhi-based HCL Technologies, which employs about 5,000 workers in the U.S. He plans to hire at least an additional 600 people as the economy improves and anticipates retraining some candidates with obsolete skills.

Unemployed workers in construction, retail, low-level health-care jobs, and teaching are more likely to be attractive to employers once hiring picks up because such jobs don’t change as quickly, experts say. “You don’t get the sense that residential construction has changed that much in the past decade,” says Harry J. Holzer, an economist at Georgetown University and the Urban Institute in Washington. The skills needed to work at a grocery or clothing store—running the cash register, for instance—are “rudimentary,” he says.

There are downsides to switching careers, because doing so can push workers into fields where their training isn’t valuable, creating a less skilled workforce, says Daniel S. Hamermesh, a former Labor Dept. official who is now an economist at the University of Texas. “It’s tremendously difficult [for workers] to decide when the skill is no longer valuable,” he says.

When employers start hiring, they’ll want to see prospective employees who have done more than pump out résumés trying to find a new job. Accenture (ACN), for example, will want to see “how the applicants used their time” to stay marketable, says Catherine S. Farley, a Seattle-based managing director at the consulting firm. “Did that person do something to keep their skills fresh?”

The bottom line: As more workers remain jobless for half a year or longer, they risk losing skills needed to get hired.

Homan is a reporter for Bloomberg News.
Tracer is an intern for Bloomberg Businessweek.

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