The United States once had the world’s most efficient market for matching willing workers with available jobs. As recently as 2000, scarcely one-in-ten unemployed workers had been out of a job for more than six months, compared with more than half of unemployed workers in the major European nations. And the percentage of Americans working was much higher than in Europe.

No more. Even with unemployment falling and the economy clearly on the mend, long-term unemployment remains near record highs, and labor force participation is at record lows. The U.S. labor market now looks an awful lot like Europe’s, with too many people out of work for long stretches of timeas a new progress report and scorecard from the Council on Foreign Relations’ Renewing America initiative shows. Yet unlike most European countries, the United States does little to help keep workers in their current jobs, or to train them for new jobs when they are out of work. This has slowed the recovery and hurts future U.S. growth because too many companies can’t find workers with the skills they need. Reversing this trend should be an area in which Republicans and Democrats can find common ground in the new Congress. 


The U.S. model for assisting the unemployed is an outdated one designed for very different economic conditions. The last major federal overhaul was in 1998 when the economy was growing strongly and unemployment was below 4 percent and dropping. There were more job openings than job seekers in the late 1990s, so the system was designed to match unemployed workers with available jobs, rather than provide training or other skills development to the unemployed.  

Today, while the headline unemployment rate has fallen below six percent, the percentage of Americans facing long term unemployment is double what it was before the recession, with nearly four in ten of the jobless out of work for more than six months. And the percentage of Americans working remains the lowest since the late 1970s. Yet no one is stepping up to the plate. The only comprehensive government programs help just a tiny fraction of the workforce. And companies have been cutting back their own on-the-job training programs; apprenticeships, for example, have fallen 40 percent in the last decade. 

What would a more effective worker-assistance system look like?  The best European models show impressive results in keeping people on the job or returning them to work, but at a high cost. Denmark has a dedicated payroll tax to fund worker training and employment services for all unemployed workers. In comparison, the most ambitious U.S. program, which helps workers who lose their jobs to import competition or outsourcing, covers less than one percent of unemployed workers.   

Germany used wage subsidies and flexible working schedules to keep workers on the job during the worst period of the downturn. For example, if a company dropped an employee from full time to part time rather than lay him off, the German government provided part of the difference between the two salaries. Both countries kept their unemployment much lower during the recession than did the United States. But these schemes are expensive. As a percentage of GDP, Denmark spends 23 times as much as the U.S. on these active labor market policies, and Germany spends eight times as much. 

Germany also invests in its future workforce. Some 60 percent of German sixteen-to-nineteen year olds participate in apprenticeships, which combine classes with on-the-job training in a specific industry. German youth unemployment rate stands at roughly 8 percent, about half the U.S. level. 

The United States should learn from the best of these examples.  IIn a new Council on Foreign Relations paper, former U.S. Trade Representative Robert Zoellick and economist Matthew Slaughter argue that wage subsidies to encourage companies to hire the long-term unemployed would be relatively inexpensive and would pay for themselves in additional tax revenues.  Other modest measures would help, including better online job matching, and the elimination of regulations that discourage retraining or flexible work arrangements. Some states have taken the lead on expanding apprenticeships. Since 2007, for example, over nine thousand new apprentices have participated in South Carolina’s new Apprenticeship Carolina program.  

Both federal and state governments need to innovate in solving the long-term unemployment problem. While there is a wide variety of job training programs at all levels of government, very few are properly evaluated to see what works and what doesn’t. As Zoellick and Slaughter argue: “An accountable government is more likely to be permitted and encouraged to adapt to changing needs.” 

Worker training was one of the few areas of bipartisan compromise in the last Congress. In July, Congress made several modest improvements such as streamlining workers’ access to training, increasing partnerships between government and local businesses, and strengthening evaluation standards for existing worker training programs. These reforms passed by a margin of 415 to 6 in the House of Representatives, and 95 to 3 in the Senate.  

Congress should build on that success. Equipping the American workforce with the right skills is critical for American companies and for the millions of Americans who have been out of work far too long. 

Alden is the director of the Renewing America initiative at the Council on Foreign Relations. Maxim is a research associate at CFR and author of the new CFR report “No Helping Hand: Federal Worker Retraining Policy.”