As many of his friends struggled to find jobs in 2009, Rand Ghayad, a PhD candidate in economics at Northeastern University, decided to search for answers to explain why smart, educated, and experienced people remained out of work for so long, despite hundreds of thousands of job vacancies.
What he found after more than four years of research has challenged conventional assumptions about long-term unemployment and shifted the national debate on what many analysts and policy makers see as one of the most pressing problems facing the US economy.
The Federal Reserve Bank of Boston has published his work, and he has been cited by several influential economists, including Paul Krugman, the New York Times columnist and Nobel laureate. And at a recent conference of top labor economists in Washington, Ghayad’s findings were the frequent topic of discussion.
“You research something for a very long time and you don’t know if it’s going to go somewhere or not,” said Ghayad, 27, who expects to complete his degree at the end of the summer. “I was very lucky.”
Four years after the last recession ended, nearly 4 million Americans — roughly one-third of all unemployed — have been out of work for more than year. Traditionally, economists have blamed long-term unemployment on long-lasting jobless benefits that undermine incentives to find work, citing European nations where both extensive social safety nets and long-term unemployment are entrenched.
In the United States, many top labor economists, including Ghayad’s thesis adviser, William Dickens, believed persistent long-term unemployment was a function of emergency benefits approved by Congress. Able to collect benefits for up to two years — and in some cases longer — many unemployed Americans were just not trying hard enough to find jobs, economists assumed.
But Ghayad did what other economists didn’t. He delved into the characteristics of the unemployed, analyzing decades of census data. He examined the industries in which people had worked, their educational attainment, and the length of their unemployment, searching for a pattern.
“There was only one thing that kept appearing, the long-term unemployed,” Ghayad said. “Everybody else was finding jobs.”
Ghayad pursued his hypothesis, mailing employers nearly 5,000 fictitious resumes that differed only in experience levels and duration of unemployment.
What he found was an “unemployment cliff”; after six months of unemployment, people experienced a dramatic drop-off in phone calls from prospective employers even if they had more work experience and better qualifications than candidates out of work for six months or less.
In other words, the longer people are unemployed, the worse their job prospects become because employers discriminate against them.
“When he showed me that it’s the length of unemployment that matters, my eyes bugged out,” said Dickens. “He really changed my mind.”
In a column at the end of April, Krugman wrote that Ghayad’s findings are “exactly the kind of thing we should fear, because it means that failure to address the slump is damaging the economy’s long-run prospects.”
Ghayad, a native of Lebanon, knows how it feels to face a tough job market. He came to Boston from Beirut to attend the MBA program at Boston University on a scholarship.
He graduated from BU in 2009 with a concentration in finance, not long before the US unemployment rate peaked at 10 percent. With few job opportunities, he applied and was accepted to Northeastern’s PhD program.
He sought out Dickens, hoping to better understand why high unemployment remained a problem years after the end of the last recession. And as his work on long-term unemployment gained wider attention, Ghayad was offered the chance to work as a visiting scholar at the Boston Fed, a yearlong appointment that Dickens said was a rare honor for someone who has not yet completed his doctorate.
The Boston Federal Reserve Bank accepted two of Ghayad’s papers on long-term unemployment for publication, and he plans to submit the results of his resume experiment for publication in an economics journal soon.
Ghayad also hopes to land a permanent job doing research at a university, think tank, or the Boston Fed when he finishes his degree, and would like to stay in the Boston area. He currently lives with his wife in Brookline.
Although he does not know exactly what the future holds, he plans to study countries that have enacted policies aimed at lowering long-term unemployment.
Germany, for example, has nearly eradicated the problem, he said.
“Somebody told me the other day that I had figured out the problem but not the solution,” Ghayad said. “This will probably be the subject of my future research.”