Long-term unemployment can become in many ways a self-perpetuating cycle. The psychological effects of long-term unemployment cause a person to become generally discouraged and less likely to find new work. As well, long-term unemployment is not without its psychological effect on employers who are less likely to hire a person who has been unemployed for a long period of time. This psychological dimension makes long-term unemployment a more difficult social problem.
As individuals cope with the long-term consequences of being unemployed they will come to rely on services offered by the government such as food stamps and unemployment insurance payments. While these services have the potential of greatly easing the suffering that comes from unemployment, they may also create a situation of dependence. If a person becomes overly reliant on the government services that come from being unemployed, he may be discouraged from seeking work.
A certain social stigma can begin to be attached to people who have been unemployed for a long period of time. Some employers feel that there must be some reason why a person would be unemployed for so long, other than a poor job market. They may assume that the person is unskilled, or lazy, or in the possession of some other undesirable trait. This will make them less likely to hire them.
Being unemployed puts a person in a much more uncertain position regarding her long-term goals. A person will be less able to make any long-term plans not knowing where her future income will be coming from. Individuals may be led to draw from their savings in order to make ends meet. The larger long-term picture becomes more subsumed into the immediate concerns of simply surviving the longer that unemployment lasts.
Obviously being unemployed for a long period of time is liable to make a person have self doubts and begin to lower his self-esteem. A more complex phenomena may be observed as well, however. When a person has been unable to exercise his talents for a long time he may begin to doubt whether those talents are still effective. People often need reassurance of their abilities in the form of positive reinforcement to maintain confidence.