Of all options, which policy will reduce unempl the most?

#1
lawgator1

lawgator1

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#1
The CBO says that the policy option that is most likely to reduce unemployment rate is to provide MORE unemployment benefits. The rationale is that the unemployed have to spend the money -- they simply cannot afford to just save it.

The policy option LEAST likely to decrease unemployment?

Reduce income taxes.


Interesting.
 
#2
#2
lawgator1 said:
The CBO says that the policy option that is most likely to reduce unemployment rate is to provide MORE unemployment benefits. The rationale is that the unemployed have to spend the money -- they simply cannot afford to just save it.

The policy option LEAST likely to decrease unemployment?

Reduce income taxes.


Interesting.
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Nothing interesting about it. It's purely a short term view and the approach to unemployment is purely about salvaging current jobs and has nothing at all to do with job creation. Short term free money voebiying has been the bane of our taxpayers since FDR.
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#3
#3
This doesn't make a whole lot of sense. Even short term, it still dismotivates people from finding work, and long-term it is flat out wrong.
 
#4
#4
shows the CBO is just a obama spokeshole. every study ever done has proven unemployment benefits increases unemployemnet.
 
#6
#6
The perverse incentives of unemployment benefits are well documented.5 Subsidizing unemployment draws out a job search. Generous benefits that subsidize "temporary idleness" may result in "chronic idleness."6 As the state makes chronic idleness more attractive, more and more people will choose that option over productive employment. As people remain unemployed, their decreased spending will slow production throughout the economy, and the system will become less and less sustainable.

In addition to these relatively short-run dangers, unemployment benefits can create a more serious long-run consequence known as hysteresis, or systemic long-run unemployment. As workers remain out of the job market for longer periods, their skills become obsolete and the likelihood of remaining unemployed increases.7 As unemployment becomes acceptable, the natural rate of employment and production falls, resulting in a less-skilled workforce.

Identifying hysteresis is difficult. However, it is possible to measure the effects of changes in unemployment benefits on workers. Economists Lawrence F. Katz and Bruce D. Meyer observe that workers receiving unemployment benefits were likely to find a job right before their benefits expired.8 Analyzing EU data, Katz and Meyer find that extending benefits from six months to a year would likely increase periods of unemployment by approximately one month.9 Their findings suggest that while unemployment benefits are often extended to help workers, they have the effect of damaging economic development and productivity.

The Costs and Consequences of Unemployment Benefits on the States | Mercatus
 
#7
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droski said:
The perverse incentives of unemployment benefits are well documented.5 Subsidizing unemployment draws out a job search. Generous benefits that subsidize "temporary idleness" may result in "chronic idleness."6 As the state makes chronic idleness more attractive, more and more people will choose that option over productive employment. As people remain unemployed, their decreased spending will slow production throughout the economy, and the system will become less and less sustainable.

In addition to these relatively short-run dangers, unemployment benefits can create a more serious long-run consequence known as hysteresis, or systemic long-run unemployment. As workers remain out of the job market for longer periods, their skills become obsolete and the likelihood of remaining unemployed increases.7 As unemployment becomes acceptable, the natural rate of employment and production falls, resulting in a less-skilled workforce.

Identifying hysteresis is difficult. However, it is possible to measure the effects of changes in unemployment benefits on workers. Economists Lawrence F. Katz and Bruce D. Meyer observe that workers receiving unemployment benefits were likely to find a job right before their benefits expired.8 Analyzing EU data, Katz and Meyer find that extending benefits from six months to a year would likely increase periods of unemployment by approximately one month.9 Their findings suggest that while unemployment benefits are often extended to help workers, they have the effect of damaging economic development and productivity.

The Costs and Consequences of Unemployment Benefits on the States | Mercatus
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Author of that study you cite says it no longer applies to this economy and disavows conservatives who cite to it:





On the Aug. 2, 2009, edition of ABC's This Week with George Stephanopoulos, conservative blogger Michelle Malkin asserted that even a liberal economist believes that unemployment benefits have a negative impact on joblessness because those benefits discourage people from taking jobs.

"It was Larry Katz, who was the chief labor economist under the Clinton Labor Department, who came out with a study, and there are a lot of these smart economists who say this – that if you keep extending these temporary unemployment benefits, you're just going to extend joblessness even more," she said.

Stephanopoulous expressed skepticism at the idea that Americans would choose "to take the unemployment benefits when a job is available."

But Malkin was undeterred. "Well, it's 79 weeks already," she said. "And then they're going to extend it by another 13 weeks. And what happens is, according to these economists who have seen it, including this Clinton economist, is that people will just delay getting a job until the three weeks before the benefits run out."

Malkin's fellow panelists joined Stephanopoulos in pushing back against Malkin's assertion.

"But when businesses advertise the few job openings they have — they'll advertise 20 openings — they have 6,000 applicants," said Cynthia Tucker of the Atlanta Journal-Constitution . "So I don't think that's the problem at the moment."

We decided to see if Malkin was correct. We contacted Katz, now a Harvard professor, and he said Malkin was probably referring to two papers he co-wrote in 1990 with fellow economist Bruce D. Meyer. One, "The Impact of the Potential Duration of Unemployment Benefits on the Duration of Unemployment," was published in the Journal of Public Economics in February 1990. The other, "Unemployment Insurance, Recall Expectations and Unemployment Outcomes," was published in The Quarterly Journal of Economics , in November 1990.

We looked at the papers, and the first seems especially on point. The paper noted that in certain European countries, generous unemployment benefit policies often had a strong correlation with high rates of long-term unemployment. After looking at U.S. unemployment data from 1979 to 1983, the authors concluded that "the potential duration of [unemployment insurance] benefits has a strong impact on the duration of the unemployment." In fact, the authors wrote, "an increase in potential benefit duration from 6 months to 1 year is predicted to increase mean duration of unemployment by 4-5 weeks, and an increase from 6 months to 2 years is predicted to generate a 13-16 week increase in unemployment duration."

To scholars, this was not a shocking result: It confirmed other research, and it has regularly been cited in subsequent studies.

So Malkin was correct in summarizing Katz's work. But there is a significant caveat: Katz himself argues that his two-decade-old finding isn't valid in today's recession.

In fact, the day before Malkin went on the air, the New York Times ran a front-page story headlined, "Prolonged Aid to Unemployed Is Running Out" that happened to quote Katz. The article said:

"Traditionally, many economists have been leery of prolonged unemployment benefits because they can reduce the incentive to seek work. But that should not be a concern now because jobs remain so scarce, said Lawrence Katz, a labor economist at Harvard. For every job that becomes available, about six people are looking, Dr. Katz said. ‘Unemployment insurance gives income to families who are really suffering and can't find work even if they are hustling to look,' he said. With the economy still listing, he added, a temporary extension can provide a quick fiscal stimulus. And, Dr. Katz said, when people exhaust unemployment and health insurance, many end up applying for disability benefits, which become a large, unending drain on the Treasury."

When we asked Katz about the discrepency between his remarks then and now, he explained that labor markets in the late 1970s and early 1980s were significantly different from today. Back then, it was common for companies making layoffs to later recall workers, and often workers accepted those jobs right as their benefits were coming to an end. Today, recalls rarely happen, and with the job market so tight, a job search can prove fruitless for many months. Most unemployed workers don't have the luxury of timing when they accept a job.

For that reason, Katz told us in an interview, "I strongly favor extensions of UI benefits when the labor market is weak and the ratio of job seekers to job openings is very high" – in other words, like the situation is right now.


To be more precise, Dr. Katz supports the posiition that unemployment benefits extension in this economy is a worthwhile fiscal stimulus. Your quotation of him for the opposite position is simply dead wrong.
 
#8
#8
It's not dead wrong. He's just trying to pretend that fundamental economics and human nature recently changed and he's full of crap.
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#9
#9
what a bunch of garbage. his own study proves this relationship. and now he's arguing it's different today?
 
#12
#12
droski said:
what a bunch of garbage. his own study proves this relationship. and now he's arguing it's different today?
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He is saying that the labor markets in the 70's and 80's were different and that, when the market for jobs is as shallow as it is now, the disincentivizing effect of unemployment benefits is very low. In particular, he is saying that in the type of labor market we have now those effects are substantially outweighed by the stimulative benefits of unemployment compensation.

Funny that people quote his study to support their argument and then when he explains the significant differences between then and now and why the effect he documented is not present in today's economy he is just abandoned.
 
#15
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lawgator1 said:
He is saying that the labor markets in the 70's and 80's were different and that, when the market for jobs is as shallow as it is now, the disincentivizing effect of unemployment benefits is very low. In particular, he is saying that in the type of labor market we have now those effects are substantially outweighed by the stimulative benefits of unemployment compensation.

Funny that people quote his study to support their argument and then when he explains the significant differences between then and now and why the effect he documented is not present in today's economy he is just abandoned.
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labor markets in the early 80s were that much different? the unemployment rate was 10% for almost 2 years in 82 and 83. how is today different? because the job market sucks unemployment insurance still doesn't disincentive people to not make the hard decision? ridiculous.
 
#16
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and he never seems to be arguing that unemployment insurance DOESN'T raise the unemployment rate, only that the stimulus effect of unemployment insurance is worth this raise. completely different argument from the CBO.
 
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droski said:
labor markets in the early 80s were that much different? the unemployment rate was 10% for almost 2 years in 82 and 83. how is today different? because the job market sucks unemployment insurance still doesn't disincentive people to not make the hard decision? ridiculous.
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1) I am certain that anecdotally there are people you can find who rest on their laurels, so to speak, and take the benefits as an excuse or rationalization not to go out and find work.

But,

2) Given the pattern we see all over the place of people listing a handful of jobs and being flooded with resumes it certainly seems as though the vast majority of people would trade their trinket benefits for a job of almost any type.

I'd be more inclined ot accept your argument if the losses were in industries that catered solely to older workers and you could make the case that they are not willing to be underemployed. But its young people, too, and in this economy they'll go to work for $12 an hour if they can find it.
 
#18
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droski said:
and he never seems to be arguing that unemployment insurance DOESN'T raise the unemployment rate, only that the stimulus effect of unemployment insurance is worth this raise. completely different argument from the CBO.
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As I say, I imagine he thinks the effect is still there, but much lower than in prior episodes of significant unemployment rates.
 
#19
#19
lawgator1 said:
1) I am certain that anecdotally there are people you can find who rest on their laurels, so to speak, and take the benefits as an excuse or rationalization not to go out and find work.
Click to expand...

over a million are being described as "giving up" the search for a job. I'm sure they busted their butts to find one though
 
#20
#20
lawgator1 said:
1) I am certain that anecdotally there are people you can find who rest on their laurels, so to speak, and take the benefits as an excuse or rationalization not to go out and find work.

But,

2) Given the pattern we see all over the place of people listing a handful of jobs and being flooded with resumes it certainly seems as though the vast majority of people would trade their trinket benefits for a job of almost any type.

I'd be more inclined ot accept your argument if the losses were in industries that catered solely to older workers and you could make the case that they are not willing to be underemployed. But its young people, too, and in this economy they'll go to work for $12 an hour if they can find it.
Click to expand...

i'm in an industry that layed off 20% of it's workforce and i still regurally get interest. even for positions i have applied for online with 100 other applicants. it's absurd to argue the labor market is so bad that a willing person couldn't find work of some sort.
 
#22
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droski said:
i'm in an industry that layed off 20% of it's workforce and i still regurally get interest. even for positions i have applied for online with 100 other applicants. it's absurd to argue the labor market is so bad that a willing person couldn't find work of some sort.
Click to expand...


I have trouble using the experience of one person, or even of a thousand, to characterize the entirety of the job market.
 
#24
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droski said:
so how does this conflict with my original statement?
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The thread question is which policy strategy has the best effect on unemployment rates. I noted that the CBO said the one having the best effect would be continued benefits because they'd get spent and stimulate the economy, whereas the policy option with the lowest projected benefits would be tax cuts, particularly for the wealthy, because the anticipation is that they would save those dollars rather then spend them.

The entire premise of the GOP argument is that continuing the Bush tax cuts will benefit small business owners, a claim that has been debunked repeatedly as the vast majority of people affected are not small business owners. On top of that, the assumption that those that are such small business owners will use the tax savings to hire people is not borne out by the current trends.

Now, if you want to globally argue that tax increases (or not perpetuating tax cuts, however you want to put it) in a weak economy is a bad idea, I think a good argument can be made for that. After all, even if the wealthy don't use the money to hire people, it will be put into some other vehicle that should have some beneficial effect on the economy. I get that.

But I think that the GOP argument that this is the way to create jobs is a bit of misdirection on their part, using worries over the economy to justify something for which they have ulterior motive.

Again, not saying there isn't some benefit, just not the one that sells as well.
 
#25
#25
a little more searching shows that the CBO report is from Jan 2010. Apparently, it's being trotted out for the current tax extension debate.

I don't have time to read it but I wonder when the extension to 99 weeks took place (before or after this report). Likewise I'd like to see the findings on:

1) where are the limits of the effect of extending them (how far beyond 99 if at all)
2) what is the positive stimulative effect of extending the upper level tax cuts (as far as I can tell they are not claiming the tax cut extensions will NOT stimulate the economy)
 
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