Persistent Unemployment andthe Debate Over How to Address the
Problem
R o b e r t R i c k e t t sF r a n k M . B u r k e C h a i r i n Ta x a t i o n
R a w l s C o l l e g e o f B u s i n e s sTe x a s Te c h U n i v e r s i t y
M a r c h 2 0 1 2
Economics 2012
Jobless Claims—Falling, but Still High
Measures of Unemployment: U1-U6
Unemployment by Age Group: 2000-2012
Education and Unemployment
Race and Unemployment
Gender, Race and Unemployment
Unemployment is Taking Longer and Longer to Adjust
Growing Duration of Unemployment
Consequences of Long-term Unemployment
Wachter, Song, Manchester (2009)—workers who lost jobs during the recession of the early 1980s earned 20% less than their peers 20 yrs later
Sullivan and Wachter (2009)—workers laid off at age 40 died sooner (at least 1 yr) than their peers
Oreopoulos, Page, Stevens (2008)—children of laid-off workers had lower earnings than their peers
Aaronson, Mazumder, Schechter (2010)—odds of finding a job next month diminish with each month of unemployment: 34% of workers in 1st month of unemployment find job next month 19% of workers in 7th month of unemployment find job next month
(for more, see Benyamin Appelbaum, “The Enduring Consequences of Unemployment,” Economix blog, NYT, 3/28/2012, 10:30 am)
Does Income Inequality Matter?
So … What to Do?
Current Debate is About What Government Should Do:
Nothing?Stimulus—if so, what kind?Is there a role for tax policy?Is the budget deficit relevant?
First, What’s Holding Down Consumption (besides job uncertainty)
Why Credit Overhang is Different Now
The Effects of “Austerity”
Major Policy Initiatives and the Deficit
Deficits and Government Spending—Comparing the Last Seven Administrations
Components of Government Spending:1962-2022 (post 2012 figures projected)
Reducing Unemployment and Government Spending are Inextricably Linked
Spending—by the Numbers
Program Spending as a Share of GDP Under Continuation of Current Policies
Avg 1962-2011
2012 2017 2022
Primary outlays 18.5% 22.0% 20.0% 20.0%Less Social Security 14.5% 17.1% 14.9% 14.5%Less Social Security and Medicare 13.0% 13.8% 11.6% 10.8%
Note: program spending includes all federal expenditures other than net interest on the debt. Sources: OMB through 2011; CBPP analysis of CBO data thereafter.
Maturity-Weighted Real Interest Rate on U.S. Treasury Debt
“Out of Control” Spending?Do the Markets Anticipate Inflation?
