Monday, July 19, 2010

the long-term tragedy of long-term unemployment

From Mohamed El-Erian in the WSJ...

Almost half of unemployed Americans have been without a job for over six months. The average duration of unemployment, which hit a post-World War II record many months ago, continues to go up. Last month it clocked in at 35 weeks. Unemployment is particularly severe among the young: A quarter of Americans between 16 and 19 years old in the labor market are without a job.

The longer it takes to understand and address these issues, the more likely the U.S. will get stuck in a protracted low growth/high unemployment trap. In addition to considering the welfare cost of substantial joblessness, policy makers should keep in mind the following...

First, persistently high unemployment erodes the skills of any labor force, especially when joblessness is a big problem among the young. This reduces future productivity and growth potential.

Second, a high rate of joblessness puts pressure on inadequate social safety nets like the unemployment benefit system. It also exacerbates the strain on government budgets already stretched at both the federal and state levels....

And finally, high unemployment has historically induced companies and countries to become more inwardly oriented. Many firms have already moved to a "self-insurance" mode, including holding large cash balances rather than investing in equipment and hiring people....

1 Comments:

At July 20, 2010 at 7:08 AM , Anonymous Anonymous said...

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