Middle Class Political Economist: Basics: Length of Unemployment is Worst Since World War II.. (HT Brad DeLong.)
The key graph:
Assuming the economy is “trying” to reach equilibrium, this suggests that it “wants” less workers.
If that is a secular trend, as suggested by the steadily lengthening jobless recessions since the 80s,
…we’re faced with the need for a new structure wherein people’s claims to a decent share of the pie are not linked to their ability (luck) in finding well-compensated employment. Alternative means are necessary to provide widespread prosperity and the widespread demand that gives producers the incentive to expand and innovate.
Have I mentioned expanding the EITC lately, and indexing it to unemployment?
Cross-posted at Angry Bear.
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2 responses to “Length of Unemployment is Worst Since World War II”
“Have I mentioned expanding the EITC lately, and indexing it to unemployment?”
In his recent book Aftershock, Robert Reich suggests supersizing the EITC (which he calls “reverse income tax”). Reich gets it. Its a pity that Obama blew off his advice during the transition.
“Here’s how it would work:
Full-time workers earning $20,000 or less would receive a wage supplement of $15,000 (i.e. income = $35,000).
Supplement would decline on income changes
o +$10,000 for $30,000 earners = $40,000
o +$ 5,000 for $40,000 earners = $45,000
o + $0 for $50,000 earners capping off the reverse income supplements
Tax rates would also support this pushup from the bottom
o 10% for incomes from $50-$90,000
o 20% for incomes from $90-$160,000…”
http://chieforganizer.org/2011/01/03/reich%E2%80%99s-reverse-income-tax/
And of course this idea was originally bruited by Milton Friedman, except that he didn’t have the work incentive. Friedman’s disciples, of course point out that it’s completely unworkable because the resulting effective marginal rates would discourage people from working harder and climbing the ladder. End of discussion.