Read on Twitter
Long-term unemployment and repeat unemployment have soared
My biggest concern about the American Rescue Plan is that it lacks funding to help hardest hit from pandemic get back to work
Below, I describe what we know from the research and what we might do this time to help
My biggest concern about the American Rescue Plan is that it lacks funding to help hardest hit from pandemic get back to work
Below, I describe what we know from the research and what we might do this time to help
tldr:
* long-term unemployment is terrible and there is a lot of it now (see plot above)
* extending benefits alone can be counterproductive
* why job retraining didn’t work in Great Recession
* there are alternative policies to try this time
* long-term unemployment is terrible and there is a lot of it now (see plot above)
* extending benefits alone can be counterproductive
* why job retraining didn’t work in Great Recession
* there are alternative policies to try this time
@TillvonWachter & Schmieder show that wages after a year of unemployment are about *30%* lower in Germany (estimates are similar for the US).
https://www.aeaweb.org/articles?id=10.1257/aer.20141566
https://www.aeaweb.org/articles?id=10.1257/aer.20141566
Counterintuitively, they find that longer unemployment benefits led workers to end up in *lower*-paying jobs. This might be because there is a “tax” in the labor market where being unemployed longer makes it harder to get a good job.
Caveat: the evidence here is somewhat ambiguous -- some papers find even larger negative impacts on this and one paper by @arash_nekoei finds small positive impacts. But nothing shows that longer unemployment benefits are a panacea for long-term unemployment.
So how can we help get workers who have been long term unemployed back to work?
Unfortunately, retraining was *not* effective (too hard for govt to know what jobs of the future were) during the Great Recession per research by @ReviseNRetweet
https://libertystreeteconomics.newyorkfed.org/2020/05/job-training-mismatch-and-the-covid-19-recovery-a-cautionary-note-from-the-great-recession.html
Unfortunately, retraining was *not* effective (too hard for govt to know what jobs of the future were) during the Great Recession per research by @ReviseNRetweet
https://libertystreeteconomics.newyorkfed.org/2020/05/job-training-mismatch-and-the-covid-19-recovery-a-cautionary-note-from-the-great-recession.html
What should we do? In another paper @ReviseNRetweet studies wage insurance, which like UI, helps cushion the financial loss from taking new jobs and therefore gets workers back to work faster
https://static1.squarespace.com/static/5acbd8e736099b27ba4cfb36/t/5ff72e739529323df1b5d7eb/1610034803945/HKLN_manuscript.pdf
https://static1.squarespace.com/static/5acbd8e736099b27ba4cfb36/t/5ff72e739529323df1b5d7eb/1610034803945/HKLN_manuscript.pdf
We also might try grants for education (instead of the loans that are currently available) and subsidized employment (see this post by @IndivarD)
https://www.hamiltonproject.org/papers/improving_tanfs_countercyclicality_through_increased_basic_assistance_and_s
https://www.hamiltonproject.org/papers/improving_tanfs_countercyclicality_through_increased_basic_assistance_and_s
Extending and expanding unemployment benefits is crucial.
But the research shows that this isn’t enough to help the long-term unemployed!
Hard to "Build Back Better" without providing support to the workers who have been hardest hit by the pandemic to get back on their feet.
But the research shows that this isn’t enough to help the long-term unemployed!
Hard to "Build Back Better" without providing support to the workers who have been hardest hit by the pandemic to get back on their feet.
#EconTwitter has been weirdly silent on this super important issue (or if there has been discussion, I have missed it)
The best media coverage of this issue so far is by @HeatherLong. https://www.washingtonpost.com/road-to-recovery/2021/02/17/unemployed-workers-retraining/
The best media coverage of this issue so far is by @HeatherLong. https://www.washingtonpost.com/road-to-recovery/2021/02/17/unemployed-workers-retraining/
