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Long-term Unemployment Still Too High

Posted By Patrick Tyrrell On March 5, 2010 @ 4:30 pm In Economics | Comments Disabled

Job seekers line up for jobs at Citi Field in Queens in New York [1]

The stock market reacted favorably this morning when it was announced that the number of people on payrolls fell by 36,000 in February, better than the 50,000 loss expected by economists. The unemployment rate held steady at 9.7%, also slightly better than expected.

Another indicator that may have received less attention is the 15-Week unemployment rate—the percent of the labor force that has been unemployed for 15 weeks or longer and is still looking for employment. In December, 2007 this statistic stood at only 1.6%. In February, 2010, it was 363% higher at 5.8%. This, after three “stimulus” bills during the time frame is proof that the idea that we can “spend our way out of recession [2]” is for the birds. In fact, after rising the astronomical 363%, the rolls of those unemployed 15 weeks or more has only declined by 147,000 since it peaked in November [3] of 2009 at 8 million 976 thousand people looking for work.

The longer-term 15-week unemployment rate is most often used to detect the level of economic pain being felt in the economy. Equally important though, this statistic reveals the percent of the workforce whose skills are eroding by not being put to use. People unemployed for 15 weeks or longer are becoming less employable as time goes by. Skills deteriorate when not put to use [4]. Therefore the chart below is alarming.

Long-term unemployed [5]

“Stimulus Bill” spending crowds out the private sector. There are more government jobs competing with private market jobs and it is not a level playing field. The government jobs are paid by the taxpayers regardless of whether their employers run them prudently because it can operate at a loss indefinitely until the government goes bankrupt and the federal spigot must be turned off. Jane Businesswoman in the private sector though has to remain profitable and compete.

Another problem with “Stimulus Bill” spending is that many workers hired by the government are paid Davis Bacon wages [6], which are artificially high. Therefore fewer workers can be hired, contributing to longer-term unemployment.

The solution to fighting longer-term unemployment is to put more money in the pockets of small business owners. This can be done through tax cuts such as by:

  • Permanently repealing the Death Tax which keeps business from expanding and growing.
  • The government should provide assurance that small business owners aren’t going to be hit with a per-worker health insurance tax.
  • The corporate tax rate of 15 to 38 percent should be lowered to 15 percent across the board so jobs are no longer lost overseas to other countries that have lower corporate tax rates.

Until policies such as these see the light of day, it will be nighttime in America—the unemployed will suffer and their skills deteriorate.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/03/05/long-term-unemployment-still-too-high/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/unemployment100224.jpg

[2] spend our way out of recession: http://www.nypost.com/p/news/politics/obama_plans_to_spend_our_way_out_Swmgz9e2H5RuGgZuBMaWSI

[3] it peaked in November: http://stats.bls.gov/web/cpseea12.pdf

[4] Skills deteriorate when not put to use: http://www.jstor.org/stable/2554901

[5] Image: http://www.foundry.org/wp-content/uploads/LTermUnemployed2.gif

[6] are paid Davis Bacon wages: http://www.heritage.org/Research/Labor/bg2158.cfm

[7] The tax on dividends should be abolished: http://www.heritage.org/Research/Taxes/CDA03-02.cfm

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