The Folly of Subsidizing Unemployment

[DEDixon 39]

Let me correct you Bro, I don't think the "entire downturn" is Obamas fault, I do believe we are well into the "Obama economy" which means ..... realistically speaking peoples future will not be brighter for some time.

PLainly put.... Obama is digging us deeper and if I were unemployed, I would expect to make much less in my next job.

we are at least in a dem economy since they took congress in 2006. they weren't sounding any alarms. they didn't even run campaigns on the economy, but instead on an anti-war platform and then did absolutely nothing to end any war.

[Mr. Big Dog 10,747]

It's been two years

You know that just about any financial crisis in history has been followed by a long (according to McKinsey an average of 6-7 years) and painful period of deleveraging and, hence, slow growth. This is nothing new, really.

[Danno 1,228]

Since your claim pre-dates Obamas inauguration we can all feel free to disregard the above dissembling.

LEts make this simple.

At what point will you admit: WE ARE NOW IN AN OBAMA ECONOMY?

[ready4ONE 5,400]

LEts make this simple.

At what point will you admit: WE ARE NOW IN AN OBAMA ECONOMY?

Unfortunately it's complicated. Since there are such a wide range of problems with our economy, many affecting others in a wide variety of ways and at differing levels over time, we don't actually have luxury of blaming solely Obama, W. Bush, Democrats, Republicans, the Rich, the Poor, Big or Small business, illegal aliens, the unemployed, or any of the other handy but useless 'biggest problem we have' scapegoat your are so fond of.

We likely won't see "the Obama" economy for years down the road and it's effects will blend and meld with every other Presidential economy since the 1950's and the effects of every other factor in our economy as well.

Economics are complicated. Scapegoating is easy. I commend you for sticking with what you know though!

Edited September 1, 2010 by ready4ONE

[Danno 1,228]

Unfortunately it's complicated. Since there are such a wide range of problems with our economy, many affecting others in a wide variety of ways and at differing levels over time, we don't actually have luxury of blaming solely Obama, W. Bush, Democrats, Republicans, the Rich, the Poor, Big or Small business, illegal aliens, the unemployed, or any of the other handy but useless 'biggest problem we have' scapegoat your are so fond of.

We likely won't see "the Obama" economy for years down the road and it's effects will blend and meld with every other Presidential economy since the 1950's and the effects of every other factor in our economy as well.

Economics are complicated. Scapegoating is easy. I commend you for sticking with what you know though!

While I do agree these time lines all bleed into each other, clearly Obama has taken actions which after 2 years we are feeling?

To say "at some point the Obama economy will rear it;'s head"

is like claiming you will make the sun rise....... and after waiting long enough, it happens.

[mawilson 2,133]

You know that just about any financial crisis in history has been followed by a long (according to McKinsey an average of 6-7 years) and painful period of deleveraging and, hence, slow growth. This is nothing new, really.

I know, but then you can't blame Bush for everything either. He inherited a bloody mess from the Clinton administration too - a house of cards which collapsed shortly after he took office. Not to mention 9/11 and other disasters he had to deal with, yet I didn't hear him whine about it and blame Clinton at every turn.

[Mr. Big Dog 10,747]

I know, but then you can't blame Bush for everything either. He inherited a bloody mess from the Clinton administration too - a house of cards which collapsed shortly after he took office. Not to mention 9/11 and other disasters he had to deal with, yet I didn't hear him whine about it and blame Clinton at every turn.

Nobody is saying it's all W fault. The fact is, however, that leveraging saw a significant spike this decade. What we now witness is that it is true that what leverage giveth, leverage taketh away. I find it funny when people talk about the US potentially looking at a lost decade. Wanna look at a lost decade? Just look back over the past decade.

[twowls 217]

Unfortunately it's complicated. Since there are such a wide range of problems with our economy, many affecting others in a wide variety of ways and at differing levels over time, we don't actually have luxury of blaming solely Obama, W. Bush, Democrats, Republicans, the Rich, the Poor, Big or Small business, illegal aliens, the unemployed, or any of the other handy but useless 'biggest problem we have' scapegoat your are so fond of.

We likely won't see "the Obama" economy for years down the road and it's effects will blend and meld with every other Presidential economy since the 1950's and the effects of every other factor in our economy as well.

Economics are complicated. Scapegoating is easy. I commend you for sticking with what you know though!

You lost him at "it's complicated."

[Nikita2Charles 32]

It's always interesting when folks making decisions or criticizing others know fully well it has nothing to do with them,hmmm Empathy? If the ball was in their court then probably they would know how it feels.

Is there abuse in the system, YES, no system is perfect i wouldn't blanket everybody whose unemployed as being lazy and not looking hard enough.

It's the same old republican excuse here one question: Giving Tax Break to the top 2% of the population will not increased the federal deficit

Giving unemployment to a family who has mouth to feed( keep in mind the amount for unemployment is not even closed to what the person used to make when they were working, there's a cap)

You mean this is socialism, giving unemployment to the least fortunate will run the national debt, but those BILLIONS of $$$$ being spent in Iraq( Hmmm Obama started the Iraq war for the short term memory folks) , Afghanistan has nothing to do with it.

Giving Companies TAX BREAK TO SHIP AMERICAN JOB OVERSEAS will not run up the national debt,

I had a team of 246 people now down to 8, the rest have been replaced by other workers in Asia.

Last July only there were about 47engineers job openings at the Asia plant location as the business cycle is improving, then guess what that cycle is broken, most of those folks who have goten laid off would NOW be call back to work, but their JOBS are not longer in the USA.

I agree to give tax break but it has to do with companies hiring here in the USA, just look at the new green Job, solar energy, the momemnt we start to look at it and start to invest, what happened now China is spending like crazy to attrack those green Jobs,

So as we move more and more toward Globalization, Stagnating salary here in the US, it's part of the grand scheme to drive this country into a 3rd world status by then it will be cheaper to build here in the US than abroad, but at what cost, you will have a SUPER RICH CLASS and the Poor, little by little we are seeing the elimination of the middle class.

But again, IT"S ALL OBAMA's FAULT

Edited September 1, 2010 by Nikita2Charles

[mawilson 2,133]

You mean this is socialism, giving unemployment to the least fortunate will run the national debt, but those BILLIONS of $$$$ being spent in Iraq( Hmmm Obama started the Iraq war for the short term memory folks) , Afghanistan has nothing to do with it.

Well actually, since you asked...

[Rebecca Jo 1,962]

I want to focus here on another dimension of the Obama administration's policies: the expansion of unemployment-insurance eligibility to as much as 99 weeks from the standard 26 weeks.

The unemployment-insurance program involves a balance between compassion—providing for persons temporarily without work—and efficiency. The loss in efficiency results partly because the program subsidizes unemployment, causing insufficient job-search, job-acceptance and levels of employment. A further inefficiency concerns the distortions from the increases in taxes required to pay for the program.

In a recession, it is more likely that individual unemployment reflects weak economic conditions, rather than individual decisions to choose leisure over work. Therefore, it is reasonable during a recession to adopt a more generous unemployment-insurance program. In the past, this change entailed extensions to perhaps 39 weeks of eligibility from 26 weeks, though sometimes a bit more and typically conditioned on the employment situation in a person's state of residence. However, we have never experienced anything close to the blanket extension of eligibility to nearly two years. We have shifted toward a welfare program that resembles those in many Western European countries.

The administration has argued that the more generous unemployment-insurance program could not have had much impact on the unemployment rate because the recession is so severe that jobs are unavailable for many people. This perspective is odd on its face because, even at the worst of the downturn, the U.S. labor market featured a tremendous amount of turnover in the form of large numbers of persons hired and separated every month.

For example, the Bureau of Labor Statistics reports that, near the worst of the recession in March 2009, 3.9 million people were hired and 4.7 million were separated from jobs. This net loss of 800,000 jobs in one month indicates a very weak economy—but nevertheless one in which 3.9 million people were hired. A program that reduced incentives for people to search for and accept jobs could surely matter a lot here.

Moreover, although the peak unemployment rate (thus far) of 10.1% in October 2009 is very disturbing, the rate was even higher in the 1982 recession (10.8% in November-December 1982). Thus, there is no reason to think that the United States is in a new world in which incentives provided by more generous unemployment-insurance programs do not matter much for unemployment.

Another reason to be skeptical about the administration's stance is that generous unemployment-insurance programs have been found to raise unemployment in many Western European countries in which unemployment rates have been far higher than the current U.S. rate. In Europe, the influence has worked particularly through increases in long-term unemployment. So the key question is what happened to long-term unemployment in the United States during the current recession?

To begin with a historical perspective, in the 1982 recession the peak unemployment rate of 10.8% in November-December 1982 corresponded to a mean duration of unemployment of 17.6 weeks and a share of long-term unemployment (those unemployed more than 26 weeks) of 20.4%. Long-term unemployment peaked later, in July 1983, when the unemployment rate had fallen to 9.4%. At that point, the mean duration of unemployment reached 21.2 weeks and the share of long-term unemployment was 24.5%. These numbers are the highest observed in the post-World War II period until recently. Thus, we can think of previous recessions (including those in 2001, 1990-91 and before 1982) as featuring a mean duration of unemployment of less than 21 weeks and a share of long-term unemployment of less than 25%.

These numbers provide a stark contrast with joblessness today. The peak unemployment rate of 10.1% in October 2009 corresponded to a mean duration of unemployment of 27.2 weeks and a share of long-term unemployment of 36%. The duration of unemployment peaked (thus far) at 35.2 weeks in June 2010, when the share of long-term unemployment in the total reached a remarkable 46.2%. These numbers are way above the ceilings of 21 weeks and 25% share applicable to previous post-World War II recessions. The dramatic expansion of unemployment-insurance eligibility to 99 weeks is almost surely the culprit.

To get a rough quantitative estimate of the implications for the unemployment rate, suppose that the expansion of unemployment-insurance coverage to 99 weeks had not occurred and—I assume—the share of long-term unemployment had equaled the peak value of 24.5% observed in July 1983. Then, if the number of unemployed 26 weeks or less in June 2010 had still equaled the observed value of 7.9 million, the total number of unemployed would have been 10.4 million rather than 14.6 million. If the labor force still equaled the observed value (153.7 million), the unemployment rate would have been 6.8% rather than 9.5%.

http://www.visajourney.com/forums/index.php?app=forums&module=post&section=post&do=new_post&f=16

Some very interesting interpretations of statistics!

Especially compelling is the comparison of US unemployment benefits to European benefits. No mention is made of how encompassing benefits are in many European countries (such as housing benefit in the UK and that nasty old National Health Service), which DOES enable people to take a longer time to look for work. But we wouldn't want to let that little fact get in the way of a scary article. After all, the unemployed in the US are getting SO.MUCH.MONEY. in their weekly benefit check. No need to worry over the mortgage! No need to worry about having no health insurance!