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Friday, June 18, 2010

Lack of Workers is Not the Problem

Rand Paul is confused about the source of the unemployment problem:

Paul urges “tough love” for long-term jobless, Lexington Herald-Reader: Republican U.S. Senate candidate Rand Paul on Friday urged Americans who have been unemployed for many months to consider returning to the workforce in less desirable jobs rather than continue relying on government unemployment assistance.

“In Europe, they give about a year of unemployment. We’re up to two years now in America,” Paul said... “As bad as it sounds, ultimately we do have to sometimes accept a wage that’s less than we had at our previous job in order to get back to work and allow the economy to get started again,” Paul said. “Nobody likes that, but it may be one of the tough love things that has to happen.”

The ratio of job seekers to job openings is currently around 5 to 1, which is extraordinarily high by historical standards. It's not a shortage of people willing to work that is causing the problem.

Update: I should have added that the problem is lack of demand, and raising interest rates/cutting the deficit, or any other removal of stimulus -- including the removal of social insurance programs such as unemployment insurance that function as automatic stabilizers -- will make things worse, not better. The economy could use a positive shock to demand right now, i.e more stimulus, but right now the battle is simply to maintain what's already in place.

    Posted by on Friday, June 18, 2010 at 03:42 PM in Economics, Social Insurance, Unemployment | Permalink  Comments (97)


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