The Unassuming Economist

I’m presenting some new work on unemployment at a conference at the University of Wisconsin this morning. I provide cross-country evidence on the relative importance of cyclical and structural factors in explaining unemployment, including the sharp rise in U.S. long-term unemployment during the Great Recession of 2007-09. About 75% of unemployment is accounted for by cyclical factors-real GDP changes (“Okun’s Law”), monetary and fiscal policies, and the uncertainty effects emphasized by Nick Bloom (Econometrica, 2009). Structural factors, which I measure using industry-level stock returns, account for the remaining 25 percent. For U.S. long-term unemployment the split between cyclical and structural factors is closer to 60-40, including during the Great Recession. Here’s my paper on cyclical and structural sources of unemployment and two related presentation slides (one and two).

Today, the La Follette School and the University of Wisconsin Center for World Affairs and the Global Economy is holding a conference on “Long term unemployment in industrial countries: Causes, Consequences and Policy Responses“. Read this Econbrowser post for the agenda and materials.

British economist Guy Standing has a new book on the Precariat, people living and working precariously in short-term jobs without benefits or social protections. Standing says that a way to a better society would be to have an unconditional basic income for everyone, contributed by the state, augmented through employment. A basic income would allow people to gain control over their time rather than rush feverishly from activity to activity. We would enjoy leisure. Hence my rallying cry “Shirkers of the World, Unite!” when I discussed Standing’s work yesterday at an event at Economic Policy Institute (EPI). Larry Mishel, EPI’s President introduced the event, which also featured noted labor scholars Heidi Hartmann and Eileen Appelbaum. Guy Standing’s previous book, Work After Globalization, has fascinating material—I heartily recommend it. It’s what I thought economics would be all about when I signed up for it some thirty years ago.

The article—The Global Unemployment Crisis: Costs, Causes, Cures  made it in the Globalist Research Center’s Top Ten Feautures of 2010. Also, see the full report on the unemployment crisis.

Is the increase in unemployment cyclical or structural? In an article released today by the IMF, Mai Dao and I summarize some new evidence on this topic. A recovery in output, using monetary and fiscal policy tools, takes too long to lift the boats of the long-term unemployed, and even then does not give them much of a lift. But whether it’s cyclical or structural, unemployment takes a severe human toll and merits a decisive policy response, as we discuss in the article. A longer version is available here.