EPI News

Unemployment, tax cuts, and the deficit

As the Labor Department reported a January unemployment level of 9.7%, reflecting 8.4 million jobs lost since the start of the recession, EPI research continues to focus on the persistent rates of joblessness and the need for a massive policy action to put people back to work.

The latest unemployment report — reflecting more than 8.4 million jobs lost since the start of the recession — comes the same week that the Obama administration released its fiscal 2011 budget, and an analysis by EPI Research and Policy Director John Irons underscores the connection between the two. “The recession — with its greater unemployment and lower incomes — automatically leads to lower revenues and higher spending levels,” Irons wrote. “Although significant challenges remain over the long term, the larger threat to the economy comes from economic stagnation and slow job growth.” For that reason, Irons defended the funding and placeholders for further action on job creation that were included in the latest budget.

Two ways to create jobs
Economist Josh Bivens and policy analyst Ethan Pollack, meanwhile, analyzed how one job creation effort focused on the transportation sector could create close to  half a million new jobs. Their analysis was based on a $34.3 billion proposal for jobs creation sector from the Transportation for America coalition, whose proposal closely mirrors a proposal contained in EPI’s American Jobs Plan. In addition to showing those investments would directly or indirectly create about 480,000 jobs, the authors offer a detailed breakdown, by gender, race, and income level, of where the new jobs would likely go. The largest portion of new jobs, they show, would go to workers with only a high school education, one of the groups that has been hardest hit by the current jobs crisis.

Bivens has also published a Policy Memo outlining why a Jobs and Wages Tax Cut Should be Part of a New Jobs Package. He estimated that a proposed Jobs and Wage Tax Cut (JWTC) that would provide businesses a $5,000 tax credit for each new employee they hired in 2010 would create about 1 million new jobs over the next year. EPI supports a jobs creation tax credit as part of a broad plan that also includes strengthening the social safety net through extended unemployment benefits and other measures; providing fiscal relief to state and local governments; creating more public service jobs and investing in schools and transportation infrastructure.

How immigration helps boost wages
While job loss remains one of the country’s most urgent economic problems, EPI research also shows a longstanding pattern of lost or stagnating wages that far predates the current downturn. A new paper, Immigration and Wages by economist Heidi Shierholz shows that immigration has actually had a small positive impact on wages of workers born in the United States. The trend holds true for workers at every educational level, including those with less than a high school degree. “Any negative effects of new immigration over this period were felt largely by the workers who are the most substitutable for new immigrants—that is, earlier immigrants,” Shierholz writes.

Misplaced blame on teachers unions
American Federation of Teachers President Randi Weingarten recently spoke at the National Press Club calling for more thorough evaluation of teachers, including simplified rules for removing ineffective teachers. EPI Research Associate Richard Rothstein published a response in The National Journal, arguing that teachers unions are too often blamed for protecting ineffective teachers, when the fault really lies elsewhere. His response, Unions not an important impediment to removing ineffective teachers, is also available on EPI.org.  Unions, Rothstein argues, do not unilaterally impose teacher discipline rules. Rather, he says that most school districts have failed to propose adequate systems for removing poor teachers.  “Administrations don’t propose such systems mainly because they are very, very expensive,” Rothstein says.

EPI in the news
The Nation Editor Katrina vanden Heuvel quoted Douglas Hall, director of EPI’s Economic Analysis and Research Network (EARN) in a blog post about an Oregon ballot initiative to raise taxes on the state’s top earners. “I think that sends a powerful message to the rest of the country and it’s a message that we hope other states hear as well. Pretty much all states are struggling with significant revenue shortfalls. And enacting high-end income tax increases is actually the least harmful way to close those revenue gaps,” Hall said. The Washington Times quoted Josh Bivens on why the latest numbers showing strong growth in GDP could not be sustained. A Pittsburgh Post Gazette story about the economic struggles of America’s middle class quoted Heidi Shierholz arguing that many middle-class Americans are increasingly challenged to afford basics like a home and a college education for their children.

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