Understanding and Responding to Persistently High Unemployment

Abstract

[Excerpt] In this study, CBO examines a broad array of policy approaches designed to reduce unemployment. Some of those policies would aim to boost the economy and demand for goods and services, reflecting the fact that the increase in unemployment in general and long-term unemployment in particular is primarily attributable to weak demand for labor, which, in turn, is the result of weak aggregate demand. Policies to increase demand for workers could reduce unemployment substantially in 2012 and 2013, although those policies could be costly to the federal government and would vary greatly in their effectiveness per dollar of budgetary cost. Other policies that CBO examined, including worker training, changes to the unemployment insurance (UI) system, and helping the unemployed transition to new jobs, would probably not have a significant effect on the overall unemploymentrate during the next two years, primarily because of their limited scope, but they could provide support to certain groups and have longer-run positive effects.