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The Jobs Crisis and Stimulus Policy Lawrence Mishel President, EPI epinet

The Jobs Crisis and Stimulus Policy Lawrence Mishel President, EPI www.epinet.org. Recession: Costing Jobs and Wages, Generating Inequality. Employment losses are steep. Unemployment will continue to grow. Particular groups have been hit hard.

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The Jobs Crisis and Stimulus Policy Lawrence Mishel President, EPI epinet

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  1. The Jobs Crisis and Stimulus PolicyLawrence MishelPresident, EPIwww.epinet.org

  2. Recession: Costing Jobs and Wages, Generating Inequality • Employment losses are steep. • Unemployment will continue to grow. • Particular groups have been hit hard. • Recession has resulted in wage and income losses. • Recession has renewed growth of inequality.

  3. A jobless recovery • Jobs down 2 million since recession began. • Greater job loss than in earlier recessions.

  4. Employment change 26 months into a recession.

  5. Unemployment up from 3.9% to 6.0% • Labor force growing minimally

  6. Monthly unemployment rate 1989-2002

  7. Unemployment will stay high throughout 2003.

  8. EPI Unemployment Forecast

  9. Wage Growth: Slowest rate since mid-1990s

  10. Average hourly earnings growth, 1995-2002

  11. Household Incomes • Household incomes fell for the bottom 95% from 2000 to 2001. • Typical household lost 2.2%, or $934 annually. • Unemployment increase in 2002 causing further decline in household incomes.

  12. 3.6% 2.6% 2.2% 2.1% 2.0% 1.6% 0.4% -0.6% -1.0% -1.8% -2.3% -2.9% Average household income growth, 1995-2000 and 2000-01, by income fifth. 4.5% 3.5% 1995-00 2000-01 2.5% 1.5% 0.5% -0.5% -1.5% -2.5% -3.5% -4.5% 1st Fifth 2nd Fifth 3rd Fifth 4th Fifth 80-95% Top 5%

  13. CRITERIA FOR EFFECTIVE STIMULUS

  14. 1. Generate Growth and Jobs • Create more customers (i.e., demand)--consumers & government. • With unused capacity, investment incentives are ineffective. • Spending is more stimulative than tax cuts. • Tax cuts are a more immediate stimulus.

  15. 2. Be Fiscally Responsible • Temporary tax cuts • Temporary spending • Leave long-term fiscal balance untouched • Permanent measures unnecessary

  16. 3. Timing • Economy needs some immediate stimulus. • Impact of stimulus must be felt over the next 15 to 18 months.

  17. 4. Stimulus must be fair • Should lessen, not exacerbate inequalities.

  18. 5. Stimulus should target currently existing unmet needs

  19. EPI Plan • Outcomes • Generates 1.5 million jobs • Lowers unemployment by 1% • Generates 2% additional growth

  20. Temporary Spending ($110 billion) • Grants to states to preserve health, education, law enforcement, and other services ($50 billion) • School renovation and repair ($25 billion) • Unemployment insurance: extend benefits and expand eligibility to part-time and low-earning workers ($25 billion) • Other measures ($10 billion)

  21. Temporary Tax Cut: A Wage Bonus ($65 billion) • Rebate of 3.5% of first $15,000 in wages • Comes from general revenue • Benefits 149 million workers • $525 for first $15,000 in wages, or $1,050 for family with two such workers

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