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EconomicPolicyInstitute January 14, 2010

The new year has brought more signs that the country’s two-and-a-half-year-old jobs crisis remains severe. On January 8, the Labor Department reported an additional 85,000 jobs were lost in December, making it official that the past 10 years were a lost decade for jobs creation.  Although the U.S.  population grew by about 25 million since the year 2000, the country added just 129,000 jobs over that entire period.  EPI continues to push for policy action on a scale large enough to address the deep jobs crisis in which more than 15 million Americans are currently out of work.

Missing workers
An EPI analysis of the latest unemployment data by economist Heidi Shierholz showed that December’s 10% unemployment rate would have been even higher had it not been for the 661,000 workers who dropped out of the labor force last month. That sharp decline continues a longstanding trend that has seen 810,000 workers leave the workforce since the start of the recession. Since the workforce needed to increase by about 2.8 million workers over that period just to keep up with population growth, it means there are now about 3.6 million “missing workers” who dropped out or never entered the workforce during the downturn. Shierholz appeared on NBC Nightly News discussing the large number of labor force dropouts.

In a piece in the Huffington Post, EPI President Lawrence Mishel stressed the need to start putting Americans back to work through some of the proposals outlined extensively in the American Jobs Plan that EPI produced late last year. “The initial effort to create jobs – the Recovery Act – is already helping,” Mishel wrote. “But the scale of the problem is much greater than that legislation can address.  We need to do more.”

The case for good deficits
Doing more to create jobs will inevitably involve spending more. Economist Josh Bivens took on critics who oppose any actions that would increase the federal deficit in Budgeting for Recovery: The Need to Increase the Federal Deficit to Revive a Weak Economy. The extensively researched paper makes the case that the impact of deficits depends largely on whether an economy is healthy or ailing. In an ailing economy with high unemployment and capacity sitting idle, Bivens says, larger deficits provide the spending that is needed to create a sustained recovery. Bivens’ paper also challenges the common criticism that today’s budget deficits will unfairly burden future generations. When the economy is weak, hawkish opposition to deficits holds the nation’s future pros­perity hostage to ideology that has no grounding in basic, common-sense economics, he said.

Paying for health care reform
Much of the final stage of the debate over health care reform has focused on the best funding options. Past EPI research has shown that the House’s proposal for a surtax on high incomes would be fairer and more effective than the Senate’s proposal for an excise tax on high-priced health care plans, which are commonly and mistakenly referred to as “Cadillac” plans even though research shows that most of these plans are not particularly lavish.  EPI advanced that argument against the tax on so-called “Cadillac” plans last week through a series of publications and media appearances.

A new paper by Mishel, Employer Health Costs Do Not Drive Wage Trends, refutes one of the main claims of supporters of the “Cadillac” tax: that the tax will rein in health care costs and lead to higher wage growth.  Mishel’s paper notes that health care costs – though extremely large – are not large enough to influence the wage growth seen in the late 1990s or the wage stagnation seen in recent years. The paper demonstrates how about half of all U.S. workers do not receive any health care coverage from their employers and could not benefit from a theoretical trade-off between health insurance and higher wages.

Bivens and EPI’s Director of Health Policy Research Elise Gould also made the case against the proposed “Cadillac” tax during debates on the PBS News Hour and the Diane Rehm Show, where they stressed that the tax was poorly targeted because expensive health care plans do not necessarily provide comprehensive coverage. They also noted that the tax would lead to increased out-of-pocket costs for those it affected and that the House’s proposed surtax on high incomes would impact far fewer people.

Upcoming events
On January 19, EPI will host a panel titled “Why more equal societies almost always do better,” a discussion of the way economic equality contributes to success and overall quality of life, such as strong performance in school and low crime rates, in different societies around the world. The presenters, epidemiologists Richard Wilkinson and Kate Pickett, will be joined in a discussion by author Barbara Ehrenreich and Harry Holzer, a professor of public policy at the Georgetown Public Policy Institute. The event will run from 10:00 a.m. until 11:30 a.m. in EPI’s offices. 

Also in the news
EPI’s research into health care reform, unemployment, and jobs creation continues to dominate the national news coverage of these subjects. Algernon Austin, director of EPI’s Program on Race, Ethnicity and the Economy, was quoted by National Public Radio in a story about the struggles young black men face finding jobs. NPR and The Miami Herald cited EPI’s analysis on the large number of discouraged workers who had stopped looking for jobs. CBS Money Watch quoted Shierholz in a story about wage stagnation, and USA Today and Newsweek both quoted EPI’s Research and Policy Director John Irons discussing the economic pain that will last long after the recession is declared officially over. EPI’s analysis of the problems associated with a tax on high-priced health plans also received wide coverage in The New York Daily News and other outlets.

For more information about EPI in the news, visit EPI.org our Facebook page.

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