Jonathan Catalan has a new piece up on the emergence of structural unemployment, a topic that has been a concern for a lot of people with the spike in unemployment duration.
I haven't gotten to read it yet, but this caught my attention:
"The Keynesian solution, as usual, is to stimulate aggregate demand. Specifically, it is held that the timeliest solution is expansive fiscal and monetary policy."
I think we need to be careful about this. What I think Keynesians are saying is that demand stimulus is necessary to make sure that cyclical unemployment doesn't become structural. But traditional fiscal and monetary policy isn't all that common a policy to address structural unemployment itself. For that you usually hear people addressing hiring and firing policies, the tax burden, hiring subsidies, training, the structure of unemployment compensation, and occasionally you'll hear people mention things like direct employment for the long-term unemployed. So I just think it's important to keep in mind that when people talk about stimulus in the same breath that they talk about structural unemployment now, I think for the most part they're addressing how to keep cyclical unemployment from becoming structural - not how to address structural unemployment itself.
I haven't personally thought about these issues for a while, but I did write a paper on policies to address long-term unemployment in grad school (which is closely related to structural unemployment problems). A lot of my thinking on this stuff (at least on the policy side) has been shaped by guys like, Layard, Nickell, and Jackson. This is an excellent book on it.
I might comment with more thoughts when I get a chance to read the paper.
Chris and the Ricardianoids (Wonkish)
1 hour ago