How to Lower the Unemployment Rate

By Covering Business     March 14, 2012

Joblessness begets joblessness.

The unemployment rate has remained above 8% for the last three years, the longest period at that level since the Great Depression, and the Congressional Budget Office projects it will remain there until 2014. The reasons: buckling demand for goods and services and a workforce with increasingly dated skills.

So, what now? The CBO looked at a variety of potential policy responses to the problem and conducted a cost-benefit analysis of each one. It published its recommendations in a February report.

Here are the two strategies the CBO said would be the most cost effective:

• Put more money in the pockets of people most likely to spend it (e.g. expand tax credits to lower-income workers or offer more aid to the unemployed).

• Lower the cost to businesses of adding more workers (e.g. cut payroll taxes).

Read the full study (PDF).

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