The Unemployment Pandemic: Addressing America's Jobs Crisis

Thank you for the opportunity to testify on the unemployment situation and the critical role that unemployment insurance plays in helping to protect workers who have lost their jobs and also in strengthening the overall economy. I am a Professor of the Practice of Economic Policy jointly at the Harvard Kennedy School and in the Economics Department at Harvard University. I am also a nonresident senior fellow at the Peterson Institute for International Economics. I do research and teaching on a wide range of economic policy issues.

My testimony makes eight points:

1. The unemployment crisis is severe.
2. Unemployment insurance has played a critical role both for the workers who have lost their jobs and for the economy as a whole.
3. Unemployment insurance has both positive and negative effects on labor supply, and it can have positive effects on labor market matches.
4. Jobs are currently constrained primarily by lack of demand by employers not by lack of supply of people interested and willing to work.
5. Expanded unemployment insurance should continue and adjust with changes in the unemployment rate.
6. The abrupt expiration of any form of expanded unemployment insurance at the end of July would create problems both for those workers directly affected and for the economy as a whole, reducing GDP by about 2½ percent in the second half of this year—more than a typical year’s worth of economic growth.
7. The unemployment insurance system had major shortcomings before the COVID-19 crisis, and it should be permanently reformed.
8. Much more is needed to protect jobs, create jobs, and foster economic recovery.

The remainder of my written testimony expands on these eight points.