Unemploymentin the U.S
Therate of employment and unemployment is, with no doubt, one of themost explored and watched indicators in any country. This isespecially considering the immense bearing it has on other aspects ofthe society including health and security among others. Indeed, it isone of the marks of performance, success and efficiency of anygovernment in meeting the needs of the people and enhancing theirlives in the short-term and the long-term.
Unemploymentunderlines a situation where an individual who is actively lookingfor a job is incapable of finding work. This is often used inassessing the health of any country’s economy. Individuals areclassified as unemployed in instances where they do not have a jobdespite their current availability for the same and actively lookingfor it in the last 4 weeks.
Thereare varied forms of unemployment in any economy, each of whichresults from specific or different circumstances. One of the keyforms of unemployment is the frictional unemployment, which emanatesfrom the difference in the time individuals take to move from one jobto the other. It goes without saying that frictional environment cannever be eliminated considering that there is no perfect informationand that individuals take time before they can find work (Foleyet al, 49). More often than not, frictional unemployment is generallycategorized under voluntary unemployment since the workers usuallyprefer to remain unemployed instead of getting the first job thatcomes their way. Of particular note is the fact that frictionalunemployment does not necessarily come off as inefficient especiallyconsidering that there are numerous instances where individuals arebetter off waiting for the right job particularly considering theirlevels of education (Foleyet al, 48). On the same note, it underlines the fact that nothingmuch can be done to eliminate or even reduce this form ofunemployment apart from increasing the efficacy of informationprovision so as to lower the time needed for individuals to look andget new and fitting jobs. Indeed, full employment may be impossibleat any given time since some workers will persistently be in theprocess of looking for other jobs or even changing them.
Inaddition, there is the voluntary unemployment which occurs ininstances where workers select not to work within the presentequilibrium rate of wages. Indeed, there are varied reasons whyworkers may choose not to take part in the labor market and,therefore cause voluntary unemployment including high income taxrates and excessively generous welfare benefits. Scholars haveacknowledged that there is a high likelihood for the occurrence ofvoluntary unemployment in instances where the rate of equilibriumwages is far below the wages that is required to give individuals anincentive to provide their labor.
Further,there is the structural unemployment which comes up in instanceswhere there exists a mismatch in the industrial or demographiccomposition pertaining to a local economy. For instance, there is ahigh likelihood for this type of unemployment to occur in placeswhere the jobs available are technically advanced whereas the workersin the region are deficient of the appropriate knowledge and skillsnecessary to perform the tasks or rather in cases where there existsworkers but there are no jobs that they can fill (Foleyet al, 56). This has been seen particularly in the contemporary humansociety where the advances in innovative technologies have resultedin the decline of the older industries, whose elimination has beennecessitated by the need to remain competitive and produceefficiently. For instance, in the United States newspaper industry, alarge number of newspaper production workers, editors and reportershave lost their jobs in the last one decade as the newspapers’conventional sources of revenue were eclipsed by the web-basedadvertising, while the circulation took a dip as a larger number ofconsumers obtained their news from the internet and television(Farrell33). In essence, the laid off journalists became part of the numberof individuals within structural unemployment. Similarly, smallfamily farmers may be incapable of competing with the wealthyagribusinesses, in which case they often leave the lands and get intothe workforce. Once they are incapable of finding jobs, they wouldadd to the statistics of structural unemployment just as is the casefor workers whose employers relocate their operations to countriesthat have low wages.
Moreover,there is the cyclical unemployment which comes into play in instanceswhere there is insufficient demand for services and goods at large soas to offer jobs to every other individual who is seeking one.Keynesian economics underline the fact that it is an extremelynatural result of “boom and bust” business cycles that isimplicit in capitalist economies. In instances where businessescontract in the course of a recessionary cycle, workers are bound tolet go, thereby increasing the level of unemployment (Farrell34). Once the unemployed consumers have lower amounts of finances toexpend on services and goods, it becomes imperative that businessescontract even further, thereby resulting in more layoffs, as well asmore unemployment. This cycle would persist to spiral downwards untilsuch a time when the situation is enhanced by outside forcesespecially through some form of government intervention.
Anexamination of the causes of unemployment would be crucial to comingup with the appropriate strategies for eliminating or at leastlowering it. Of particular note is the fact that there are far muchmore mechanics than explained by the varied forms of unemployment.
Oneof the most prevalent causes of unemployment is the immobility oflabor. The immobility of labor results in an increase in structuralunemployment. Indeed, the industries that are experiencing growth andrequiring more labor do not necessarily capable of employing orabsorbing the same workers who were displaced by the decliningbusiness entities. There are, however, varied forms of immobility oflabor including occupational, industrial and geographical immobility.Industrial immobility comes into play in instances where workers areincapable of moving to other industries, for instance, moving fromthe insurance industry and obtaining employment in the motor industry(Farrell42). A large proportion of unemployment in the United States may beblamed on the industrial immobility since the increased growth ofservice industries coupled with the decline of industries in themanufacturing category has enhanced the necessity for mobility.Geographical immobility, on the other hand, occurs in instances whereworkers are unwilling and incapable of moving from one region toanother (Foleyet al, 61). This is particularly worsened by the high variation ofhouse prices in varying regions, particularly considering that it canbe extremely difficult or even impossible for an individual to sell ahouse at a particular area and go ahead to purchase an equivalent onin another city or region. Geographical immobility may also resultfrom other factors including strong family and social ties or eventhe unwillingness of individuals to interrupt the education of theirchildren by changing schools. This may also be compounded by theimmense stress pertaining to moving places. In the case ofoccupational immobility, it is noted that a large number of workersmay find it difficult to go to another job in the same or anotherindustry. For instance, there is immense difficulty in having adoctor retrain so as to become a dentist (Farrell48). Occupational and industrial immobility has a high likelihood ofoccurring in instances where skills cannot be transferred betweenjobs and industry. This may also emanate from information failuresince workers would be immobile as a result of deficiency ofinformation pertaining to the availability of the suitablejobs(Farrell53). Labor market immobility often results in the creation ofregional unemployment, a form of structural unemployment, whichunderlines the fact that a change of the industry structure leavessome individuals incapable of responding through changing theirlocation, industry and job, thereby remaining permanently ortemporarily unemployed. Immobility may also result in an increase inlabor costs as it becomes necessary for firms to give their workerssome incentives so as to relocate to other areas.
Inaddition, the rising unemployment may be blamed on the reduction ofjob creation. Indeed, scholars have noted that in the course ofeconomic downturns, it is common for job creation to fall in spite ofthe persistent growth in the labor. This means that jobs become moredifficult to come across as unemployed individuals remains the samefor a longer period of time. Research has shown that it is notincreased job losses but decreased job creation that would offer anexplanation for a large proportion of the increase in the rate ofunemployment in the course of recessions (Farrell53). It is noteworthy that during such times, not only is there arise in the rate of unemployment but also the average amount of timethat workers would remain unemployed. Indeed, the number ofunemployed workers at any time is in almost perfect unison with theaverage amount of time that workers remain unemployed. For instance,during the height of the recession in 2001, the rate of unemploymentincreased by 47 percent, while there was a 39 percent increase in thelength of time an individual remained unemployed (Foleyet al, 63).
Onthe same note, it is well acknowledged that the increase inunemployment may have resulted from the enhanced cost advantages ofother countries such as China. Researchers have, in fact,acknowledged that China as a country is taking up a large number ofjobs from the United States (BoeriandOurs73). This is particularly as a result of the immense cost advantagesemanating from the ultra-low cost of labor, which makes a largenumber of companies to move from the United States into China. Thisis because companies are seeking to reduce the costs that they incurin their manufacturing processes, an aspect that is well catered forin China as a result of the abundance of cheap labor and availabilityof technical expertise at a low cost. Unfortunately, a large numberof people cannot relocate to China, leave alone taking lower wages ina foreign land, which means that there would be an increase inunemployment (Farrell54).
WhatActions is the Government Taking?
Ininstances where the rate of unemployment becomes excessively high,often above 6%, the federal government usually steps in and attemptsto create more jobs. This comes as extremely crucial in instanceswhere the high unemployment rate is cyclical, stubbornly long-termand exists in numerous segments and industries in the economy. Thetwo fundamental techniques that any government including the UnitedStates may employ in its effort to create more jobs revolve aroundthe modification of its fiscal policy, as well as changes to themonetary policy.
Themonetary policy is under the control of the Federal Reservegovernment of the United States, which is an autonomous central bankthat is authorized to regulate the supply of money in the country. Inorder to trigger the creation of more jobs in the economy, the Fedmay take two different actions (BoeriandOurs77). First, the Fed could lower the rates of interest in the entireeconomy thereby making it cheaper for businesses and banks to accessloans. This would allow or encourage banks to increase theirinvestments while businesses would expand thereby stimulatingvitality in the economy and creating an increase in the capacity ofbusinesses to hire more workers (BoeriandOurs82). A decrease in interest rates would also result in lowerindividual costs of borrowing thereby encouraging more consumers tospend higher amounts of money in the economy. On the same note, theFed can increase the availability and amount of money in circulationthrough the selling and buying of varied financial instruments suchas bonds and treasury bills (Farrell59). This would allow for increased investment, where the entry ofhigher amounts of money in the economy would trigger an expansion ofcommerce, thereby allowing businesses to hire more workers.
Inaddition, the government may use fiscal policy in instances where theexpansionary monetary policy by the Feds is insufficient to reversethe downward trend of the economy. The use of varied fiscal policiesis aimed at combating the persistent high unemployment levels. Inthis regard the government may reduce taxes for individuals andbusiness entities so as to enhance and stimulate growth in theeconomy (BoeriandOurs86). On the same note, it may increase its expenditure in certainindustries so as to increase employment, or even higher individualsto build varied things such as mass transit systems or even offerservices such as repair and upkeep of infrastructure. On the samenote, it may offer some benefits to individuals who are unemployed,which would then be used on basics such as housing, clothing andfood, thereby driving manufacturers and retailers to employ morepeople.
Inconclusion, unemployment is always a cause for concern in any economyin the globe. This is especially considering that it has a bearing onother elements of the economy including security and even overallgrowth. There are varied causes for unemployment in the contemporaryUnited States including competition from China, increased relocationof companies, as well as incompatibility between the skills ofindividuals and the available jobs. Nevertheless, the highunemployment rates may be credited to the fact that the number ofjobs created every year are far below the number of individuals whoare joining the labor market. Nevertheless, the use of monetary andfiscal policies by the government would allow for increasedemployment rates.
Boeri,Tito, and J C. Ours. TheEconomics of Imperfect Labor Markets.Princeton: Princeton University Press, 2008. Print.
Farrell,Diana. Offshoring:Understanding the Emerging Global Labor Market.Boston, Mass: Harvard Business School Press, 2006. Print.
Foley,Lynn H, Donna K. Ginther, and Madeline Zavodny. Technology,Growth, and the Labor Market.Boston, Mass. [u.a.: Kluwer Acad. Publ, 2003. Print.