Reducing unemployment

Reduce unemployment

Unemployment is a huge problem. Unemployed workers are experiencing financial losses, and causing a burden on tax payers providing benefits to the ex-worker. The national economy suffers because of lower output and instead of gaining tax money, losing it. People in disparity for money resort to crime and the list goes on and on.

According to the U.S bureau of statistics, the U.S has an unemployment amount of 16 million, with another 7 million under employed. That is the equivalent of the state of Pennsylvania and Connecticut combined. Millions of families in devastating crises and the huge loss in consumer demand. When the consumer demand is down, it discourages many business employers to hire or invest. A never ending cycle, only getting worse.

The barriers to fixing unemployment are that we have dug our selves in such a big hole during the recession, making it hard to recover. Millions of people lost there jobs right while the next generation of high school and college students were looking. Almost every idea to fix unemployment has a downside. The more money the government puts into trying to fix the economy, the more debt we seem to get in. The government can’t let our debt exceed our total GDP, and that’s a major thing they’re worried about. Well, that’s a problem. The longer they wait to try and fix it the worse it’s going to get before it’s too late. Fixing unemployment is much harder than it sounds. Mark Zandi, the chief economist at Moody’s Analytics builds data models of what he predicts will happen in the years to come with unemployment. He’s found with the methods that are going now; unemployment will drop to around 6.6% by the year 2016. Lower than it is today, but nowhere near less than 5% like it was before the recession. A publisher named David Kestenbaum decided to go interview Zandi. He challenged him to fix the economy in the world on his computer to get back down to 5% by 2016. Zandi tried many different ideas:
A long term deal of government tax increases+spending cuts = 6.1%
The euro surviving, Europe’s economy growing, and more export to Europe = 5.9%
Gas prices drop by $20 a barrel = 1/10th %

All of these ideas don’t drop it the rate enough. Next Zandi tried crazy ideas that most likely won’t happen but still tested them:
Boost home prices by 10%, lend out more money and raise consumer confidence = still not under 5%
A barrel of oil cut in half, Europe has a spectacular recovery, China keeps growing and Africa’s economy takes off=5.2%

The graph shows the rate from before the recession and 3 ways it can go into the future. After a catastrophic recession, it’s not always possible to fix things. The only thing we can hope for is a way to reduce it as much as possible

The idea I found that would be most effective is subsidizing employers, especially and mainly small business owners, who instead of laying people off at times of need, reduce the work hours to keep employment. It makes it worth not laying people off and the government funded money goes right into the economy. How this works? Employers have two options at low times of demand. Either fire workers or reduce hours. If the company agrees to reduce hours, the government subsidizes at least half of the lost hours pay. This allows the worker to keep there job at reduced hours, while the company doesn’t lose nearly as much. With the employee still having a job, he/she doesn’t need to be put on unemployment benefits. They will still be making money to put into the economy on things they need to survive without relying on the government.

Best case scenario this could work. Small businesses make up over 60% of jobs according to Derek Thompson. Subsidizing in these fields, as well as other large companies who qualify, in the long term can go a long way in preserving and creating new jobs.

There’s no guarantee that the subsidizing will directly work to keep jobs or create jobs, and the government may be at a loss if the business ends up still going bankrupt. Businesses could cheat the system and say they need to fire people just to earn money so they can reduce hours of work. The company would have to be advised very carefully. This would create more government jobs, but at the cost of the government and tax payers.

There’s really nothing to lose with this idea. The worst thing it just doesn’t work and the method is stopped being used. This idea has been put into action in other countries, the main one being Germany. After its recession, Germany used this plan to start up many of the small businesses that needed help to recover. Many economists have discussed this idea and really think it should be put into action.