Unemployment Crisis

Unemployment crisis: The demand for goods and services is needed to achieve the growth that will boost the economy and provide jobs.

Unemployment is the number #1 issue facing the U.S. Economy. It is imperative that the government intervene to help reduce today’s staggering rate of unemployment. We will take a look at unemployment defined, the different types of unemployment and their causes. Throughout our analysis, it is crucial to reflect on historical trends and policies. Unfortunately, there is not a quick fix to the current unemployment crisis. It is a multi-faceted issue that the government needs to sort through and develop a comprehensive strategy appeals to both political parties.
According to the United States Department of Labor, Bureau of Labor Statistics, a person is classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work. Actively looking for work may consist of any of the following activities: * Contacting * An employer directly or having a job interview. * A public or private employment agency. * Friends or relatives. * A school or university employment center. * Sending out resumes or filling out applications * Placing or answering advertisements * Checking union or professional registers * Some other means of active job search.
When looking at the overall macroeconomy, several types of unemployment have been identified, including: frictional, seasonal, cyclical and structural. The last three of these types mentioned are considered “natural” byproducts in an economy where upward mobility is allowed, and expected to be part of the labor force even in boom. The presence of these types of unemployment also reflects labor markets responding to dynamic industries that change the composition of their output based on signals from the economic activity. [1] The first type of unemployment is frictional unemployment, which is strictly voluntary. The unemployed worker may choose to move from one job to another, possibly in search of better pay or more opportunities. For example, Mr. Johnson is a local banker who desires to be a Senior Vice President of Financial Markets. It might be necessary for him to seek other opportunities and gain experience in other areas of the banking industry to prepare for the next step in his career. [2] The remaining three categories of unemployment are strictly involuntarily. Workers have been displaced from their jobs for a variety reasons. Seasonal unemployment affects occupations that are only utilized during certain times of the year due to the nature of their work. For example, a construction worker in the Midwest may only be able to work during the warm months. A retail clerk at a department store may be hired to help out during the holidays. Both frictional and seasonal unemployment are generally short-term. [2] Cyclical unemployment occurs in the downsizing phases of the economy. The level of spending in the economy is insufficient to the purchase of goods and services. Many corporations downsize their labor due to reduced profitability. In periods of high economic activity there are more job vacancies and the unemployment rate decreases. Contrary, during periods of low economic activity, unemployment rates rise quickly. Employers may replace workers with machinery or build factories abroad where the cost of labor is less expensive. [2] Structural unemployment is directly related to cyclical unemployment and slows the economic recovery period. Structural unemployment is the impact of changes in the framework of the economy on the demand for labor. Structural change is caused by technological change, which usually means that the demands for some types of workers increases, while others find their skills are no longer relevant. For example, a bank teller is replaced by an automated teller machine or a retail clerk is replaced by a self-checkout counter. Structural change results in job loss in some occupations and gains in others. [2]
There is not a quick fix to the current unemployment crisis. It is a multi-faceted issue that must be reviewed from a historical perspective through the policies in existence today. The government needs to come up with a comprehensive strategy that is bi-partisan in nature and appeals to both parties. Most importantly, the bottom line is the demand for goods and services is needed to achieve the growth that will boost the economy and provide jobs.
The first proposal to reduce unemployment would be for the government to hire the unemployed. They could put people to work performing jobs that require manual labor. Similar to the 1930’s, the government hired people through Public Works Programs for jobs such as building roads, expanding the railway systems, and various types of manual labor positions.
The second proposal for the government would be to lower taxes and subsidize business investments. Lower taxes will promote companies to grow, creating more jobs, resulting in lower unemployment. Moreover, lowered taxes coupled with subsidies for business investments could result in companies that have gone abroad to bring business back to the United States. However, the downside of this proposal is that by lowering taxes, the government does not generate as much revenue. This results in less money available to put back into the economy.
Another proposal that could help boost the economy would be to address the housing crisis that has forced millions out of their homes. The government could allow homeowners who are underwater on their mortgages to become long-term renters. An independent appraiser could set the fair market rent for their home. Millions of homeowners who bought homes at bubble-inflated prices would see a sizeable reduction in their monthly payment. This program would free a lot of people from the prolonged stress and uncertainty of unmanageable debt and boost consumer demand.
The above proposals will help reduce the short-term unemployment issues. However, a very important aspect that also needs to be addressed is the long-term solution to unemployment. The government must find ways to increase spending on education. More importantly, college opportunities will provide the next generation with a better chance of avoiding poverty conditions.