Affiliated School;
Is the widespread unemployment experienced in recent years the worst in the U.S. history or have there been times in the past when the national unemployment rate was higher? What is the current unemployment rate in the U.S.? Has the unemployment rate risen or fallen over past year? What do you think the U.S. unemployment rate will be one year from now? Explain your point of view
Unemployment is a situation where people are out of work and are actively looking for work. There are several types of unemployment varying from structural, frictional, cyclical, disguised and temporary unemployment, they are caused by different factors that occur in the business cycle but at the end of the day the unemployed have no salary and cannot easily meet their daily needs (Aaronson, 2010). Unemployment tends to increase when there is a recession, this is because it is a point in time when there is low investment and low production and most companies either completely shut down or downsize their labourers in an attempt to remain open with the little revenue they are getting. It is a point in time where too little money is running after a lot of commodities. The United States has been going through a recession since the year 2001 and the effects are still being felt up to now (Rothstein, 2011).
The rate of unemployment is a figure that is acquired when we divide the number of the unemployed by the number of those who are still in the labour force and multiply by a hundred. The current rate of unemployment is said to be at 6%. Going by this unemployment rate we can easily conclude that this is not the highest that the American people have experienced in their past. This is because during the 1982 and 1992, the unemployment rates were 7% and 9% respectively. But before we come to a conclusion let us first of all get all the facts straight, there is a difference between those who were considered as unemployed in 1982 and 1992 and those who are considered unemployed currently. This is because there is discretion in the unemployed (New York Times late Edition, 2013).
The government has easily founds a way of hiding the unemployed under the social security programme that states that those who are unemployed due to disability, either physical or mental, should receive some amount of money from the program. According to the government these people should not be termed as unemployment because they receive some amount of money each month, this can easily be termed as income. However these people should fall under the list of the unemployed because in real sense they are not working nor do they pay taxes to the government. If these people would be included in the number of the unemployed as they were in the previous years, then the current rate of unemployment would be higher than it is currently being stated. It could be almost 8%, and this would be the highest rate of unemployment that America has experienced in the last twenty five years.
People, who would normally be counted as unemployed, are now in the disability list. There has been a massive increase in this list with close to 50%, from 1999 to 2008; this is because congress started loosening the criteria required for one to be in this list. Most of the people are those with back pains and some mental disorders but these cannot completely render them unable to work. This means that the government is hiding the real truth behind this program (New York Times late Edition, 2013).
The government would also like the public to believe that most of the unemployed people are on short term unemployment and find other jobs within a short time because the economy is apparently improving; this is not the true situation on the ground. This is because during the previous recession it would take a people on average sixteen weeks to find another job, during this recession it takes on average thirty nine weeks for someone to find another job. The labour market has also adopted a new strategy whereby, they would rather employ someone who has been out of work for a shorter time and lacks proper experience rather than hire someone with the proper experience but has been out of work for a long period of time. This means that the more you are out of work, the higher your chances of not securing another job.
The recession and its effects have lasted for a long time since 2001 to currently. This is mainly because we are not dealing with the correct numbers and therefore the policies and strategies put in place are meant to solve a problem of lesser magnitude than the one actually being experienced in America. The first thing that we notice is that the current government fiscal policy has dedicated a lot of the government funds into facilitation and maintenance of the social security program, this is due to the increase in the number of people who qualify to this program. If this money can be used for other purposes like investment into physical and human capital then the economy would increase. This is mainly because the main solution to unemployment is for the government to invest in employment generating sectors of the economy. This means incentives in the form of physical capital like improvement in infrastructure in uniform would increase the labour required and decrease unemployment. Human capital on the other hand requires improvement in the education system by employing more teachers and building more schools that are readily equipped to produce full baked graduates who will perform with professionalism (Rothstein, 2011).
If the current conditions prevail then the rate of unemployment will increase by one year from now. This is because the economists are dealing with wrong statistics, seconds it is due to the poor fiscal policy that is currently being implemented, which is catering for the current expenditure and not for the future economic situation. The government is however trying to improve the situation by offering reduced interest rates in order to attract more investments. Increase in the level of investment will increase the labour force required in different sectors of the economy and will make this country to come out of the recession. This is because both aggregate demand and supply will increase and more money will be running after more goods. But the low interest rate should be a temporary strategy, this is because low interest rates discourage savings and loans from banks are given from these savings. This means if the interest rate is not raised again within the cause of the year, then there will be no more money to give out as loans for investment and the economy will dive back again into recession.
Long term unemployment has become a prevalent issue in America currently as it is experiencing the after effects of a recession, this has made the recession to be highly dependent on unemployment insurance and more and more public funds are channelled to the insurance companies (FRBSF Economic Letter 2013). This money can be put to more profitable uses if unemployment would decline as the economy is said to be rapidly growing.
References
FRBSF Economic Letter 2013- February -03, Long Term Unemployment
New York Times late Edition (East Coast), 2013, ProQuestDocuments, The Unemployment Myth, Unemployment; Economic conditions; Disability pensions; Economic statistics, New York Times.
Aaronson, Daniel, Bhashkar Mazumder, and Shani Schechter. 2010. “What Is Behind the Rise in Long-TermUnemployment?” FRB Chicago Economic Perspectives 2Q/2010, pp. 28–51.
Rothstein, Jesse. 2011. “Unemployment Insurance and Job Search in the Great Recession.” Brookings Papers on Economic Activity 103 (fall), pp. 143–209.
