According to the released Bureau of Labor Statistics, the rate of unemployment in United States has increased over at an alarming rate. Approximately 11.3 million people in the country are unemployed. This is approximately 7.3 percent of the national population. This has affected the economy of the country negatively. According to the report, the number of people who were temporarily laid off had risen by approximately 448 000 people. The statistics revealed the unemployment rates for various groups of people in the country. The rate of unemployment among men was at 7.0 percent and about 6.4 percent among women. The increase in the rate of employment among women came as a result of increase in women empowerment programs countrywide. The unemployment rate was highest among the teenagers whereby approximately 22.2 percent of the teenagers did not have jobs. This can be attributed to their lack of skills and failure in implementing better youth empowerment programs. Unemployment rates among the racial groups differed significantly. It was highest among the blacks whereby approximately 13.1 percent of the blacks were unemployed. The rate was lowest among the whites where only 6.3 percent were unemployed (U.S. Bureau of Labor Statistics).
Several factors have led to the increase of unemployment in the country. The poor performance of the American economy has contributed to increased rates of unemployment in the country. One of the most significant landmarks that have led to the increase in the rate of unemployment is the recent economic crisis in the country. Different sectors of the economy have portrayed different trends of unemployment. The leisure and entertainment sector was one of the sectors that were highly affected by the economic crisis. This led to high levels of unemployment in the sector. The retail and marketing sector also lay off a significant number of workers during the economic crisis. In the health sector, close to half a million people have been temporarily laid off following the recent government shutdown. There has been an increase in part time jobs leading to the reluctance of companies to employ people on permanent terms.
The failure of companies to invest their profits in the employment of people has contributed to the increase of unemployment in the country. Many companies in the country have embarked on other ways of spending their profits other than increasing the number of workers. After the economic crisis experienced in the country, many companies are cautious in increasing the number of staff. The cost of maintaining the staff in such times affects the companies negatively. This has led to high levels of unemployment in the country. Companies are seeking for an assurance of the stability of the economy before embarking on recruiting new workers.
Another reason of the increase in the number of unemployment in the country is the increasing trend of the government to lay off workers. Both the central and local governments have opted to lay off many workers in recent years. The hard economic times have forced many government institutions to lay off workers instead of seeking other ways to improve the economy. This trend has encouraged people in the private sector to emulate this example fearing the hard economic times ahead. The high rate of unemployment has discouraged people from seeking jobs. They have developed the notion that jobs are hard to find in the modern society.
Various types of unemployment have led to high rates of unemployment in the United States. They include structural unemployment, frictional unemployment, involuntary, cyclical, and voluntary unemployment. Statistics reveal that structural unemployment accounts more for the high levels of unemployment in the United States than cyclical unemployment. Structural unemployment arises due to technological or industrial changes in the employee’s area of specialization while cyclical unemployment arises due to demand for jobs going up and down, with the season of business such as peak and off-peak. Structural unemployment occurs when the job seeking population does not move quickly to vacant jobs due to skill mismatch. The employers have job vacancies, but the employees cannot meet the skill required to fill the vacancy with the available job. This mismatch results to long-term unemployment in the in the United States. Structural unemployment rate is evident in construction, finance, and real estate sectors because of the financial crisis in the United States. The workers who used to work in those sectors cannot be transferable easily to the growing sectors such as health care and education because of their mismatched skills. Homeowners in the underwater mortgages are unable to move to the growing areas due to housing burst in the sector. The mismatches between the workers and job openings in these sectors leave many workers unemployed leading to the high rate of national unemployment.
Although structural unemployment is more identified with the unemployment rate n the United States, cyclical unemployment also plays a part in the unemployment process. Many people get employment in the boom period especially in the tourism, farming, and construction sectors. During such seasons, almost all job-seeking people get employment opportunities. After the season is over, there is low demand for services, products, and these results to few workforce requirements. Many of the employees working in these sectors are retrenched, and this leads to mass unemployment. Many businesses rely on seasonal booms and recession in the United States. These businesses produce and distribute their products in certain seasons and this makes cyclical unemployment rampant, in the United States.
The high rate of unemployment in the United States is more attributed by involuntary unemployment rather than voluntary unemployment. Involuntary unemployment refers to when people looking for jobs are willing to work with the prevailing wage rate, but they cannot be employed. Voluntary unemployment occurs when the job seekers wage rate is higher than the employer’s wage rate. Involuntary unemployment in the United States is caused by; high population, high job competition, and low education and technological levels. The rising population in the United States has contributed to involuntary employment. The United States federal government has been unable to create jobs to match the increasing population making many people to lack jobs. Levels of education in the United States are low, and this has made it hard for people to match the advancing technological sector. This has made many people to lack employment in the developing companies in the states. Low demand for workers in various industries in the United States causes many people to remain unemployed against their will. There are few cases of voluntary unemployment in the United States due to high job competition. Government offering generous unemployment benefits to the unemployed population attributes to the cases of voluntary unemployment. This makes a number of people opting not look for jobs to enjoy the government benefits. Involuntary unemployment counts for a large portion of unemployment in the United States population. This is because the existing job opportunities in the job market are less than the job seeking population. This has also been propelled by the high competition for jobs (Hooper, Joseph, and Aaron Zalewski. 73).
Frictional unemployment results due to people shifting from one job to another. Frictional unemployment in the United States is a common cause for the high rate of unemployment. Many factors contribute to frictional unemployment in the United States. Low payment in the job markets highly attributes to frictional unemployment because people keep looking for new jobs to be paid more. Long working hours in various companies make employees leave their current working positions. They instead look for new vacancies where they do not work for long hours. Skills mismatch also makes workers keep on searching for jobs as they fail to keep up with the growing trends in their respective jobs. Frictional unemployment is highly experienced by graduates, as they are new in the job markets and take time to find appropriate jobs within their desired wage rates. Job attitude by the people in the United States highly attributes frictional unemployment (Hooper, Joseph, and Aaron Zalewski 79). Many people seeking jobs look for white-collar jobs. When these jobs are not available, they are not willing to work on the available casual ones. This attitude on jobs results to unemployment because people will keep on searching for a job. Some companies and industries contribute to frictional unemployment type by providing low wages. Many people looking for employment keep searching for companies that are well paying and this process renders high unemployment rates in the United States.
Impact of unemployment in Modern America
The high rate of unemployment in the United States has many impacts on the economy, demographics, and global competition. Unemployment also has psychological effects on the people of America. Unemployment makes people be involved in activities such as drug abuse and crimes that do not help the development of the country. The high number of people involved in these activities has led to a slow rate of economic growth in the United States. Lack of jobs has a negative impact on the economy because it means the government cannot get the desired revenue from these people’s salary tax. Unemployment also contributes to low global competition with other developed nations. The high rate of unemployment makes America face high competition with nations such as Canada that has a low level of unemployment. Unemployment in the United States has led to the psychological impact on families and the community in general. The children of the unemployed parents may lack proper education because they cannot afford school fees for their children. Lack of jobs leads to distress, and this affects the family well-being. Lack of employment causes drug abuse amongst the youths, and this affects community development (Kriner, Douglas L., and Francis 82). Lack of jobs reduces resources leading to poor housing, transport, medical care, and unfunded education institutions. There are incidences of increased crime rate due to poor education. Unemployment also creates an imbalance amongst the people. The unemployed people in the neighborhoods of the employed ones feel a sense of unfairness. This at times results to discrimination especially between the children of the involved parties.
Solutions to the rate of unemployment
One of the most rampant for of unemployment in the country today is frictional unemployment. Many people have voluntarily quit their jobs in search of “greener pastures”. The cause of this trend is the increase in unhappiness in their jobs. One of the most effective ways to combat the rising rates of unemployment is to reduce the number of people quitting jobs with the hope of finding better jobs. The government can achieve this by increasing the minimum wage rates. Many people who quit jobs in the country are in search of better-paying jobs. The increase in the cost of living has increased demand for better pay. Increasing the minimum wage and successive wages of people will ensure that people have the ability to cope with the rising cost of living. It will also reduce the number of cases of frictional unemployment (Kriner, Douglas L., and Francis X. Shen 97).
The government also needs to promote education to ensure that workers quit when the time to quit is right. Many people end up jobless because they quit a certain work before they have gotten another work. Education to these workers will enable them quit working in place only after they have another job to take up. Education will also help in creating good relationships between employers and employees. One of the major contributors of frictional unemployment in the country today is the poor relationship between employers and employees. Education should target both employers and employees. It will help in combating prejudice to the employees and thus improving the relationship between the employees and their employers. Companies should increase their flexibility to accommodate different people.
The other significant cause of unemployment in the country is the mismatch of skills required for various jobs and the jobs available. In some cases, many people in the country have no jobs because they lack the required skills and qualities that match certain jobs. The industries and companies have opted for mechanization instead of human labor. This has been one of the main causes of unemployment in the country today. One of the ways to deal with this employment is to ensure that all education offered in the country equips people with the ability to fit into various jobs in the country. The education system should equip people with the skills to handle the changes technology thus, enable people to fit into various jobs in the country. The government should put policies that enable companies to balance the use of machines and human activities. The government should put policies that ensure that companies balance the use of machinery with human employment. Companies should also ensure they carry out regular training sessions to ensure that they equip the people relevant skills to match the required skills.
Another factor that has led to the increase of unemployment in the education sector is the immobility of employees. Many people remain jobless because they cannot move to regions where jobs are available. This can be attributed to family ties and housing issues. The lack of proper housing in some regions has discouraged people from working in certain areas where jobs are available. In cases where spouses cannot find jobs in the same place, unemployment of one of the spouses is inevitable.
Cynical unemployment is also prevalent in the society today. When this unemployment occurs, the number people with skills for particular jobs exceeds the number jobs available that field one of the major solutions to this unemployment is encouraging entrepreneurship. People with certain skills and qualities should not only depend on employment as their only source of revenue. They should engage in entrepreneurial activities that will help in creating jobs for themselves. The government and financial institutions may help in providing capital to these people to enable them start their entrepreneurial ventures. Entrepreneurship helps one get a job for himself and create jobs for other people. These institutions should also offer guidance to the new entrepreneurs to ensure that they succeed in their entrepreneurial ventures (Kriner, Douglas L., and Francis X. Shen 45).
Another way of increasing entrepreneurship and reducing the rate of cynical unemployment is through education. The education system has failed to provide learners with entrepreneurial qualities that would help people fit into various job markets. The failure of the people to acquire the correct entrepreneurial qualities during their learning has contributed to the rise in joblessness. The government should also reward institutions and companies that offer employment to people in the country. Rewards and recognition to companies that offer employment to many people in the country will encourage companies and industries to create more job opportunities. This will help curb unemployment in the country.
Voluntary unemployment occurs when a person is unemployed because he cannot find a job of his choice. Voluntary unemployment is also prevalent in the modern society. Many people remain unemployed because they cannot find their dream jobs. In other cases, the available jobs do not meet the expected wages of a person. This has led to the increase of unemployment in the modern society. Education should equip the learners with qualities to enable them work in various environments. People should learn the importance of patience and perseverance in various positions before seeking for better jobs.
Involuntary unemployment takes place when a person is willing to work at any conditions and wages but remain unemployed. A high number of people in the modern society are involuntarily unemployed. For various reasons, these people cannot find jobs the modern market. The solutions to this group of people depend on the causes of unemployment. The main solution to people who are involuntarily unemployed is entrepreneurship. Entrepreneurship will enable them create employment for themselves and their colleagues.
Corruption is also another cause of unemployment in the country. Many skilled people remain unemployed because of the high rates of corruption in some companies. Some people have offered jobs to unqualified people because of their family relation and other corrupt activities. This has denied employment opportunities to people who have the qualifications to these posts. In other cases, people have been managers of companies have failed to meet the employment standards required and opted to spend the money set aside for more employments in wasteful endeavors thus increasing levels of unemployment. Fighting against corruption is one of the ways of ensuring that unemployment is reduced in the country.
It is the responsibility of both the government and the private sector to increase the employment levels in the country. The citizens should also equip themselves with the skills and attitudes that will help them fit into the job market.
“Employment Situation Summary.” U.S. Bureau of Labor Statistics. U.S. Bureau of Labor Statistics, 18 Feb. 2014. Web. 18 Nov. 2013. <http://www.bls.gov/news.release/empsit
Hooper, Joseph, and Aaron Zalewski.Advanced charting techniques for high probability trading the most accurate and predictive charting method ever created. Hoboken, N.J.: John Wiley & Sons, 2013. Print.
Kriner, Douglas L., and Francis X. Shen.The casualty gap: the causes and consequences of American wartime inequalities. New York: Oxford University Press, 2010. Print.
Essay on ECONOMICS: The Challenges of Unemployment
Unemployment is a form of manifestation of macroeconomic instability expressed in excess of supply over demand of labor, when the economically active population is not engaged in economic activity in the country despite active search for job and willingness to work. Obviously, with the incomplete use of the available manpower resources economic system works not reaching its production capacity limits, and any economic growth in the country is out of the question. Thus, unemployment entails a significant reduction in potential gross product and national income. According to Okun’s law the increase in actual unemployment by 1% compared to its natural rate leads to 2.5% loss of GNP, which further manifests in the reduction of total consumption, savings and investment, general increase of social burden and uneven distribution of unemployment costs among different population groups, and overall reduction of households’ welfare (Verhaar & Jansma, 2014, p. 82). In addition, the rise in unemployment causes worsening of crime situation, worsening of growth dynamics of public interest in labor, as well as loss of qualifications of able-bodied citizens.
By the end of 2013 there were nearly 202 million unemployed in the world, that is, about five million more than in the previous year (Nattrass, 2014, p. 90). This especially harmed 74.5 million young people aged 15 to 24, which is a million more than in the previous year (Nattrass, 2014, p. 91). If governments continue to do nothing and do not deal with the crisis of youth employment, stagnant unemployment and other problems of the labor market, this may lead to further social tensions. Thus, unemployment is currently one of the most serious challenges that contemporary economies must overcome. Further in this paper, we will examine the main types of unemployment and produce recommendations on preventing the development of factors causing them.
Major types of unemployment
All working-age population that is not working, but is looking for job is considered unemployed. The criteria for distinguishing the types of unemployment, as a rule, are the reasons for it.
Thus, involuntary or unemployment of expectations occurs when an employee is able and willing to work at a given wage, but cannot find a job. The reason is the imbalance in the labor market due to the inflexibility of wages (due to laws on minimum wages, trade union demands, raising wages to improve the quality of labor, etc.). When the real wage is above the level corresponding to the balance of supply and demand, labor supply exceeds demand. Number of applicants for a limited number of jobs increases, and the chance of real employment decreases, which increases unemployment rate. Varieties of involuntary unemployment include cyclic (caused by repetitive production decline in the country or region), seasonal (depends on fluctuations in the level of economic activity during the year, characteristic of some specific sectors of the economy), and technological (related to mechanization and automation of production, which resulted in part of labor power becoming superfluous, or requiring a higher skill level (Verhaar & Jansma, 2014). In turn, voluntary unemployment is related to the reluctance of people to work, for example under conditions of reduced wages. Voluntary unemployment increases during economic boom and decreases in recession. Also, there is a concept of “unemployment trap”, when a person’s income do not differ much, regardless of whether one works or not (due to deprivation of the right to appropriate compensation and fringe benefits, as well as significant payments of insurance premiums, etc.), which reduces a person’s interest to employment (Verhaar & Jansma, 2014, p. 128).
One of the key types of unemployment is structural unemployment which is caused by structural changes in the economy, such as changes in the structure of demand for products of different industries, consumer goods and production technologies, elimination of obsolete industries and professions (Nattrass, 2014). As a result, the structural mismatch occurs between the skills of the unemployed and demands of the available vacancies. This means that people who have a profession and skill levels that do not meet modern requirements and current industry structure, being laid off, cannot find a job. Together with frictional unemployment, structural unemployment forms a natural unemployment, which is compatible with the state of full employment, and the actual amount of production in this case is equal to the potential (Verhaar & Jansma, 2014, p. 98). Here, frictional unemployment implies unemployment associated with the process of changing jobs, i.e. voluntary abandonment of one job and the search for another. Frictional unemployed include the dismissed or ones who quit their job, pending restoring at previous job or having found a new job, but who have not started it. Frictional unemployment is a phenomenon not only inevitable but also desirable, as it promotes a more rational allocation of labor and higher productivity.
In addition, OECD experts (2010) distinguish institutional unemployment emerging in the case of state or unions intervention in setting the size of wage rates that differ from those that could be generated in the natural market economy, as well as marginal unemployment of poorly protected population layers and the lower classes, in particular unemployment among women, youth unemployment in a group of 18-25-year-olds, and unemployment among people with disabilities. Another serious problem is the presence of hidden unemployment as opposed to registered one, when the unemployment of potential workers is not reflected in official statistics. For example, as a result of production decline, labor force is often not used fully, but is not dismissed either. In latent unemployment, formally employed actually become unemployed persons. In addition, there is a separate layer of individuals wanting to work, but not registered as unemployed. Partly, hidden unemployment is represented by people who stopped looking for work (Verhaar & Jansma, 2014, p. 156).
The reduction of unemployment is an extremely challenging task namely due to the existence of a variety of its types. Theoretically, it is not possible to develop a common way of dealing with unemployment, and therefore any state is forced to use different methods to solve this problem, some of which are discussed below.
Common to all types of unemployment measures include creation of new jobs by stimulating small and large businesses, and establishment of labor exchanges and other types of employment services (Verhaar & Jansma, 2014; OECD, 2010; Blustein et al., 2012). However, in general, effective implementation of methods to overcome unemployment requires identifying the factors that determine the supply and demand of labor for each particular form of unemployment.
Thus, for example, measures to deal with frictional unemployment primarily include the improvement of the information supply system for the labor market and creation of special services for this (OECD, 2010, p. 41). It is obvious that if the unemployed does not have information on existing vacancies, one cannot get a job. To solve this problem there are labor exchanges, employment centers and other similar private or public organizations. Equally important are the systematic studies of the labor market, including the study of the structure of employment in the labor market of public entities, registered unemployment problems, problems of interaction between employees and employers, employment problems of certain categories of the population, organizational problems of employment service and its individual directions. In addition, various job fairs, open days and similar events can be held to increase awareness.
Fighting structural unemployment involves transformation of more complex mechanisms like providing opportunities for training and retraining of the unemployed, as well as protectionist measures to protect the domestic market (Blustein et al., 2012; OECD, 2010). In particular, protectionist measures help protect undeveloped and inefficient sectors of the economy of the country, reducing unemployment caused by the defeat of the enterprises in the competition. At the same time, as Blustein et al. (2012, p. 349) rightly note, this eventually reduces the competitiveness of national companies, undermines international trade, and monopolizes production leading to various negative consequences for the economy. Therefore, more efficient are the methods of economic diplomacy that also focuses on the development of the domestic market, but alongside is promoting national products in the foreign market, supporting investment projects in other countries and attracting foreign investment, providing the best terms of trade in foreign markets (McBride & Mustchin, 2013; OECD, 2010).
In addition, the development of vocational education and training of public services allows workers to improve their skills, thereby adapting them to changes in the labor market. Particular attention should be paid to scarce occupations and professions (McBride & Mustchin, 2013, p. 346). The disadvantage of this method is that it does not give quick results and increases inequality among workers, since the probability to get education increases in accord with the current job position (Nattrass, 2014, p. 92). Besides, unemployment caused by the decline in production and a sharp increase in the working population cannot be reduced in this way (OECD, 2010, p. 45).
The major means of combating cyclical unemployment are implementation of stabilization policy aimed at preventing the deep recessions of production and, consequently, mass unemployment, as well as creation of additional jobs in the public sector (McBride & Mustchin, 2013; Blustein et al., 2012). Direct job creation through public spending is often formed by execution of public interest work, for example, in the field of environmental protection, road and railway construction, clearing debris from places of residence and so on. This approach is part of the Keynesian model of the economy, and it proved to be effective during the Great Depression in the United States. In total, in the 1933-1939 in the United States the number of employees in public works for the construction of canals, roads, and bridges reached 4 million people (Verhaar & Jansma, 2014, p. 183).
An important aspect in overcoming unemployment, particularly voluntary and hidden, is holding indirect labor market policy aimed at the formation of a certain attitude to unemployment in society, and smoothing its negative effects, as McBride and Mustchin (2013, p. 343) mark. Administrative employment regulation should include the ensuring of legal protection of employees, using of alternative forms of employment, developing unemployment insurance system, simplifying registration of the unemployed at employment services, strengthening guarantees in terms of payment for work and addressing arrears of wages, as well as introduction of effective protection system for wage workers through the mechanism of social partnership (Blustein et al., 2012; OECD, 2010; Nattrass, 2014). Here, in addition of flexible and non-traditional forms of employment providing the possibility or works to choose the optimal working schedule, it is also necessary to use the world experience of job-sharing and work-sharing in time and space. In turn, the system of social partnership is designed to provide negotiation to determine the minimum wage, and in some cases – to establish criteria for increasing wages at the industry or company level within the framework of the national policy of income and employment.
Since unemployment is a serious macroeconomic problem and an indicator of macroeconomic instability, the state must take measures to fight it. However, ways to overcome unemployment are directly depend on the unemployment types, because they are caused by different reasons. In our view, the factor-based policy is one of the most effective, as it interprets unemployment in the full range of its manifestations. In particular, measures to deal with frictional unemployment primarily include the improvement of the information supply system for the labor market and creation of special services for this, while structural unemployment involves the provision of wide opportunities for training and retraining of the unemployed, as well as economic diplomacy measures aimed at domestic market protection and attraction of investments. Cyclical and hidden unemployment could be prevented through the mechanism of administrative regulation, development of social partnership system and creation of additional jobs in the public sector.
At the same time, individual events cannot completely eliminate the risk of unemployment and its growth: this can be achieved only in the overall improvement of the economic situation in the country. Therefore, the national policy to combat unemployment should focus on the long term, providing not only population employment, but also stable economic growth.