Introduction
Macroeconomics is basically a branch in economics that focuses on the general aspects of a nation’s economy. The field handles issues such as gross domestic product (GDP), national income, inflation and price levels, rate of growth and unemployment (Mankiw, 2014). Macroeconomics also focuses on how various disciplines relate to affect the economy and the how the current trends moves the economy of the country (Mankiw, 2014). In his presentation, ‘Modern macroeconomics and monitory policy’, Arnold outlines the principles in the theory of macroeconomics and its application in the modern world. Under the macroeconomic theory, various subjects such as the monetary policy, GDP price inflation and unemployment are discussed. Basically, unemployment is the greatest determinant of economic development in the United States of America. Employment is quite an important factor in determining the stability of a country and its citizens and thus its dynamics are crucial in the study of macroeconomics. Therefore, this paper will focus on the issue of unemployment in United States. Additionally,the paper will also analyze the current trends of employment in the United States, different types of unemployment and the cost of employment to the government and the effect it has to the economy
The current state of unemployment in the United States
According to a report on the United States unemployment rate, the rate of unemployment dropped to 4.3 per cent in May where it was 4.4 per dent in April. The record was the lowest since May 2001. The average of unemployment in United States from 1948 to 2017 is 5.8 per cent. Seemingly, the number of jobless people continues to decrease and this is a good indicator of economic growth. However, the country needs to beat the lowest record of unemployment which was in 1953 where the rate was 2.5 per cent. The high number of unemployment comes with quite some implications to the government and consequently to the economy. The graph below shows the trends in the level of unemployment in the United States-:
Delegate your assignment to our experts and they will do the rest.
Types of unemployment
There are several types of employment, and their study will help understand the various causes of unemployment. The types of unemployment include structural unemployment, frictional unemployment, voluntary unemployment, seasonal unemployment and cyclical unemployment.
To begin with, structural unemployment happens when a lot of people do not possess the qualifications that are required for the large number of vacancies available (Geoff, 2015). The reason towards this may be due to the lack of the skills that the employer is looking for or the long distance from the employer to those who possess the qualifications. Naturally, the type of unemployment is caused by the mismatch between the employer's demand for the job seeker's skills or the geographical distance. Shifts in the market such as technological advancements, innovations, and change in consumer taste can lead to the structural type of unemployment (Geoff, 2015). Globalization is also a major factor leading to the structural unemployment due to the changes in the trade patterns between countries (Geoff, 2015). Due to the mismatch, those looking for jobs are forced to go elsewhere out of their residential areas to try and find places where their skills may be applicable. The movement may involve moving out of their country, and this is a major blow to the economy as much of its labor force, and revenue is lost to another country.
Frictional employment is caused by the time that people take during the transition from one job to another (Geoff, 2015). People are always abandoning their current jobs to try and look for better ones due to various reasons such as pay or employee's benefits. Also, employers often hesitate to hire the first job seekers with the hope of finding better ones in the future. The time the employer delays to hire a new employee and the one the job seeker takes from one job to another causes frictional employment. There are ever new openings in the job market and people are always looking for better places to work, and thus it is almost impossible to avoid this kind of unemployment. The only thing that can be done to reduce the form of unemployment is offering information on how to reduce the time spent during the search (Geoff, 2015). Such information would be on how to write better curriculum vitae or how to start up their businesses rather than waiting for formal employment which may not always be available. Employers should also be encouraged to always advertise open vacancies so that those looking for new jobs may apply.
The third type of unemployment is the voluntary unemployment where workers are unwilling to work with the current wage rates (Geoff, 2015). There are various reasons why job seekers may opt to decline the offers in the job market. Such reasons include access rates in the income tax and high, generous welfare benefits. Precisely, the type of unemployment occurs when the equilibrium wage rate is way lower than the rate sufficient to encourage workers to provide their labor force (Geoff, 2015). The employers may also be a reason for unemployment where some treat their employees quite harshly. Some employers do not have welfare services such as allowances or even deny their workers their rights such as leaves. It is quite uncomfortable working in an unfriendly environment, and thus most workers choose to leave and stay unemployed. The workers voluntarily stay out of work with the hope that interventions will be made to improve the situation in the job market.
Seasonal unemployment is as a result of the seasonal changes in the demand and labor supply during a given year (Geoff, 2015). The demand for some goods and services may fluctuate within a year in some markets. The change in the demand translates to waves in demand for workers in the affected sectors. They can also occur due to the nature of some industries producing only those services that are needed during specific times of the year. Construction, tourism, and farming sectors are most affected by seasonal unemployment (Geoff, 2015). A good example is a demand for postal services during Christmas. During this time, people are always sending gifts and card to friends and relatives using postal services. At this time, the postal office employs a lot of people to assist with the activities. After the festive season, the industry no longer requires the workers as there is no cards or gifts to be posted. Thus, the office is left with no option than to fire the employees leaving them unemployed.
The last type is the cyclical unemployment which is as a result of economic recessions (Geoff, 2015). Cyclical unemployment is also referred to as demand-deficient unemployment or the Keynesian unemployment. In most times, businesses go through cycles that reduce their demand for labor or inputs especially when production declines. A fail in demand of products produced by an individual business may lead to losses, its closure and increased worker layoffs (Geoff, 2015). The businesses experiencing the downfall are left with no option but to fire the employees to minimize losses and maintain its profits; the process is referred to as down-sizing. This time of unemployment does not necessarily occur in all the sectors of the economy but only to those affected by the lack of demand in what they produce. Thus, fired workers can always seek for employment in other industries.
Effects of unemployment on the economy
As the level of unemployment rises, there is a loss of output for a country and income for the individuals (Arnold, 2014). For most people lack of formal employment makes them unable to meet their daily needs. They are hence forced to reduce their daily consumption and even in extreme cases to liquidate their assets which are usually at a loss so that they could be able to meet their financial needs (Yang, 2012). The effects are thus not only felt by the individual but by the whole economy. Such who live from hand to mouth have less contribution to the economic growth of a country in the sense that they cannot contribute to the government projects or even pay taxes (Arnold, 2014). It gets to a point where they can longer sustain themselves forcing the government to take charge and cater for their needs. It is usually a huge blow to the government because the money could be used for other developments such as improvement of infrastructure.
Unemployment reduces the number of goods produced or services provided (Arnold, 2014). A lot could be produced and innovations made if everyone had secured a job. Unfortunately, those abilities and skills go unused as most of them are busy looking for jobs. An economy that produces less than it requires suffers a lot as people cannot enjoy the consumer products they need (Yang, 2012). Also, services such as healthcare are inefficiently provided due to reduced number of health workers leading to the situation of a sick nation. If people cannot access the services they expect, then they become reluctant to work for the growth of the economy (Yang, 2012). Also, if fewer people are working, there is a less possibility of innovations in various factors and lack of advancements hinders the economic growth of an economy.
Apart from the direct negative impacts of unemployment, there are also the indirect ones. Most people are so much frustrated when they cannot secure a job, and the discouragement mostly leads to indulgence to some anti-social behaviors such as theft or drug abuse (Yang, 2012). An economy that is faced by cases of theft is unable to grow because the cases might involve high profile theft such as in government institutions like banks. The government spends a lot of time in search of the thieves and the money; the time and money lost could be used for other projects. When most people abuse drugs, there are unable to work and thus cannot contribute to the growth of the economy. The government spends a lot of time in the building of rehabilitation centers and arresting the abusers.
Conclusion
Overall, unemployment is a great determinant of the economic status of any country. As seen in the graph, there are fluctuations in the level of unemployment in the United States over the years. The unemployment is caused but not limited to the listed types of unemployment. Regardless of the type of unemployment, it has a range of negative impacts both to the individual and to the economy. If nothing is done to reduce the levels of the unemployed people, then the country will continue to experience losses in the economy regarding output and labor forces(Arnold, 2014). The weak economy will affect government projects and their delivery to the citizens. To avoid this, much need to be done to ensure citizens acquire employment. One way is by enhancing the collaborations between the private and the public sectors. The relationship will help create jobs as well as increase output. Another way is by teaching the workers on how to be self-employed. If all people are equipped with skills necessary to start own business or company, then there would be less jobless people. The education system should hence be revised to stop focusing more on the white collar jobs but also include the blue collar jobs. Such strategies will ensure that most people are employed and thus improving the economy.
References
Arnold, P. J. (2014). Modern macroeconomics and monitory policy. , slide serve
Geoff R. (2015). Unemployment - Main Causes of Unemployment. Tutor2u
Mankiw, N. G. (2014). Principles of macroeconomics. Cengage Learning.
Yang Y. (2012). Macroeconomic Unemployment Explained. Econguru
United States Employment Rate (2017) web. Trading economics
