In Carolina, each estate is allowed to administer a distinct insurance, what other calls (the unemployment benefits) programs, however in general, "the state-federal programs are intended to provide temporary financial assistance to workers who have lost their jobs through no fault of their own and also meet other work and wage requirements." The benefits are offered based on period of the workers’ earnings ( Schmiedern & Von Wachter, 2016). Every estate has its guidelines which dictate the amount every unemployed worker is supposed to earn. Those who qualify for these benefits are those workers in North Carolina who have become unemployed through no fault. Moreover, there are other qualifications which the employee must meet for them to be considered for the benefits. The question is what is the impact of this policy on the employees, and to the general economy? The author of this article, therefore, aims at answering this question by presenting a critical economic analysis of the impact of this policy and make recommendations whether it is feasible.
Before observing the benefits or the adverse effects of this policy in the economy and labor market in general, we have to start by examining the labor market equilibrium. There is high unemployment rate in the market. Many factors contribute to the firing and also downsizing by companies in the market and thus increase the rate of unemployment in the market. According to the labor equilibrium theory, the workers often love working when the wages are very high. On the other hand, the companies like working when the wages are very low. Labor equilibrium, therefore, tries to find a balance between the two sides. It tries to find the situations where the demand for labor equates its supply. In the old policy, when the workers get unemployed out of his or her will, there were likely chances that they will demand the employment immediately. This will make the equilibrium model shifts positively since the demand will be high and the labor supply will be low. In the case of the new policy, we expect the situation to be very different. In the new policy, if the employee becomes unemployed, they are assured that they are sure that they will get benefits for certain period as they try to adjust. It means that the rate at which they will demand the new jobs is meager as compared to a situation where the benefits would not have been there. It means that that demand for the new jobs will reduce and the supply will be very high. With the new policy in place, there will be a negative shift in the demand curve which will see the increase of supply of the labor in the market. Another interesting part of this is the behavior of the equilibrium in case there is a reduction in the benefits of the policy. When the benefits are reduced, there is a negative shift in the demand curve. While in case the benefits of the policy are increased, the demand curve registers positive shift ( Langdana, 2016).
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Based on the illustration given on the effect of the old and the new policy in the equilibrium and the demand and supply curve, there are many implications for the North Carolina new policy. First, the illustration shows a positive shift in the demand curve and a shift in the equilibrium in favor of demand. In this case, the fact is that in the old system, in case the employee becomes unemployed out of the will, they will always strain to find a new place to work. The implication is that there will be high demand for a job for the workers with reducing the supply of the workers. It means that the Wages will be very low in the market and the workers demand the consumer goods and services in the market will be very low. The supplies will continue to shrink the production rate, and hence more unemployment in the market will be witnessed. This will hurt the economy. It means that the old system seems to be reducing the employment rate instead of increasing ( Depken & Gaggl, 2016). On the other hand, when we introduce the new policy, we witnessed a negative shift in the demand curve, and the equilibrium favored the supply side of the curve. The implication, in this case, is that in case the policy is introduced, many people who happened to lose their jobs, and they are eligible for this benefits, there are high chances that they will not be in demand for jobs immediately as they will still have money to adjust. Some will resort to businesses while others will use the money to do another kind of income generating activities such as farming and many others. It is likely possible that demand of the jobs will reduce and as the law of the demand and supply dictates, the supply of the job opportunities by the companies will increase with good wages. Good wages means that the consumers will have purchasing power in the market and the demand for goods and services will increase. The companies too will thereby increase their production rate to match up the order. More workers will be needed, and the economy will be very stable. With the increase in benefits, the economics become even stable ( Fischer, 2017).
In conclusions, the unemployment benefits policy which is in place in the North Carolina will increase economic stability. The illustration shows that its introduction in the labor equilibrium has negative demand in the jobs, it means that labor job opportunities will be high and at good wages which will increase the purchasing power, and this will increase production, employment, and economic stability.
References
Depken, C. A., & Gaggl, I. P. (2016). The Impacts of Ending Long-Term Unemployment Insurance: Evidence from North Carolina. Routledge.
Fischer, G. (2017). The US Unemployment Insurance, a Federal-State Partnership: Relevance for Reflections at the European Level (No. 129). Institute for the Study of Labor (IZA).
Langdana, F. K. (2016). The Supply-Side Model and the New Economy. In Macroeconomic Policy (pp. 233-270). Springer International Publishing.
Schmieder, J. F., & Von Wachter, T. (2016). The effects of unemployment insurance benefits: New evidence and interpretation. Annual Review of Economics , 8 , 547-581.
