The workforce comprises of employed and unemployed individuals. It is dominated by unemployed people because the supply is higher than the demand. Unemployment refers to the state of having no income but one is searching for a job position. It is an economic determinant which measures the strength of an economy. According to Moscarini and Postel-Vinay (2017) , individuals who have no jobs, looking for employment and are ready to get job positions are unemployed. The definition of unemployment does not give a specific definition of unemployed individuals. With respect to the macroeconomic perspective, unemployment entails individuals who are not employed, looking for jobs, and is ready to start working after they get an opportunity. The people who are neither employed nor unemployed are not part of the workforce.
This paper focuses on the employed and unemployed people in the macroeconomic aspect. The paper will focus on the demand and supply of the labor and unemployment in accordance with the macroeconomic theory. In addition, it will look into the macroeconomic concept of unemployment. The paper will retrieve information from books, journals, and articles that have presented data on the levels of unemployment and labor in the country. The data will be analyzed with respect to macroeconomic perspective as presented in articles on Unemployment and labor supply in America. Unemployment has increased in the country as a result of increased supply and low demand for labor in the country.
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Causes of Unemployment and Workforce Development
The level of unemployment has increased due to the high supply of employees which does not match with the demand of the employment sector. The workforce is producing many employees who cannot be absorbed in the American industries. There limited opportunities in the employment sector because the new industries have not yet developed to employ a large workforce (Hall, 2017). The aggregate supply of labor does not match with the aggregate demand needed to meet the full employment .
There has been an increase in the supply of high-qualified employees. Many citizens particularly the young people have enrolled in the higher learning institutions which have increased the number the of degree and masters certificate. The total supply of labor is high while the demand is low. The gap between the demand and supply of labor causes unemployment in the country (Nunley et al, 2017) .
Effects of Unemployment and Workforce Development on the Gross Domestic Product of the Country
Unemployment is similar to idle resources in the country which can be utilized through employment. A high rate of unemployment in the state results in low economic growth and production of goods. The high unemployment rate decreases the gross domestic product of country because the production rates decrease. The state has taken measures such as formulating regulations that will increase the economic performance by increasing the employment levels. The policies include capital investments in some sections of the economy for the available resources to be maximized. Further, the government offered favorable market opportunities to motivate investors to make investments in the country. The rate of unemployment can reduce slightly as a result of increasing the investments (Nunley et al, 2017) . These policies have not reduced the rate of unemployment in the country due to the difference in demand in supply .
The economists view unemployment as the cause for the decrease in the country’s gross domestic product. They argue that an economy is stable when the employment rates are high but it becomes unstable due to the increase in unemployment. The rise in unemployment has a ripple effect on the economic growth of a country.
Source: (Dao, Furceri & Loungani, 2017)
From the data above, the GDP was approximately 16. 80 trillion dollars and the average employment rate was 6.2 %. The employment levels decreased resulting in the increase in the country’s national income. The supply of labor is approximately 77 % due to an increase in the employment opportunities. The gross domestic product of the United States was slightly high to a reduction in the level of unemployment. The country production rates increased as a result of an increase in the employees in the industries (Dao, Furceri & Loungani, 2017) . From the statistics, it is evident that unemployment is influenced by the aggregate supply of labor. The country’s GDP is affected by the rate of unemployment.
Economic Analysis
Classical Theory of Unemployment and Labor
Keynes attested that aggregate supply and demand are used to determine the level of unemployment. This is an indication that supply and demand influence the level of employment. The wages affect the supply of labor. In case the supply of labor changes, the demand will have to change.
The figure above illustrates an equilibrium condition of employment. The demand for employment is N d =D (W/P) which means that the demand for labor is a function for the wages. In case there is a rise in the level of employment, the price of the wages will decrease. The demand will decrease because it is a function of the wages. The supply of labor is written as N s =S (W/P) which means that supply is a function of the wages. The changes in the price of the wage will affect the supply of labor in the market. A change in the demand or supply of labor will influence the equilibrium level of employment. From the figure above, the wages were increased to W/P 1 which resulted in the reduction of the rate of employment to N. The graph illustrates the effects of the changes in wage-price on the rate of unemployment. It is clear that the prices of wages in the country are high which has led to the increase in the rate of unemployment.
Recommendations
Firstly, the government should formulate policies for a maximum wage for employees in the workforce. This strategy will assist in controlling the price of wages in the labor market which will increase the demand of employees. The level of employment will remain in its equilibrium as result of controlling the wage prices. The production and the gross domestic product of the country will increase.
Secondly, the government should give subsidies to the employment sector so that they can increase their employees. This method can be risky because it does not have an impact on the economic growth of the country because the country will spend finances in giving subsidies to the industries. It will increase the country’s production rates.
In conclusion, the rise of unemployment in the country is as a result of an increase in the total supply of labor that is not absorbed in the employment sector. The increase in the supply is due to the high number of graduates in the market. The demand for labor is affected by the prices of wages in the labor market. The government should intervene by controlling the price of the wages and giving subsidies to the employers for them to increase the employees.
References
Dao, M., Furceri, D., & Loungani, P. (2017). Regional labor market adjustment in the United States: trend and cycle. Review of Economics and Statistics , 99 (2), 243-257.
Hall, R. E. (2017). High discounts and high unemployment. American Economic Review , 107 (2), 305-30.
Moscarini, G., & Postel-Vinay, F. (2017). The Relative Power of Employment-to-Employment Reallocation and Unemployment Exits in Predicting Wage Growth. American Economic Review , 107 (5), 364-68.
Nunley, J. M., Pugh, A., Romero, N., & Seals, R. A. (2017). The effects of unemployment and underemployment on employment opportunities: Results from a correspondence audit of the labor market for college graduates. ILR Review , 70 (3), 642-669.
