Economy Situation In The USA - Essay Example

Economy Situation In The USA Rising inequality in USA The rising income inequality in USA is one of the most important impacts that the global financial recession has left back in the economy. Income inequality on the other hand leads to a large number of economic hitches such as poverty and unemployment. The problems had already been quite prominent in the nation prior to the crisis, but it worsened during the after-shock phase. Rate of unemployment had already been looming around 9 percent during 2009. However, the primary problem that led to such high rates of unemployment was the problem of racism that prevails in the nation. Recently, the national government has been trying hard to eradicate these vices from the heart of the nation through the adoption of various measures. The present paper focuses on various revelations being made by the national government on this aspect as well as the policy measures that it has prescribed to correct these follies. It emphasises on how income inequality in a nation can trigger unemployment as well as poverty in a nation and how investments in education and innovations can cure the problem in the long-run. Prevailing situation in the USA The present situation in the USA is quite alarming in the sense that the neither has the rate of economic growth reduced remarkably, the rate of unemployment as well as extent of income inequality has been on a rise for some time now. Many noted researchers and observers claim income inequality in the nation to be one of the most essential factors behind a plummeting economic growth rate. The average rate of unemployment in the nation is equal to 5 percent (prevalent almost since 20 years), which is much lower than the 10 percent rate of unemployment prevailing at present. Moreover, the nation is also characterised by a high number of students dropping out of college that keeps the general image of the economy low in the skill front. This is also the reason why the nation is low in innovations as well, unlike those in the nations underlying Europe. The economic scenario in USA is found to be a terribly unstable one in comparison to that in Europe. While in the former, even employed people find it difficult to rest assured about the security of their jobs, those in the latter at least can anticipate their future in terms of unemployment. The worse fact is that all these issues have taken a heavy toll upon the economic progress of the nation which again has eventually been causing income inequality. Measures to correct extent of income inequality in USA The main problem looming around the economy of USA is that of a deteriorated trend in the economic growth rate. Noted economist Ragu Rajan revealed that it will be wiser for the national authorities to focus more upon long term structural issues such as unemployment and income inequality. In addition, it will also be wise for the national administration to arrange for some vocational training for the national youth as well. In fact, it could easily be realised that unemployment is the reason behind a rising rate of income inequality in the nation. Observers researching upon this aspect have figured out certain areas which need to be emphasised upon by the national authorities while framing their respective fiscal policies. These measures have been described as follows. Firstly, it has been realised that the national population or rather the labour force is suffering from a lack of productivity which the reason why the creation of economic value in the nation has been poor. This is the reason why it has been stressed that the fiscal committee must lay some emphasis upon investing more and more funds for industrial innovation. The higher the incorporation of technology into the production process, lower will be the efforts that a labour needs to put for the production of a single unit; hence he will be left with more energy to produce excess units within the same time period. In fact, this is the method being followed up in Europe that concentrates upon a stable innovation path so as to stick to a stable economic growth. Secondly, the nation suffers from the problem of high unemployment particularly due to the recent financial crisis which struck the economy. USA here had attempted to introduce some strategies so as to reduce the rate of unemployment artificially. The people, who had been retrenched, were provided jobs either on a temporary basis or on a part-time basis so that none of them stayed full-time unemployed. The following diagram shows the percentages of employed labour force who either work as part-time recruits or have been working on a temporary basis; it clearly indicates a rising trend in the same past 2007. Hence, it is important to eradicate the problem of unemployment on an urgent basis. Moreover, the economy is characterised by high rates of racism which makes it difficult for the non-American population to grab jobs. In fact, there is a common convention among the residents of America that non-American people (i.e., have a different country of origin) are the last to be hired for any post and the first ones to be fired out of one. Since they too form a significant part of the economy, it is equally important for the national authorities to be reticent towards them and arrange for their quick recruitment as well. Thirdly, the importance of education is also one that needs to be stressed upon. In an age when the importance of the service sector is fast gaining importance, it is no longer considered as wise to neglect the high rate of school drop outs. Though American colleges and universities are among the top-notched ones in the world, rarely does an American cross the premises of a college. Most of them are satisfied with a maximum of high-school degree which leaves them unprepared and untrained to conduct jobs that need high end expertise. This is where lies the importance of structural development, to be attained over the long run, so as to revive the nation from the clutches of income inequality and hence poverty in future (Konczai, ‘Our unemployment crisis is not structural’). Conclusion The present paper focussed upon the extent to which a rising rate of income inequality could result to a gradually deteriorating rate of economic growth. Simultaneously, it also aimed to exhibit the extent to which the rate of income inequality prevailing in a nation could lead to various looming economic hitches such as poverty. Income inequality in a nation could also be caused by a poor level of average education in a nation. It had hence been suggested by many a researcher that income inequality could be corrected through bringing upon structural development in the nation which could be brought about through a rise in the rate of employment and improving level of education in the nation. Moreover, technological progress had also been stressed upon as a primary tool to correct a depreciating rate of growth. In fact, unless innovation is there, the nation cannot avail the resources necessary to facilitate education and eradicate poverty from the heart of the nation. References Konczai, M. “Our unemployment crisis is not structural”. November 8, 2010. The Washington Post. November 26, 2010. . Read More