MACROECONIMCS IN UNEMPLOYMENT [Instructor] [Task] MACROECONOMICS IN UNEMPLOYMENT Unemployment, also called joblessness, is an economic state in which competent and skilled persons seeking job opportunities fail to get any. High rate of unemployment is characteristic of a struggling economy…
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For instance, in 2011, the United States plunged into its worst unemployment rate in decades, 7% (Domino, 2011). Unemployment is caused by a combination of numerous factors. Despite desperate attempts to curb it, it has persisted. According to Symes, poor government policy on unemployment is the principal cause of unemployment (1995). She also sites high unemployment compensation as a reason for unemployment (p. 173). When unemployed people receive compensation equivalent to what others on employment in other countries earn, they tend to be reluctant in job searching. After all, why search for a job when the government can foot your bills? Minimum wage legislation is also another cause of unemployment. By enacting the minimum wage legislation, the government made it alsmost impossible for small and medium size businesses to hire qualified persons. It is irrational to hire employees when your business cannot pay their salaries. High salaries is against business operation principle of maintaining the lowest possible level of expenditure to maximize profits. Surprisingly, discrimination is still among the factors causing unemployment. Some employers discriminate job seekers based on their race, religion, age, residence, physique, gender, or even political ideologies. Landy claims that, “Hundreds of thousands not yet old, not yet voluntarily retired find themselves jobless because of arbitrary age discrimination…” (2005). This is a solid evidence of age discrimination in employment. Whatever the reason, job discrimination is not justified at all. Besides the major causes of unemployment, many local factors cause unemployment. Such factors may include the location of the unemployed person, transport flexibility, cost, and availability, and commitment to job searching. Symes (1995) laid a scathing attack on government policies on unemployment terming the policies as the principal cause of unemployment (p. 9). This statement may be debated. However, government policies certainly play a role in influencing unemployment. Some of the government policies that influence unemployment are discussed below. Employment policy Even though commitments may vary, all governments attempt to stimulate employment. The US government for instance has tried to encourage business efficiency by bailing out firms adversely affected by the 2008/2009 economic depression to avoid massive layoffs. The UK government, on the other, hand introduced “The New Deal,” a programme that offers training and development to the unemployed to enhance their chances of securing jobs. Taxation policy The government may also use taxation, as a primary fiscal policy, to control unemployment. By cutting taxes, the government stimulates economic growth while at the same time reducing the rate of unemployment. This works in two ways. First, tax cuts increases consumers’ income, which means their purchasing power is increased. From the second perspective, businesses earn more money, as consumers buy more. The increased income leads to expansion, which consequently leads to hiring. Government Spending Government’s expenditure is not arbitrary, but well calculated. The government’s spending can influence unemployment significantly. For instance, by funding new programmes such as road construction, the government creates direct jobs to the workers involved in the construction. Additionally, there are indirect jobs in the private
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