Labor Markets in the US - Essay Example

Labor Markets in the US Labor Markets in the US Economists believe that the economy of the United is being sucked into what they refer to as “economic black hole”, a state requiring immediate intervention of economic specialist; otherwise, the economy might never recover. The fact that the economy has been experiencing fluctuations make people believe that the nasty recessions have been overcome. Lack of economic ideas among citizens and government is attributed to the belief that a period of economic growth and prosperity will be realized. However, this could just be a dream that might never been realized. The economic meltdown experienced in the US affected the labor market significantly leading to a notable change (Conrad, 2005). Therefore, economist should find ways to recover the affected labor market in their endeavors. Labor market in the US had somehow a balanced equilibrium in terms of employment before the crisis. Analysts in America noted a relatively low rate of unemployment at 3.9 percent in January 2001. Nevertheless, due to crisis and financial issues, unemployment lost dynamism and increased. The rate of layoff spiked with crisis while the rate of hiring fell down considerably. In March 2005, the official rate of unemployment in the US reached 5.2 percent. It represented 13.6 million people in America who were unemployed, part-time workers out of economic necessity, or had lost courage to look for jobs. This resulted due to recession and crisis surrounding September 11, 2001 (Conrad, 2005). Average rate of unemployment in the U.S Retrieved from http://static5.businessinsider.com/image/4b6ad5ac000000000018cc41/economic-black-hole.jpg The rate of labor force participation in United States exhibited a funny trend before and after the crisis. Before the crisis, the rate of labor force participation increased due to continuous entry of women into the labor market. After crisis, they contributed to 66 percent of labor force in 2005 while rate of labor force participation in men declined to 73 percent. Scholars argue that, rate of labor force participation increased due to high entry of women who had accurately planned their future and were able to venture and compete in the labor market (Jacobsen, 2004). Before the crisis, United States minimum wage remained constant at $ 5.35 per hour but this varied from one county to another. The Congress gave counties power to set minimum wage above federal level. As a result, the counties set an hourly minimum wage. During and after crisis, pursuant of fair labor standards broke the record when they set a constant minimum wage of $5.15 per hour (McDonald, 2007). Living standards in United States are high with high per capita income but less evenly distributed compared to other countries. Americans enjoy luxurious products like cars and personal computers than any other large nation. However, the average median of income of an average American aged 25+ was approximately $ 32,000. Lately, income inequality clocked 45 in 2005. The technology onrush can largely describe the gradual growth of a two-tie labor market in United States. United States labor statistics bring about belief that the great Chinese economy is surpassing that of the US. This is evident due to marvelous successful market amendments commenced by China in 1978. The roughest 2009 times saw US record an official rate of unemployment of 9 percent. If adequately counted those who stopped looking for jobs but could work if employed, the percentage would increase further. On the other end, China reports an accurate percentage of less than 4.5 of unemployed but only living in urban areas. The question on labor force participation in both countries is narrowly debatable. The rate of work force participation in China is high with men dominating the figure. Women although not many, jet into the labor market to compete with the rest. Comparisons between the two show that both countries have a high rate of labor participation with Chinese surpassing America. China has a higher minimum wage compared to America. Recently, China raised its minimum wage up to 21 percent in order for its citizens to cope up with the rising cost of living and strengthen its domestic demand as well. Earlier last year, China’s leaders claimed that increasing minimum wages was part of its next five-year project that commenced in 2011in order to boost people’s incomes. Statistics noted a higher percentage of minimum wages in China compared to United States (Ryan, 2011). The per capita gap between US and China is utterly uneven. America recorded nearly 15 trillion Gross Domestic Product in 2009 where else China, in spite of a large population, it recorded 5 trillion. Average Chinese had an income less than $4,000 in 2009 while average Americans pocketed $48,000 in the same year. These gaps remain huge every year but narrowed in 2010. Therefore, the gap between incomes per capita in both countries is diverse with that of United States rating higher compared to that of China. Labor market effects play a huge role in competition between US and China in which America is the largest importing country while China is the largest exporting country. Analysis of competition of exports and imports between the two shows that rising exposure raises lack of employment, reduces labor forces participation, and reduces minimum wages in local markets. China’s imports create a broad-based consumer surplus and concentrates losses for manufacturers of import-competing products. The scale of result is large in terms of competition between the two countries. Increased American exposure to Chinese imports has greatly affected local labor markets. Employment reduction concentrates on manufacturing sector, which explains the sudden decline in manufacturing employment in the US from 2001 to 2007. Gradual growth in import exposure spikes a substantial increase in payments transfer to households and individuals in form of lack of jobs benefits, in-kind medical benefits, and income support payments. Moreover, there are factors that historically limit trade’s impact on American labor. Imports from low wage economies are small. Therefore, standard theories point out low-wage states are common sources of disruption to high-wage labor markets. Nevertheless, the situation has drastically changed owing to large China’s spectacular economic growth. In conclusion, United States imports have raised with most of such growth stems from rising imports of goods from China. Transfers fall far short of offsetting the huge decline in average household incomes available in local labor markets that are highly exposed to China trade. In the medium run, the same order of magnitude in US helped consumers gain from trade with China. References Conrad, C. (2005). African American in the US economy. Maryland: Rowman & Littlefield. Jacobsen, J. & Skillman, G. (2004). Labor markets and employment relationships: a comprehensive approach. New Jersey: John Wiley & Sons. McDonald, J. (2007). Urban American: growth, crisis, and rebirth. New York: M. E Sharpe. Ryan, M. (2011). Hnadbook of U.S Labor Statistics: Employment, Earnings, Prices, Productivity, and Other Labor Data. Maryland: Bernan Press. Read More