Relationship between Unemployment and Output of Productivity - Essay Example

Arthur Okun clearly explained in numerical values the link between unemployment and output. Okun’s Law states that “1 percent more unemployment is estimated to equal 2 percent less output” (Schiller G-4; "Okun's Law or Rule of Thumb", 60). This was also stated as “The higher the rate of growth of output, the greater the reduction in unemployment, and vice versa” ("Okun's Law or Rule of Thumb", 60). Does this Law apply to the prevailing economic condition? Conversely, one can hypothesize that this law does not apply to the prevailing situation in the United States of America and that 1 percent more unemployment does not jeopardize the percentage of output.

In the United States of America, circumstances often force people to persist in joblessness. For example, many work applicants are from the secondary level of education and only some college units. Most employers however of the 21st-century economy prefer information technology literacy in addition to completing a college education. Also, the volume of products as the output of inputted goods and services are dependent on the availability of the components of goods to be produced, and the availability of employees with hi-tech awareness (Schiller, 127).

An even depressing marker is the fact that goods for production may be for consumption or investment. In case the capital will be used for consumables only, then nothing will be allocated for investment goods and vice-versa. This is the situation when capital is limited. Plus, despite the increasing population, the labor force has not increased, so the potential for output from out of the population is very well below the output needed to support the population (Schiller, 127-128). These facts show that most people must have to be responsive to existing conditions on balance between employment and output or Gross Domestic Product.

One good way of being responsive to existing conditions is to be pragmatic with limitations on availment of objects used as resources and expertise. These limits set boundaries on productivity. Additionally, if more people will find jobs in exchange for wages, then, more will be the input for the labor necessary for production. In other words, the balance between employment and output or Gross Domestic Product can be achieved with the minimization of boundaries set by the government and other concerned non-governmental groups on utilization of the natural resources and expertise (Schiller, 128).

Another front that could be harnessed to raise productivity is the unaccounted portion of labor. These are the full-time mothers, the full-time students, the teenagers, the children, the sick, the disabled, and those who are working within a family business but are not paid wages for doing jobs (Schiller, 126; Frumkin, 1987). Practically, these people are parts and parcels of the consumers and demand side of the economic market, yet they have no direct productivity in terms of income generation. They may even be the bulk of the population that is reliant on the working groups’ productivity. Plus, they are the population who spends more and consumes more than those who are employed. Real-life economic growth could hardly be achieved then unless something is done with the dependent population in the American society.

Gauged by the facts that unemployment economically means nil output, which is synonymous with no income, and no productivity, despite consumption satisfaction, fiscal policies on economic management should then consider the idea that economic growth may only be realistically achieved by stimulating productivity other than employment.