Labor Market in the USA - Term Paper Example

The neo ical economics tradition in American labor economics goes back to the early 20th century in which the principle roots of capitalism were embedded in the Jeffersonian era. The labor market in America is one of the most intriguing topics of study as it accumulates and embodies many aspects of the economy itself. Since America is so intensive it its quest to practice the Adam Smith’s depiction of Capitalism, the labor force correlates with the condition of the economy. Smith’s theory that propagated dependence of individualism that oozed out of the nation at this time period. America’s obsession with Industrial began with Slater’s mills in which textiles became the primary market to produce. Although it may seem a new age, most workers were orphans or children who owed debt to the nation. The drive of capitalism for this country relied on many factors that included slavery, turned raw goods into products, factories, and the ability to produce such a drastic workforce. Hence, Smith’s ideas of capitalism along with an adequate labor force. The labor market impacts the economy through market equilibrium, immigrants, and statutory laws enacted by the government (Abowd, 12). During a recession, when the economy struggles to thrive, employment is diminished as the labor force is not to keep the market equilibrium in check. Consequently, during an economic book, both employment and inflation rise due to the money supply market. Labor, capital, natural resources and entrepreneurship are the key elements that contribute to serve as a catalyst for the economic growth of US. Labor consists of the people who produce the goods and services in an economy while capital is the equipment, machinery, manufacturing plants and office buildings needed to produce goods and services (The Workers Union. 2). Labor is also influenced by government investment in infrastructure, such as schools, roads and parks. These can also have an effect on the wages paid to the labor force because people are willing to relocate depending on the competitive salaries offered. The economic history of labor market is associated with the correlating the forces that drive the allocation of labor effect in the economy during different times. Labor market institutions are prevalent in society as the formation of unions is the testament towards the collaboration and gathering of the labor market (The Workers Union, 28). In addition, the new decade has witnesses the evolution of labor market as job staffing agencies have been created in order to combat unemployment("Labor, the Economy and Monetary Policy - Everyday Economics”). Informal mechanisms of the labor market are also dominant in society. One of the factors that influence the labor market is immigrants. The role of immigrants in the U.S. labor market has long been debated. Since America is known as the cultural melting pot in which assimilation was induced, immigrant workers have long contributed to the labor force in America. A new study revealed that granting amnesty to 12 million workers would escalate the economy, creating jobs and wage increases for American individuals themselves. This report also insists that legalizing these immigrants would boost the current GDP by a hefty figure. In addition, this study indicates that every 100,000 immigrants are a catalyst for 510 businesses to expand (Abowd, 15). In 2004, more than 21 million workers, one in seven workers in the United States were immigrants (Abowd, 16). Clearly, possessing a mobile labor force facilitates to keep unemployment low. These business schemes are essential for the tough recession that the country is plagued with currently. Latino Americans continue to be the focal point as they take cheap jobs that require extensive labor. With the recessive economy looming, the idea of outsourcing is another controversial issue that can potentially disrupt the local economy. Since outsourcing is usually cheap for companies, many companies have looked overseas to tighten up their salary budgeting. Outsourcing can be beneficial or detrimental for the economy in many ways. Outsourcing can reduce overhead and give a bust to the local economy of the hosting nation. However, it can also eliminate job placement in America, which can hinder economic growth. Another factor that critically impacts the labor market is labor mobility. Labor mobility is a term that refers to the ease in which workers can migrate to different geographic regions within an economy. It is extremely crucial in the study of economics because it impacts labor, the major factors of production which in yields positive results in growth and production. One of the key criteria of evaluating labor mobility is geographical and occupational. Geographic mobility is vital as it defines the labor’s opportunity and ability to work around a certain location. Geographical mobility is crucial because it can have various ramifications on the economy of a nation. First and foremost is the fact that it increases the supply of labor. As more workers enter the economy, the labor force increases which is a static demand since it diminishes wages (“Labor, the Economy and Monetary Policy - Everyday Economics”). Another crucial factor about geographical mobility is the fact that it can increase productivity and efficiency. As the influx of laborers can drive the economy through their specialized skills in the workplace, the risk for older workers to be eliminated grows. Another element in which labor can be attracted is through giving work visas. Work visas are given to few selected people, who earn their respective positions in a company but are not citizens of a host nation. With the advent of labor migration, unions were formed in order to protect and preserve the interests of workers. Undoubtedly, many unions have fought to win higher wages and working conditions for their members. This also created the basic law of demand and supply in which unions were able to raise the price of labor("Labor, the Economy and Monetary Policy - Everyday Economics - FRB Dallas." Federal Reserve Bank of Dallas). In return, employees in essence employed less workers. The labor movement can be traced as far as the era of progressivism in which economic reform became the cry for advancement. The progressive called for a more direct democracy in which the needs of society were met through large government involvement. With all the factors accumulated, one must question remains-what affects the labor market? Changes in demand for goods and services can dramatically impact the labor force. The fluctuations in economy that occur on every day aspects can cause a severe blacklash in the economy. If the demand for goods and services slows, corporations are forced to cut down on production and labor. Hence, the role of the government is critical as the government can induce many tools to combat unemployment. Unemployment is a serious economic problem in the labor market("Labor, the Economy and Monetary Policy - Everyday Economics). The government can create many policies which combats unemployment through three phases. These three phases of unemployment consist of: frictional, structural and cyclical. Frictional unemployment is associated with normal turnover ratio in the labor market(“Labor, the Economy and Monetary Policy - Everyday Economics”). Consequently, cyclical unemployment occurs with alterations in the economy cycle while structural unemployment tends to narrow the gap between training and job sourcing. Without a doubt, the US government is a key factor that decides the labor market through variety of methods. The U.S. government can also modify the labor market through paying unemployment insurance benefits, setting the minimum wage benchmark, and by raising or lowering business and income taxes. The government also has the full say in establishing labor union laws. Moreover, the government also takes additional steps by implementing special programs to create jobs temporarily if unemployment plagues society. Unemployment is a critical factor that can cause severe economic and political problems in many countries. Unemployment forces the government to provide resources in which the unemployment labor markets team. Much research is conducted in order to study the cause and effects of unemployment insurance savings accounts, implementation of unemployment insurance systems, and other issues relating to this agenda. Evidently, the recession that plagues the current economy in which the rise of unemployment has become the focal point of the struggling American economy (The Workers Union, 14). After the global recession that hit the American economy, it has struggled to recover from the ashes, leaving many recent graduates in deep thoughts about their future. The federal government can also play a key role impacting the economy in numerous ways. The Federal Reserve undoubtedly controls the monetary policy so that it can also control the labor market. In essence, the Federal’s monetary policy is directly correlated with cost and availability of money and availability that is allocated within the economy. In many instances, the monetary policy is too tight in which the economy suffers as businesses struggle to obtain credit("Labor, the Economy and Monetary Policy - Everyday Economics - FRB Dallas." Federal Reserve Bank of Dallas). Thus, the federal government controls the economy by injecting money in the economy to keep the labor force. Consequently, when unemployment rates are low, the federal government should slow the growth rate of money and credit so that the economy grows at a continuous pace. Overall, the labor market is an intriguing topic to study as it entails the future of the Keynesian economics that affects the supply and demand of work force along with monetary policies. Undoubtedly, the labor market will continue to impact the economy through market equilibrium, immigrants, and statutory laws enacted by the government. With the presidential elections heating up, it will be interesting to see how each candidate reacts to the current recession that has spiraled downwards. Works Cited Abowd, John M., and Richard B. Freeman. Immigration, trade, and the labor market. Chicago: University Of Chicago Press, 1991. Print. The Workers Union. Oxford: Clarendon Press, 1971. Print. "Labor Unions: The Concise Encyclopedia of Economics | Library of Economics and Liberty." Library of Economics and Liberty. N.p., n.d. Web. 2 Nov. 2011. Read More