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Unemployment - Essay Example

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Unemployment is of different types and their causes are also of different types. Insufficient effective demand for goods and services in an economy is the main cause of cyclical unemployment according to Keynesian economics…
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Advocates of Structural economics argue that unemployment is the result of structural problems in economy such as inefficiencies, inherent in the labor market. Disruptive technologies and globalizations also cause unemployment because many workers don't fit in the new jobs that are new technology oriented in which old workers are not trained. Globalization makes the jobs outsourced from other countries making the domestic workers redundant. In downturn phase of an economy wages are generally high because of sticky demand of workers for higher wages and unions disruptive attitude of workers. Advocates of Monetary economics focus on money supply excessive expansion that is responsible for inflationary situation in the economy as the main cause of unemployment.

In laissez fair economy every seller gets a buyer at some price called the clearing price. Sellers and buyers may refuse the clearing price voluntarily. But in regulated market the scenario is different.. General Theory claims that the concept of say's law is not practical. Unemployment that is involuntary does not exist. Unemployed person must meet their needs for survival and government of the country supports them to find employment through various schemes. According to classical economics demand for and supply of labor determine the price and employment level is set by these forces. Demand being more will push the wages and employment up and vice versa. Both monetary and fiscal policies can be used to increase short term growth of economy and the following employment level. Supply side is often affected by labor unions. Flexible policies, government attitude, reforms, education make labors supply more flexible that in turn increase supply of goods and increase employment level.
Either all these explanations and theories may fit in to answer the unemployment variance in G5 countries or only some of them may be the relevant answer. Unemployment level in G5 countries during 1998-2008 has been different. In USA, Europe and Japan the unemployment levels were at half the rate than in France and Germany. There are three European economies, one American and one Asian in G5. Unemployment trend in USA had been falling from nearly 5% in average in 1992 to marginally above 4% in 2007. For January 2008 in the U.S. the unemployment rates were 4.4% for adult men, and4.2% for adult women.. In Japan the rate has come down from 2003 at 4% to 2% in 2007. In Germany the unemployment rate has been falling since 1993 from nearly 10% to about 4% in 2007. In France the unemployment rate has remained high and fell marginally in2007 only to be above 7%. Traditionally USA experiences lower unemployment levels than countries in Europe. UK and Denmark outperforming Italy and France and it also changes over time throughout economic cycles
In Germany unemployment level peaked in 2005 at 10.6 and then fell down up to 7.4 in 2008. The rate of fall is quite sizable from 7.38% to 14.83%. As per Philips Curve employment and inflation are interrelated. Demand stimulus through expansionary policy could increase employment without leading to higher inflation. Here in this case unemployment rate went increasing and inflation rate also remained low. Thus the Philips Curve mechanism does not fit in case of German unemployment development.
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