USA: The unemployment mess. (A retrospect – 2011)

Article written in September, 2011. Just my thoughts and ideas on what the US could have implement as a potential resolve to there deep unemployments sores. Moreover I believe that this can even be implemented as of today!

The United States is plunging into a deep hole, struggling to make consensuses and cure unemployment. The country is going through some rough times and its economy has seen an humongous downturn in 2011. Stock prices gave way, Europe debt crisis became worse, S&P lowered the debt rating and the country was on the verge of default. What could be worse?

The unemployment rate was unaltered at 9.1%. About 14 million people are currently unemployed. This type of unemployment is called cyclical unemployment because it is primarily caused by the condition of the economy. Jobs made zero net-gains in August, and made people even more worrisome of the nation’s future. What came as shocking news was that there were 300,000 more citizen wanting jobs, stated the Labor Department in its latest press release. Around 4.5 people on average are competing for the same job, which in a regular economy would only be 2. This could all be due to Europe’s debilitating condition and America’s debt crisis. The employers, as anybody would feel, believe it is not the right time to hire.

As we go deeper inside the unemployment issue, we can unravel some staggering figures.  The 14 million unemployed are not competing with each other, rather they are competing with almost 8.8 million other people. These 8.8 million people are not considered as unemployed because they are part-time workers. These workers are employed, but due to weakening sales or demand from consumers, they are put on “hold”. Before employers go out on a hiring spree, they will first increase part-time worker’s hours and soon they will become full-time workers like before. Moreover, another 2.6 million people are counted as discourage workers [people who stop looking for work] and when these people start looking for jobs, they will again be considered unemployed. So if you take into account all these factors, the unemployment rate in US is more devastating then you really think it might be.

  • Solution

 The Congress and the Fed is trying to do it’s very best to try to control the situation and improve GDP and economic growth. The government should implement an appropriate fiscal policy that would lower taxes for business and increase it for the wealthy. About 50% of the income is held by the upper class, or wealthy, families in the US. The US also spends a lot for elderly retirement benefits. If the US can increase taxes for the rich, cut spending on pension plans, and lower taxes for businesses then companies might be able to produce more at a lower cost, therefore reducing the price. If there is a lower price, consumer demand might increase. This will surely improve the unemployment dilemma. Another method is to improve the amount of information available on jobs to the public.

The Fed can lower the country’s huge deficit by selling bonds with long maturities of 25 years or more so that interest doesn’t have to be paid in the short term. This could give enough time to get rid of the debt problem, and it could use some of the bond funds to fuel job growth by providing subsidies to businesses.

Another alternative would be implying a trade zone. This is when many businesses cooperate to bring down input costs and increase the demand for more manpower. If the US can somehow provide this type of opportunity to businesses, then unemployment could surely decrease to normal levels.

  • Story of a family during the last few years [hypothetical]:

Four years ago, the Newcomers, owned a lavish home and earned around $100,000 annually. In 2007, during a period of 2 years of unemployment, they lost their four bedrooms home and shifted to a two bedroom apartment. Since employers weren’t willing to hire and many people were on the waiting list working part-time. The Newcomers couldn’t find a job. Through 2008, the time of the recession, the Newcomers sold almost all their luxuries. Today, even though they are still above the poverty line, they are still finding it very hard to find a job, and their lifestyle has deteriorated a lot.

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