Classical Theory of Employment

A condition that has existed since the beginning of commercialization, unemployment has been in our history since its monumental recognition in 1929. The Great Depression is really when unemployment became a real issue and its highest peaks where between 1932 and early 1933 when the average rate of unemployment was 24.9%. Fast forward almost 80 years and unemployment is still a political issue whose rate has experienced a roller-coaster ride of highs and lows. Unemployment has many forms, but it is technological unemployment, that is a crisis which if declined will lead to an excellent and a benevolent rise to our nation’s economy.

In 2011, the rate of unemployment is at 9%. Although there is a decline it has been rather slow. Financial analysts predict that unemployment rate would drop to 8%. Even for the people who still have their jobs the hours that they work have been reduced since then. With reduced hours the productivity of the workers would not be fully exploited which in the end, affects the economy. This is so because with a small fiscal base the economy has not been able to recover from recession fast enough. Although there have been positive growths in the employment rates these growths are barely enough. They do little to help in the dire situation. This only means that joblessness is something that the population would have learned to live with.

3. What is a recession and how are recessions related to unemployment? Using Marx’s concept of exploitation would it be easier or harder for employers to exploit their employees during a recession? Please provide your reasons for your conclusion.

For what has been a very, very long time, our elected representatives have sought to achieve “full employment” as a national goal….but full employment has been suspect as a possible cause of inflation, and is therefore weakened by decisions of the Federal Reserve, in an attempt to retard inflation. In terms of causes, unemployment has changed; the character, degree of severity, possible solutions of unemployment over the last ten years or so have been reduced, and has morphed in terms of just who is experiencing the unemployment and the suggestions for answering the problem. It has been the traditional fundamental trades, like manufacturing, viewed as part of the shift in the economy towards the new information age model, as workers

These major flaws in the past economic theories lead to the new ideas. Economist John Keynes explained that classical economics stated that wages and prices are very flexible; when in actuality they weren’t as flexible as previously assumed. Keynes argued that the market is self-adjusting, however it has a long time before it actually made its way back on the rise. “In the long run we are all dead” was quoted from Keynes. Keynes believed that it was the aggregate demand for goods in the economy that determined the level of employment and the level of output.

The United States labor force history is bound with many changes especially because of the rippling effects of massive demographic alterations that happened within the United States populace. The United States was a major agricultural country until late in the 19th Century where significant industrial growth led to many Americans going to the city to work in factories. The environment was characterized by mass production, low wages, and a lack of skills, which led to the intervention of the government to protect the rights of workers using labor standards. They included the 1938 Fair Labor Standards Act that allocates the national maximum hours and minimum salaries people are required to work and receive respectively. It also prohibits child labor abuses and outlines rules for overtime. The 1964 Civil Right Act asserts that employers cannot utilize discrimination practices in hiring based on national origin, religion, sex, and race[footnoteRef:1]. [1: U.S. Bureau of Labor Statistics ?Employment Projections ?2014-24: table 4 http://www.bls.gov/news.release/pdf/ecopro.pdf]

When governments look at policies to reduce unemployment, they tend to look at the short term and then the long term. In the short term, they need to ensure there is sufficient demand and economic growth in the economy to help control cyclical unemployment. This is done by adopting

According to Keynesian economic theory, Keynes points out that unemployment is a serious issue in the economy that is caused by imperfect information between producer and consumer. It implies that the producer may not sell out all the goods that they produce Chang, H-J. (2014). For instance, similarly, a great many of labors seek to find an occupation, but all the work-seekers may not be completely accepted by employers due to firm’s own preference and labour ‘s productive capacity. Moreover, Keynesian economic thought states that uncertainty also is a main

During the first Industrial Revolution, many social standards of the community were starting to change. Since there were new spinning and weaving machines available, the textile mill factories were built to increase their profit. The people who established these mills hired children and women to decrease their labor cost by paying them low wages and having poor working conditions for them as well. The Labor force impacted American culture through various means such as the child labor conditions, women in the factories, and the immigrants working in the factories.

The United States has always faced its fair share of economic ups and downs. Financial upturns can quickly lead to downswings, and there have been plenty of theorists who believe they can solve the great divide. No one ever plans for a recession to last more than a few months, let alone watch the economy crumble into a deep depression. How can this happen, when the economy is supposed to be able to self-correct itself as one theory suggests? Moreover, when self-correction does not triumph, does a new theory take effect to explain this conundrum? This week’s readings have introduced the concept of how classical economics have been taught since 1817, along with John Maynard Keynes ideologies (Rittenberg & Tregarthen, 2012).

The United States has been experiencing the lowest rates of unemployment it has seen in several years. A person is considered unemployed if he/she is of working age and is actively looking for a job but cannot find one. An unemployment rate is found by dividing the number of workers that are unemployed by the number of people in the labor force and then multiplying this number by 100%. A labor force can be defined as all the people in a country who are able to work, whether they have a job or not. There is a “natural” rate of unemployment which indicates that there is no way to get the country at a 0% unemployment rate because of scenarios such as people who can’t find jobs because of a lack of information, people who do not have the motivation

James Hamilton of University of Virginia presents his model of unemployment and business cycle. During the course of this paper, I will focus on the unemployment theory as well as develop its context. The paper investigates how specialized labor plays a key role in the general equilibrium model of unemployment. This idea is not entirely new. Ricardo’s chapter on “Sudden Changes in the Channels of Trade” focuses on the similar context of theory development with respect to unemployment.

This article is of high importance to understand as well as be able to place a solution for this increasing issue of unemployment and how globalization and technology effects not just the companies using them but the population as a whole the people that are being forced to leave and sit without jobs is leaving no choice but the federal government to have to deal with all that is happening and adding expenses on the treasury. The issues at hand are economic problems that greatly affect the financials of any country no matter how big, the article speaks mainly about the lack of jobs and how “There remain roughly three applicants for every open job.” This which can be related to a country having high population. Another is extending the unemployment insurance benefit from 26 weeks to 47 weeks, this also puts high costs on the US at 25Billion$. There is the idea that if the UI benefits are cut there can also be loss of jobs for already employed workers. More to add unemployment itself is a huge problem and also the period that the worker has been unemployed either highly experienced or low experienced can also have its own effects of finding and getting accepted to work again.

He argued that, there is a natural rate of unemployment where the real wage rate is in long run equilibrium for employment rate to be below the natural rate, employers and potential employees must be willing to be hired. An employer will engage more employees only if there is an actual decrease in the real wage rate, whereas potential employees, will accept work only if there is an actual or perceived increase in the real wage rate. Hence, any unemployment rate below the natural rate must, in the long run, be a disequilibrium rate. According to Friedman (1977) workers are not likely to suffer from money illusion, as they will not ignore what happens to their real pay in the long run. An initial higher wage will force employers to raise prices in order to afford paying the higher wages, this will still lead to a higher wage demand, which in turn leads to higher prices. Therefore, there is no end to the wage price spiral at any rate of unemployment below the natural rate.

Money is essential to any individual looking to have a decent lifestyle; labor is the avenue through which this is acquired. The economy goes through various fluctuations in activity causing unemployment to fall, rise, or level out. What this creates is the first type of unemployment, known as cyclical; frictional is the second type, caused by a temporary leave (for whatever reason) by the employee, and structural is the third type, varying with the economic changes in demand. The absence of unemployment at its maximum level is termed full employment, another version of unemployment. The term encompassing the sum of the frictional, structural, and, yet another type of unemployment, surplus unemployment is that of the natural rate of