Natural Rate Of Unemployment Essay

The unemployment rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month. Unemployment is termed as a major health of the economy and every country tries to reduce unemployment rate for sustainable growth. It is referred as the number of unemployed workers divided by the total civilian labour force. Every economy tries to ensure full employment in the country but there is the existence of natural rate of unemployment though nation tries hard to obtain full employment in the country.

In any economy, no matter whether it is controlled by the government or by free markets, people need to work in order to support it. The government does not generate tax revenue by magic. There have to be people in that economy earning an income to ensure that the government continues to collect taxes. In a free market economy, the same applies because there are some services which only an organized government can supply (such as protection from extra-national threats), but there also those which the people get for themselves because of the working of the markets. In any scenario, unemployment is, at the very least, a drag on the economy, and it can be much worse. This paper examines how the unemployment rate in the United States is underreported, and how that fact effects the sluggishness of the present economy.

There is an old cliché that say “the more money you make, the more you spend.” How accurate is this statement? What effects does wage increases, have on inflation? Lately the topic of discussion conveys the matter of minimum wage increases sparking an increase the cost of living. The individuals who would not receive pay raises; but will be affected by cost of living increases as well as labor costs, do not want to see the wages go up. However there are people scrambling to survive on minimum wage or slightly more, while other individuals struggle to feed their families every month. The other side of the debate is the wealthier population feels the lower income population needs work harder to move up the corporate ladder in order to earn more money. While the individuals themselves feel they should be making more money for the work they currently do and services they provide. In this paper, I will cover subject matter pertaining to the many different aspects that come along with wage increases. After analysis of all of the information the choice will be made whether to side with wage increases based on the opinions of individuals on both sides of the argument. Also I will highlight what will be best for the economy and in my opinion what is best for the people.

President Barack Obama has recently proposed an increase in the minimum wage rate to $10.10. With the increase of minimum wage there are both potential benefits and costs. One of these costs is the risk of employers being forced to lay off workers due to their fixed budgets. In the short run the price of labor is a fixed cost, and when this fixed cost increases dramatically it has a major impact on the controlled budgets of employers. The increase in the cost of labor is also paired with an increased cost in higher taxes for business

There are three different kinds of unemployment that affect our economy: frictional, cyclical and structural. Frictional unemployment occurs when there is a time laps between being employed and looking for work. This term can also be referred to as search employment because it is the time spent searching for a place of employment. One example of this would be a student taking time off of work to finish college and get a 4 year degree. Usually, it takes a lot of time and dedication to finish the last years of school, so some students tend to go to school full time and work part time or not at all. This type of unemployment is also classified as voluntary unemployment because this period of unemployment is at the discretion of the person to some small degree. Secondly, there is cyclical unemployment which changes depending on the business need; for example, workers are laid off when business is bad - then

Paradoxical studies have been done showing both positive and negative effects on employment. Basic economics tells us labor is a commodity and raising the price floor will cause a surplus, but relatively recent studies tell

Although there is a great deal of disagreement about how to regulate the minimum wage in America, statistics indicate that the minimum wage has not been keeping pace with inflation. “The federal minimum wage is just $7.25 an hour and hasn’t been raised in three years. But a raise is much more overdue than that. If we look at the minimum wage 44 years ago, and simply adjust it for inflation, it would be more than $10 today.” However, there is tremendous resistance to raising the minimum wage, because of the belief that to improve the economic recovery, workers must be ‘cheap’ to encourage businesses to buy more labor. According to classical economic theory, as supply increases in the form of unemployed labor, labor prices should be allowed

The natural rate of unemployment is defined as the unemployment rate that is consistent when the economy is operating at its potential output. This rate would occur when the economy is considered stable.

But research has shown that modest increases like the proposed raise to $10.10 have little to no effect on employment and that affected businesses can absorb them with negligible price adjustments. As the country struggled to pull itself out of the Great Depression, America’s business leaders saw what many employers are coming to recognize today that paying low wages has significant costs for businesses. To build a thriving economy, workers need to be paid wages upon which they can build a

Phillips curve a curve demonstrating the relationship amongst unemployment and changes in wages or costs. It was for some time thought to mirror a trade off amongst unemployment and price increases, in spite of the fact that Phillips exhibited his findings just as an observed consistency, financial experts rapidly came to see the relationship as speaking to an trade off amongst price increases and unemployment; policymakers who favored dynamic policymaking trusted that they could pick elective blends of unemployment and inflation. The Phillips curve clarifies how it can influences the unemployment or inflation and who was correct or mistaken when the strategy creators settle on their

In his article Time to Ditch the NAIRU, published in the Journal of Economic Perspective, James Galbraith has addressed an alternative view on the controversial NAIRU, or the natural rate of unemployment. His argument is well presented in four parts: the non-compelling theoretical cases for the natural rate; the mismeasure of the NAIRU and the shortcomings of the short-run Phillips curve; professional disagreements and discussions on the location of the NAIRU, and lastly, costs and benefits of using the natural rate of unemployment a policy guide tool. This response paper will critically analyze Galbraith’s view and provide a personal viewpoint on the main ideas related to the NAIRU, in context particularly presented by Galbraith and the world’s economy in general.

Unemployment rates were essentially higher in August in 6 states, lower in 3 states, and stable in 41 states and the District of Columbia, the U.S. Authority of Labor Statistics reported today. Ten states had eminent jobless rate diminishes from a year prior, 5 states had increments, and 35 states and the District had no noteworthy change. The national unemployment rate stayed at 4.9 percent in August and was minimal not quite the same as that of August 2015.

The national unemployment rate in the United States from December 2015 is 5.0 percent, which has reduced from the previous months in 2015. The unemployment rates for Whites are 4.5 percent, which is lower than the national average. But sadly the unemployment rates for minorities are much higher. According to bls.gov the rate for unemployment for African Americans is 8.3 percent; although this number is the lowest it has been since 2007, theirs is still higher than the national average. The unemployment rate for Mexican-Americans (Hispanics) is 6.3 percent and for Asian Americans is 4.0 percent. This shows that overall African-Americans still have higher unemployment than every other demographic since December 2016.

The United States is currently experiencing a slow recovery from the recession of 2008-09. The current unemployment rate is 7.7%, which is the lowest level since December of 2008 (BLS, 2012). However, this rate is believed to higher than the rate that would occur if the economy was operating at peak efficiency, and it is also believed that there are structural issues still underpinning this performance. For example, the number of Americans who have exited the work force as the result of prolonged unemployment is believed to be higher than usual. In addition, the Congressional Budget Office (CBO, 2012) notes that long-term unemployment of greater than 26 weeks is at a much higher rate than normal, which will have adverse long-run effects on the economy, since workers with long-term unemployment often find their career paths derailed.

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