Labor Is A Driving Force

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Lauren Lawson Dr. Scott Testa EC201.3 December 1, 2014 Unemployment in America Labor is a driving force in every economy. Wages paid for labor helps increase consumer spending and is essential for companies. Unemployed workers represent wasted potential inside an economy. Unemployment arises when factors of production that are willing and able to produce goods and services are not actively engaged in production. Unemployment means that the economy isn’t meeting its goal of full employment. There are four basic causes for unemployment in a working economy. These reasons are: minimum wage lages, labor unions, efficiency wages, and job search. The labor market is just like any other market. If there are a lot of unemployed workers who want jobs, the price of labor will drop until all that force is employed. In order to keep a certain standard of living, the government implements a minimum wage. However, raising the minimum wage can increase unemployment. The second reason for unemployment is based on efficiency wages. Firms benefit by paying their workers above the minimum wage so they can produce happier, healthier, and more productive workers. In turn, more people want to work for that position than there are actually seats for that position. Therefore, efficiency wages can increase the wages for workers who are employed but increase overall unemployment. Job search isn’t similar to the other causes of unemployment. When a person decides that they want to work, then he
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