Unemployment refers to one’s state of joblessness despite his or her efforts to seek work actively. The rate of unemployment is represented by dividing the total of jobless individuals against the entire labor force. During the recession period, the economy normally experiences an unusual rate of unemployment. Current statistics maintain that more than two hundred million people are unemployed globally. This factor is attributed to the slow employment growth rate in advanced and developing countries. Considerable debates remain to explain the causes, effects, and solutions related to unemployment. Many polices are available for implementation by governments if they look to reduce unemployment in the economy with most of these policies focusing on the underlying unemployment causes (Artis, 24).
The Austrian economics school states that market mechanism should be regarded as reliable solutions for alleviating the burden of unemployment. The market mechanism solution goes against external factors directed at the labor market including minimum wage laws, taxes, unionization, and other regulatory laws that discourage employment. Keynesian economics put into emphasis the cynical employment nature and recommends solutions aimed at reducing the rate of unemployment in the recession period. This theory revolves around recurrent supply shocks capable of lowering aggregate demands for products hence reducing the rate of unemployment.
Keynesian economics models suggest government interventions fostered to raise the demand workers. These interventions include job creation public funding and expanding monetary policies. The Georgist school of thought – economic theories before the Keynes- was also able to note the cynical nature and as well also considered the in land speculation role that raised the economic rent. Sustaining economic activity in the rent bubble is not possible because the rent funds mostly come from wages and interest (Artis, 46). The Georgist theory therefore solicited land value taxation as a means of eliminating capital and labor taxation. This theory was notably against Marx’s theories and land nationalization.
Ultimately, unemployment poses massive impact on the society and economy as well. In many countries, the burden of paying the benefits owed to the unemployed rests with the government. The longer the labor remains unemployed or the larger its number, the more funds the government is liable (Bean, Charles, Layard, and Nickell, 34). Therefore, unemployment makes a nation deal with decreased production, lost income, and additional costs. Furthermore, the unemployed individual has a diminished spending power since he or she would rather save than spend unnecessarily. This in turn affects the economy adversely. Increased job insecurity and taxes ultimately influences the spending power of even those with jobs. This implies that they minimize their spending thus affecting the economy adversely. Unemployment also affects indirectly other factors including health costs, income per person, and standard of living.
Other than the economy, unemployment as well affects the society. Unemployment normally comes with anguish, unhappiness, and despair. One effect of unemployment in the society comes through problems in mental health. These problems may involve low self-confidence, depression, and feeling unworthy. With no source of income and its associated frustration, the unemployed normally have negative attitudes and may feel they have lost a sense of purpose (Artis, 64). Normally, high unemployment results in political instability due to the lost trust to the administration by the citizens. Another effect comes through employment gaps. In this case, the more the unemployed remain jobless, the harder it becomes for them to secure a job. It is hard for an employment opportunity to arise for a person out of work for a long time, even though it was not his or her fault per say.
With the devastating effects associated with unemployment, it is imminent for the government to step in and establish ways creating more jobs as well as educating people on efficient ways of securing jobs. One way comes through employment insurance. This can in particular be seen in the United States where the state government runs the employment insurance put forward by the state. Currently, the employment insurance in Massachusetts is the highest with Mississippi having the lowest. The current economic crunch has led to the extension of employment benefits in most states.
The government as well works to enlighten society on the ways of acquiring jobs through employment and training administration. Most governments emphasize on internet use as the most appropriate means seeking jobs. The internet has a vast array of websites that provide information regarding worker dislocation programs, training, and employment opportunities. Governments also derive employment reduction plans from the Keynesian economic theory. In this case, state governments work to increase their expenditure. In this case, the effect involves increased aggregate demand that consequently affects the equilibrium national income. Governments also work to lower rates of taxation as a means of increasing the disposable income of consumers and boost national spending. The effect is normally greater when tax is reduced on the workers with incomes lower than average (Bean, Charles, Layard, and Nickell, 57). Another way of how governments deal with unemployment comes through lowering interest rates. Relaxing monetary policy through reduced interest rates encourages credit demand and increases the consumer’s disposable income. It also encourages firm investments due to the fallen marginal costs.
Artis, Michael. “The Unemployment Problem.” Oxford Review of Economic Policy. 14.3 (2008). Print.
Bean, Charles R, Richard Layard, and Stephen Nickell. “Unemployment.” Economica. 1986 (2010). Print.