The U.S. Government considers a person unemployed if they are at least 16 years of age, willing and able to work, and who are actively seeking employment, but have not found a job. To be considered unemployed, someone does not have to lose a job. The unemployment rate also includes people who are returning to work, for instance, a stay at home parent returning to work. A person entering the job market for the first time, like a recently graduated student, and a person that leaves their job is also classified as unemployed. It is important to point out that not all unemployed people will be in the unemployment rate.
The Government does not include someone who is incarcerated or institutionalized when figuring out the monthly unemployment rate. Individuals who have given up on finding work and have simply stopped looking, considered discourage workers, are also not included, nor are the hidden workers, those people paid cash and fail to report their earnings to the government. These hidden workers include both that are legal, like housekeeper and nannies and those that make a living illegally, like illegal gambling. For whatever reason people are unemployed, there are three major types of unemployment.
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How it works
In every economy, people change jobs or take new positions often. This temporary unemployment is considered frictional unemployment. There will always be some frictional unemployment as people search for a better job, with higher pay or better benefits. Structural unemployment results from lack of training, skills, or the ability to perform certain jobs. When a nation is in recession or depression, there is a downturn in the economy. The demand for goods and services along with employees decreases, resulting in cyclical unemployment. Economist must consider all these factors when measuring full employment and the natural rate of unemployment.
Since there will always be some amounts of frictional unemployment, a nation will never reach full employment. However, full employment does not mean that every adult over the age of 16 are employed. Some people do not want to work, for instance, full-time students or homemakers. To Economists, “full employment is an arbitrary level of unemployment corresponding to the natural friction in the labor market. It is a concept that implies some sort of balance or equilibrium in an ever-shifting labor market. (Miller 148). When the economist tries “to assess when a situation of balance has been attained in the labor market, they estimate the natural rate of unemployment.” Which is “the rate that is expected to prevail in the long run once all workers and employers have fully adjusted to any changes in the economy.” For the estimate to be correct, they “should only include frictional and structural unemployment” (Miller 148) when figuring out the natural rate of unemployment, and not include cyclical unemployment, which results from a recession.
Furthermore, most of us understand the impact of a recession, but do not realize the full effect of unemployment. Unemployment is costly. Not only does it result in loss of output for the entire nation, it results in higher spending for the government in unemployment insurance for those that qualify. This loss of output results in fewer schools, houses, restaurant meals, clothes, movies, and cars that could have been produced, and therefore, bought. Unemployment also affects the person that is unemployed. It places “hardship on the individual or family and could result in failed opportunities.” (Miller 143). “The unemployed are unable to earn money to meet financial obligations resulting in failure to pay mortgages or rent that may lead to homelessness. Unemployment increases the susceptibility to malnutrition, illness, mental stress, and loss of self-esteem, leading to depression. Unemployment may push the unemployed to accept jobs that do not fit their skills, resulting in underemployment, and the fear of job loss can spur psychological anxiety.” (Mondal). Is there an answer to reaching full employment?
Politian’s try to answer this question every day. In fact, most people have their own opinion of how to solve unemployment. There is not a clear-cut answer to eliminating, or at least reaching full employment. I have been unemployed since June 30, 2016 when I closed my tanning salon. I closed my business because my landlord passed away, and left the building to his children, who decided they wanted to raise my rent to a price I could not afford. The closing of my salon left 3 other people, besides, myself without a job. In today’s world, greed is a big part of the problem. Retail centers charge outrageous prices for rent, to businesses that are barely making it because of the economy. Not considering that the mom-and-pop stores are the backbone of this country. Big businesses, like Wal-Mart, do not pay their employee’s enough money to live off on. They keep their employees at part-time so, they do not have to give benefits, which costs the government more money in food stamps and health insurance. Pharmaceutical companies and Insurance companies pay their CEO’s millions if not billions of dollars while the rest of their employees are struggling to pay their bills or send their children to college. The government has so many rules on regulations on almost any business it makes it hard for new businesses to start, or existing businesses to expand. Payroll taxes, sales taxes, property taxes, corporate taxes are costing the citizens more and more of their hard-earned money, leaving them less money to spend on the things they need.
College costs are rising, leaving college students in debt for several years after entering the workforce. This leaves them with less money to buy new homes, cars, clothes, and save for their own future, not to mention less money to pay for their children’s college, which will more than likely double. The wages people earn are not keeping up with the costs of survival in the U.S. However, I do not believe that raising the minimum wage is the answer to this. I feel raising the minimum wage would only increase the costs, and result in higher inflation rate. If, someone flipping burgers at McDonald’s makes $15 per hour, the cost of a Big Mack will rise. I know if I still had my salon, I would have to raise prices by at least a quarter if not half to account for the increase. Not only would the pay increase, but so would the amount of payroll taxes each business must pay. I feel there needs to be some give and take. Greedy business owners need to realize who makes them money. I realize we do need some government regulations, but they have their hands into everything. They need to focus on what is important to the earth, and not so much on controlling every business. The government also needs to learn to live within its means as it tells us citizens all the time, instead, of taking so much of our money. I believe new business should be the ones to get tax breaks, and not huge corporations. And some of the tax breaks corporations get should be eliminated. They are the ones with the most money and pay less percentage than most people. I could go on and on about the ideas to help with unemployment, but the truth is, there is not a clear-cut answer to lowering employment.