ECO120 - Group Assignment PDF

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FACULTY OF ADMINISTRATIVE SCIENCE AND POLICY STUDIES DIPLOMA IN PUBLIC ADMINISTRATION (AM110) ECO120 – FUNDAMENTALS OF ECONOMICS SEMESTER: OCTOBER 2020 – FEBRUARY 2021 ASSIGNMENT TITLE: UNEMPLOYMENT IN UNITED STATES (U.S.) PREPARED BY: NAME

STUDENT ID NO.

AISYA NAJWA BINTI SAPAWI

2019691122

GRACE RAMIE GALA

2019428378

JASINTA NAWAI ANAK AMBROSE

2019441344

RHETA ANAK AYUH

2019447224

LECTURER: LUCY BATCHY ANAK GABRIEL PUEM

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TABLE OF CONTENTS: NO. 1.0

CONTENTS INTRODUCTION

PAGES 3–5

1.1 DEFINITION OF UNEMPLOYMENT 1.2 MEASUREMENT/CALCULATION OF UNEMPLOYMENT 1.3 THEORY OF UNEMPLOYMENT 1.4 TYPES OF UNEMPLOMENT 2.0

THE ISSUE THAT RELATED TO UNEMPLOYMENT

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2.1 BACKGROUND OF UNEMPLOYMENT IN UNITED STATES 2.2 STATISTICAL DATA AND EXPLANATION ON UNEMPLOYMENT 2.3 CAUSES ON WHY UNEMPLOYMENT HAPPENED 3.0

THE EFFECTS OF UNEMPLOYMENT

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3.1 INDIVIDUAL 3.2 COUNTRY 4.0

THE PUBLIC POLICIES AND SOLUTIONS TO OVERCOME

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UNEMPLOYMENT 5.0

CONCLUSION

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6.0

REFERENCES

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1.0

INTRODUCTION The existence of unemployment has caused the biggest hurdle in economic growth. When

the labour force is not working, then the economy will lose the potential of Gross Domestic Product which has the potential to be produced by every worker with their time and energy. Basically, the disposal of scarce man power resources and rapidly producing greater revenue and services. That is, the output of Gross Domestic Product actually grows slower than it should even be able to shrink altogether. Unemployment has consequences to country and individual and economic. Unemployment in the United States that will be discussed here is about the problem, the impact on individuals and countries as well as its solution in reducing unemployment in the United States. These factors can influence the period of unemployment, the number of employees and the level of wages.

1.1 DEFINITION OF UNEMPLOYMENT The term unemployment is what refers to individuals who are in the working age where the individuals is able to work and willing to work but they can’t find a job that is suitable for them. Unemployment represents the number of people in the workforce who want to work, but are unable to get a job. Definition according to the U.S. Bureau of Labor Statistics (BLS), unemployment are the people who have no job, but are actively looking for work in the last four weeks, and are currently available for work. The BLS also actually includes people who are temporarily laid off and waiting to be called back to their original job in unemployment statistics. The BLS doesn’t count all unemployed people as unemployed and it doesn’t include those who have not been looking for work for the last four weeks. The BLS eliminates them from the workforce, which consists of the unemployed and working. In fact, the vast majority of people who leave the workforce are when they retire, go to school, have disabilities that make them unemployed, or have family responsibilities. Also, the BLS doesn’t count people who want to work but are not actively looking for work. Unemployment often falls during economic prosperity and the rise of the current economic downturn which can put a great deal of pressure on public finances as tax 3

revenue declines and the net cost of social security increases. An important tool for managing the unemployment rate is with government-imposed spending and taxation decisions or known as fiscal policy and adjustments of U.S. Federal Reserve interest rates, monetary policy. Unemployment is often seen as a measure for measuring the economy's health in the country. It is usually measured by the unemployment rate, which divides the total unemployment by the number of people in the workforce, and unemployment serves as one of the indicators of economic status. The labour force of a country is the actual number of people aged 16 years and above who are willing to work. Economically, they are referred to as an active population consisting of those who work and those who are unemployed.

1.2 THEORY OF UNEMPLOYMENT The theory of unemployment according to Karl Marx in his book Theory of Surplus Value, in fact the way capitalists are produced to work is too many workers while making the rest a reserve army of the unemployed poor. Unemployment does exist in an unstable capitalist system and a massive periodic unemployment crisis is expected. He theorized that unemployment is inevitable because it is actually an important part of the capitalist system, which is also with recovery and regrowth which is also part of the process. The provision of manpower as a proposal that can emphasize wages is a polar function in the capitalist system. This can be achieved by dividing the proletariat into surplus labor or workers and underemployed or unemployed. At first glance, the unemployed seem to be inefficient because unemployed workers will not increase profits, but the unemployed can benefit in the global capitalist system because the unemployed can lower wages which is a cost from the owner’s perspective. From that perspective, low wages will benefit the system by reducing rent to the economy. However, it did not benefit the workers as Karl Marx said, the workers or the proletariat sought to benefit the bourgeoisie through their capital expenditure. The capitalist system can manipulate the labor market unfairly by perpetuating the unemployed which lowers the demand for workers for fair wages. Employees compete with each other in services to increase profits for owners. As a result of

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these capitalist production methods, Marx argues that workers will experience alienation as well as segregation through their economic identities. According to Marx, to get rid of unemployment permanently is the only way is to eliminate capitalism and also the system of forced competition for wages and then switch to the socialist or communist economic system. The continued existence of unemployment will be proof of the inability of capitalism to ensure full employment for contemporary Marxists.

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2.0

BACKGROUND OF UNITED STATES United States, officially United States of America, abbreviated U.S. or U.S.A., by name

America, country in North America, a federal republic of 50 states. Besides the 48 conterminous states that occupy the middle latitudes of the continent, the United States includes the state of Alaska, at the northwestern extreme of North America, and the island state of Hawaii, in the mid-Pacific Ocean. The conterminous states are bounded on the north by Canada, on the east by the Atlantic Ocean, on the south by the Gulf of Mexico and Mexico, and on the west by the Pacific Ocean. The United States is the fourth largest country in the world in area. The national capital is Washington, which is coextensive with the District of Columbia, the federal capital region created in 1790. The US unemployment rate edged down to 6.7 percent in November 2020, from the previous month's 6.9 percent and compared with market expectations of 6.8 percent, as fewer people looked for work. The number of unemployed persons fell by 326 thousand to 10.7 million and the employment level declined by 74 thousand to 149.7 million. The labor force participation rate edged down to 61.5 percent in November, 1.9 percentage points below its February level. The employment-population ratio was little-changed at 57.3 percent, 3.8 percentage points lower than in February. Unemployment generally falls during periods of economic prosperity and rises during recessions, creating significant pressure on public finances as tax revenue falls and social safety net costs increase. Government spending and taxation decisions (fiscal policy) and U.S. Federal Reserve interest rate adjustments (monetary policy) are important tools for managing the unemployment rate. There may be an economic trade-off between unemployment and inflation, as policies designed to reduce unemployment can create inflationary pressure, and vice versa. The U.S. Federal Reserve (the Fed) has a dual mandate to achieve full employment while maintaining a low rate of inflation. The major political parties debate appropriate solutions for improving the job creation rate, with liberals arguing for more government spending and conservatives arguing for lower taxes and less regulation. Polls indicate that Americans believe job creation is the most important government priority, with not sending jobs overseas the primary solution.

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3.0

PROBLEMS IN DETAILS As we know the current level of unemployment no matter in the United States or

anywhere else will definitely happen whether it is in the long or short term. So how does the unemployment problem occur in the United States? There must be certain reasons why this issue arose. For sure, there are many types of unemployment and the first one will be the frictional unemployment. So, if we look at the first type of unemployment, we will be found that it is usually happened in a short term or temporarily mainly because of market turnover. For instance, the willingness of employees themselves who are determined to leave their jobs. Some unemployed workers have saved a certain amount of money for their own use during their period of work and decided to quit after they were able to get the desired amount. They will be unemployed for a while until they find a job that offers a more lucrative salary. The duration in finding the new job is called the frictional. This frictional unemployment also can be happened if there is an employee who like to move around until they get a better position in another workplace. Another cause of friction unemployment is due to the attitude that occurs among the new workforce, especially among university graduates who graduate at a high level of learning. They are so selective in their work that the level of unemployment among graduates is at a high level and it is very worrying even if it is temporary. Historically, as educational attainment rises, the unemployment rate falls. For example, at United States, the unemployment rate for college graduates was 2.4% in May 2016, versus 7.1% for those without a high school diploma. In addition, friction unemployment also occurs due to those who re-enter the workplace who previously stopped possibly because they were married, had to take care of children or other problems that they could not avoid. Next type of unemployment is the structural unemployment resulting from the change in the structure of economic. This structural can cause long-term unemployment. For example is when the employment sector has made progress in the use of technology. The workforce involving humans will be declining where sophisticated equipment such as robots or computers will take over all existing work. So, opportunities in creating jobs for human beings will be limited to get. At the same time, the unemployed who will enter a job may be required to have a high level of knowledge in operating machines, otherwise they will lose the opportunity. It is not impossible that this structural unemployment occurs when a company tends to move to a place that has a low cost of living where that also means the cost of paying to get a new labor is only incurred at a low rate. Then for another type of unemployment, it will be the cyclical 7

unemployment or in technical term it is known as the demand-deficient unemployment, it’s only happened during the recession or also depends with the economic condition. Cyclical unemployment is created by low market demand. When demand declines, companies lose so much value. They have to lay off staff if they don't predict sales to pick up anytime soon. Higher unemployment triggers even further decline in market demand, which is why it's cyclical. This results in large-scale joblessness. Demand-deficit unemployment happens often when incomes are too high. Most of the reasons against higher minimum wages seem to be that. Critics claim that they would let other employees go as employers are forced to pay a higher wage per employee. So, one of the examples that we can relate with this statement is when the U.S. faced the subprime mortgage crisis and resulting recession of 2007–2009, which significantly increased the unemployment rate to a peak of 10% in October 2009. The unemployment rate fell steadily thereafter, returning to 5% by December 2015 as economic conditions improved.

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4.0

EFFECTS OF UNEMPLOYMENT The national unemployment rate is defined as the percentage of unemployed workers in the

total labor force. It is widely recognized as a key indicator of the performance of a country's labor market. As a closely watched economic indicator, the unemployment rate attracts a lot of media attention, especially during recessions and challenging economic times. This is because the unemployment rate doesn't just impact those individuals who are jobless–the level and persistence of the factors of unemployment have wide-ranging impacts across the broader economy. According to the U.S. Bureau of Labor Statistics (BLS), when workers are unemployed, their families lose wages, and the nation as a whole loses their contribution to the economy in terms of the goods or services that could have been produced. Unemployed workers also lose their purchasing power, which can lead to unemployment for other workers, creating a cascading effect that ripples through the economy. In this way, unemployment even impacts those who are still employed.

4.1 INDIVIDUAL The costs of unemployment to the individual are not hard to imagine. When a person loses their job, there is often an immediate impact on that person’s standard of living. Prior to the Great Recession, the average savings rate in the U.S. had been drifting down toward zero (and sometimes below), and there are anecdotal reports that the average person is only a few weeks away from serious financial trouble without a paying job. Prolonged unemployment can lead to an erosion of skills, basically robbing the economy of otherwise useful talents. At the same time the experience of unemployment (either direct or indirect) can alter how workers plan for their futures — prolonged unemployment can lead to greater skepticism and pessimism about the value of education and training and lead to workers being less willing to invest in the long years of training some jobs require. On a similar note, the absence of income created by unemployment can force families to deny educational opportunities to their children and deprive the economy of those future skills.

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The effects of parental unemployment and job displacement on the well-being of families and children have rarely been more relevant than in the current economic climate. Research suggests that job loss can have wide-ranging negative impacts. It can negatively affect families’ economic security. This is reflected in families’ reducing their food expenditures, moving, and relying on public assistance. Job loss also negatively affects adults’ physical and mental health and marital relationships and increases the likelihood of divorce. Children’s well-being diminishes, impart via effects on these family factors and perturbations in parent-child relationships.

4.2 COUNTRY Strong and sustained unemployment has been a big problem for the economy in two main regions. One of these fields has eroded the funding base and secondly, intensified government demands through the use of welfare services owing to the effects of high unemployment on poverty and injustice. The government should fulfill the needs of the people in its country. Big country such as US need higher amount of money to sustain the economy of the country. But when unemployment is higher than that, it would be difficult to manage the economy. This may cause a big loss to the country economically. The next effect is that the negative costs resulting from unemployment. Because of unemployment, the GNP of the economy would be smaller than the real GNP, that is to say that the potential of full employment. The disparity is referred to as the GNP distance. The difference is positive but can be marginally negative if the real GNP exceeds the future GNP and this can only be done when workers work overtime or companies operate their plants outside their productive capability.

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5.0

SOLUTIONS TO REDUCE UNEMPLOYMENT In order to reduce the rate of unemployment in the US is to start a new job. During the

2016, it was really important to start up 50,000 to 110,000 of jobs in one month. This is to prevent the rate of unemployment increase rapidly. It is also believed that when the rate of unemployment reaches 6% to 7%, it shows that the economy does not have enough jobs to be filled by the people. That is where the government should take the responsibility. Based on the history of unemployment in the U.S., the Bureau of Labour Statistic shows the rate of the unemployment by annually. As far back as in the 1949, it records the annual amount of unemployment in the labour force and shows the progress and the weakness of the fiscal and monetary policies. This is because the rate of unemployment is influence by these two policies. The first solution to this unemployment is by implementing the expansionary policy or monetary policy by the Federal Reserve. Monetary policy is the actions and the relationship of a central bank which manage the supply of money. The supply of money includes the credits, checks, cash and mutual funds from the market. Credit is the most significant of these types of capital. Things that are under and cover by credit are such as loans, bonds and mortgages. The main objective of this policy is to manage inflation, to reduce unemployment, and to promote moderate long-term interest rates. This solution is the most strong, fast and reliable. With lower interest rate, households may borrow as what they need. This entails costly products such as vehicle, houses, and electronic goods. It helps to boosts enough demand to bring the country's economy back on course. If the crisis is extreme, monetary won’t be able to manage and it will not be enough on its own. This why they need the fiscal policy, because they need to stimulate the economy, the government should consider to cut the taxes and raise the spending. As a start, the fiscal policy effect is slower than the monetary policy as it takes time to be decided by the Congress and the President. But once it is executed, it can be more efficient. It also gives much-needed confidence that the government is going to turn things around. Trust is the key in persuading people to invest as soon as possible for a prosperous future. By cutting taxes, it is also the same as lowering the interest rates. Both give companies and customers more to spend on their living and helps increases the demand. It also allows companies more capital to spend and recruit more employees to work. Government spending may take the form of workforce services. The government directly employs workers and it also contracts with other businesses to develop and offer services. It offers customers the cash they needed to purchase more goods. 11

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CONCLUSION In a nutshell, unemployment is a serious social and economic problem and has a

profound effect on all things but is often overlooked. A stronger unemployment assessment system should be implemented to determine the causes of unemployment and how to better address it. It can have a negative impact on the unemployed as those who are unemployed will have worse prospects for finding new jobs and those who work will also feel less secure to maintain their jobs in the future. Overall, for economic development, governments and individuals should take the ...