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Unemployment in the USA
Few economic indicators are of more concern to Americans than unemployment statistics. Each month, the federal government's Bureau of Labor Statistics surveys sixty thousand individuals around nation. If respondents say they are both out of work and seeking employment, they are counted as unemployed members of the labour force. Jobless respondents who have chosen not to continue looking for work are considered out of the labor force and therefore are not counted as unemployed. Often unemployment figures decrease because people leave the labour force. Those who leave the labor force actually make unemployment rates look better, the unemployment rate includes only people within the labour force who are out of work. Not all unemployment is the same. Unemployment can be long- or short-term. Unemployment can be frictional, meaning someone is between jobs. Unemployment is called structural when someone's skills are no longer demanded because of a change in technology or an industry downturn
Some economists say there are reasons to think that unemployment in the United States is not a big problem. In 1991 32.8 percent of all unemployed people were under the age of twenty-four and presumably -few of these were the main source of income for their families. One out ,of six unemployed people is a teenager. Moreover, the average duration of a spell of unemployment is short. In 1991 it was 13.8 weeks. On the basis of these numbers many economists have thought that unemployment is not a very large problem. A few weeks of unemployment -seems to them like just enough time for people to move from one ' another. Yet these numbers are misleading. Much of the reason "unemployment spells appear short is that many workers drop out "the labour force at least temporarily because they cannot find tractive jobs.
To fully understand unemployment, we must consider the causes of-term unemployment. Empirical evidence shows that two causes are welfare payments and unemployment insurance These government assistance programs contribute to longterm unemployment in two ways. First, government assistance increases unemployment by" prompting people who are not working to claim that they are looking even when they are not. The work-registration requirement fare recipients, for example, compels people who otherwise not be considered part of the labour force to register as if they were a part of it. This requirement effectively increases the measure of unemployed in the labour force even though these people are better dc scribed as non-employed. The second way government assistance pro grams contribute to longterm unemployment is by providing an incentive not to work. Each unemployed person has a "reservation wage" — the minimum wage he or she insists on getting before accepting a job. Unemployment insurance and other social assistance pro grains increase that reservation wage, causing an unemployed person to remain unemployed longer.
Consider, for example, an unemployed person who is used to making $10.00 an hour. On unemployment insurance this person receives about 55 percent of normal earnings, or $5 50 per lost work hour. If that person pays 15 percent federal tax, and a 3 percent state tax, he or she pays $0.99 in taxes per hour not worked and nets $4.51 per hour after taxes as compensation for not working.*lf that person took a job that paid $10.00 per hour, governments would take 18 percent for income taxes and 7.5 percent for Social Security taxes, leaving him or her $7.45 per hour of work. Comparing the two payments, this person may decide that a day of leisure is worth more than the extra $2.94 an hour the job would pay If so, this means that the unemployment insurance raises the person's reservation wage to above $10.00 per hour.
It is a great mistake to attribute most unemployment to government interventions in the economy or to any lack of desire to work on the part of the unemployed. Unemployment was a serious economic problem in the late nineteenth and early