Brad Wahlgren
AP Economics
Mrs. Straub
3/24/2015
Invisible Unemployment
While you’re out and about enjoying the daisies and daffodils, because you believe that the economy is coming out of the recent recession, you really should be preparing for the coming economic apocalypse. What is this new economic problem you may ask? It’s called Invisible Unemployment and its coming for you.
The years of 2007-2009 marked rough years for the economies of the world. This two year span marked the largest recession that the world has seen since the Great Depression of the 1930s; years remarkable for stark images of concerned mothers looking off into the distance and unemployed men standing in bread lines. The most recent recession was caused by extreme amounts of borrowing and ill-advised mortgages which plunged the world into higher rates of unemployment. Macroeconomics deals greatly with the relationship between unemployment and inflation because they are associated with recessions and GDP growth respectively. As the world grows out of the recession, one would expect prices and wages to rise naturally with the new levels of growth, however this phenomenon has not been observed with the most recent economic growth. In fact, wages have remained stagnant since the end of the recession and the official unemployment rate does not accurately present the true amount of unemployed workers.
Wages Growth Over the Last Year
Let us first discuss the lack of wage growth. According to TheAtlantic.com, this can attributed to differing amounts of growth in various industries. For example, many new jobs were created in the food and retail industry, but the wages that accompany these jobs remain flat and dismal. In other industries such as energy and manufacturing, less jobs are available, but the wages in these industries are growing steadily. Hopefully, the unequal wage growth will attract more people from the service industries into jobs in other industries where wages are growing, because stagnant wages result in invisible unemployment. What is invisible unemployment? I’ll tell you. Invisible unemployment are the discouraged workers who either have given up looking for a job, or are not satisfied with their current employment. When wages are stagnant, many people quit looking for jobs and either remain unemployed or go back to school. Therefore they do not contribute their full worth to the economy through the output of their labor in addition to spending on products. Perhaps worse are the people who remain employed in positions they are not satisfied with. Given the opportunity, they could produce large amounts of output in different fields of employment for greater wages. This represents a loss of efficiency by the economy and restricts the U.S. from achieving more economic growth coming out of the recession.
This is not an easy solution to fix. With companies increasingly outsourcing jobs, it makes it more difficult for unskilled workers to remain employed. Historically, unions negotiate wage prices with their employers when prices rise relative to their wages. This may just need to happen again in industries that are not experiencing significant amounts of wage growth. Either way, invisible unemployment is a major hindrance on U.S. economic growth.
Works Cited
NEW YORK (CNNMoney) -- There Are Far More Jobless People in the United States than You Might Think. "The 86 Million Invisible Unemployed." CNNMoney. Cable News Network. Web. 24 Mar. 2015.
Thompson, Derek. "The Rise of Invisible Unemployment." The Atlantic. Atlantic Media Company, 9 Nov. 2014. Web. 24 Mar. 2015.
This is why the employment rate is so much more important to look at than the unemployment rate. The unemployment rate in recent years has gone down however the employment rate has mainly been steady. How can that be the case you may ask. The unemployment rate does not count part time workers that want to be full time or those who have given up searching for work or those who have an education to pursue a better job than they are in. Just because the unemployment rate is going down does not solely indicate that the economy is improving.
ReplyDeleteInvisible unemployment is something really interesting to think about because it makes you wonder how many people are really unemployed that aren't counted in the national unemployment rate. I also wonder how much efficiency is being lost that nobody actually knows about from the workers who consider themselves unemployed as well as able and willing to work, just discouraged. I would think a way to combat this loss of efficacy would be to find a way to identify how many workers consider themselves invisibly unemployed, and then once there's a number as to how many people are like this then actions to count them in the nations unemployment rate might be implemented. I feel like they should also be counted in the nations unemployment rate.
ReplyDeleteGreat topic choice! Unemployment is something that has always interested me and I like how you talked about invisible unemployment. Sometimes I wonder if the reason why people are unemployed impacts the economy. Some people are unemployed because they were fired, while others were laid off because the company had to make cuts, and even more, some people just cannot find a job they want to stick with. Your essay sheds light on this intriguing discussion.
ReplyDeleteWow, I was smelling the roses, but didn't even know it. What a bunch of who-ha information we are receiving, I never knew that the economy hasn't increased its expect prices and wages, and those were key observations for knowing the economy is doing well. Just to add more sprinkles to the ice cream, I agree with Dan K. as he states that we be observing more of the employment rates, rather than the unemployment rates as there can be outlying factors.
ReplyDeleteBrad, I got shivers after reading this. I can't tell if it's from the fever or from the striking information you have presented. Clearly it looks like this invisible unemployment is falsifying the true unemployment rate, which may in turn result in Phillips curves that do not genuinely display the nation's economic condition. It's a good thing you brought up this issue.
ReplyDelete