Economy and Government, Essay Example

A recent article reports that the current long term unemployment crisis in the U.S. is one of the worst in historical terms. About 40 percent of all people current unemployed have been without jobs for at least 27 weeks and reached as high as 45 percent during the recent great recession. The proportion of long-term unemployment as a percentage of total unemployment has been the highest in recent years since the end of WWII (The Huffington Post, 2013).

The chart in the graph paints an interesting picture since the end of WWII. The previous highest proportion of long term unemployment in the total unemployed labor force was about 25 percent during the 1980s and before that it was about 21 percent during the mid-1970s and late 1950s (The Huffington Post, 2013). It may not be unreasonable to assume that the unemployment situation is probably the worst since the Great Depression.

According to The Brookings Institution, long term unemployment may adversely affect the lifetime earnings of 4.7 million Americans and the joblessness would also negatively affect their children’s health. In addition, long term unemployment also significantly reduces the prospects of reentry into the job market. Unemployment for nine or more months results in 20 percent fewer interview opportunities for individuals applying for low or medium-skilled jobs. Being out of the job market for a significant period of time also reduces employment prospects due to decaying skills (The Huffington Post, 2013).

This article touches upon several concepts covered in the chapter seven which also covers unemployment. It is apparent from the article that most of the unemployed Americans are either “job loser” or “reentrant”. The chapter mentions that the overall average unemployment duration during the past 25 years has been 16 weeks which reminds us how different and dire is the situation in the labor market now.

It is also possible that the actual unemployment rate as well as long-term unemployment rate may be quite higher than the official estimates due to the “discouraged worker phenomenon”. It is also reasonable to assume that most of the unemployment is structural and cyclical because the job market outlook has been so bleak over the last few years that fewer people would choose voluntary unemployment.

As far as the government’s role in the economy is concerned, the U.S. Government should play more active role in boosting the employment rate through both capital spending as well as creating favorable conditions for employers to hire more and consumers to spend more. Even though the unemployment rate in the U.S. is still not at a desirable level, it is relatively much lower than many countries in Europe where the governments have played smaller part in stimulating their respective economies than the U.S. Government. Even the lessons of the Great Depression demonstrate government’s importance in boosting employment rate and recovering the economy. One of the reasons U.S. came out of the Great Depression were the policies of then President Franklin D. Roosevelt who chose a different path than his predecessor. President Roosevelt’s Administration increased government involvement in the economy (Miller Center, University of Virginia) to increase employment rate and provide support to struggling businesses.

Reference

Miller Center, University of Virginia. (n.d.). Franklin Delano Roosevelt: Domestic Affairs. Retrieved August 23, 2013, from http://millercenter.org/president/fdroosevelt/essays/biography/4

The Huffington Post. (2013, August 20). Long-Term Unemployment Crisis Is Historically Terrible (CHART). Retrieved August 23, 2013, from http://www.huffingtonpost.com/2013/08/20/great-recession-long-term-unemployment_n_3785410.html?utm_hp_ref=unemployment-extension