In this blog, I cover chapter 1 of "The Unemployment Crisis" by Richard Layard, Stephen Nickell, and Richard Jackman.
[1] Unemployment reduces output, income, and increases inequality as the unemployed job skills atropy.
[2] Unemployment fluctuates. My interpretation is that when the actual unemployment rate, U is not equal to the natural unemployment rate, Un, output and prices are not in equilibrium. When U deviates from the natural rate then there can be inflation or deflation.
[3] Unemployment in the European area has been associated with a massive increase in long-term unemployment. I interpret this to mean that job opportunities vanish the longer a worker is unemployed. Some blame generous unemployment benefits and high minimum wage.
[4] Unemployment varies greatly between countries. I once heard Robert Solow speak on this subject at Cornell College, Mt. Vernon, Iowa. It was a fact he was researching. He had reached no conclusion.
[5] Unemployment varies between age groups, occupations, regions, and races.
It is my analysis that the authors believe that unemployment is the core of an economy's ills. Unemployment imposes a psychic cost on those who are out of a job. Although the unemployed have more free time to seek leisure, few actually want to be out of a job. Most people want to feel needed. I believe that working presents challenges that develop character, skills, and gives meaning to life.
[1] Unemployment reduces output, income, and increases inequality as the unemployed job skills atropy.
ReplyDeleteI couldn't agree more...
[2] Unemployment fluctuates. My interpretation is that when the actual unemployment rate, U is not equal to the natural unemployment rate, U, output and prices are not in equilibrium. When U deviates from the natural rate then there can be inflation or deflation.
The notion of "Natural Unemployment Rate" was invented in order to explain the failure of capitalism to reach a full employment. In no other market do we hear the idea that prices don't clear demand and offer. The idea that there is a high percentage (>4%) of natural unemployment is an absurdity and unbearable to me. Have we ever heard of unused capital?
The cause of unemployment is due to the competition between work and capital. We see that when long-term interest rates are low unemployment is also low and wages are low.
[4] Unemployment varies greatly between countries. I once heard Robert Solow speak on this subject at Cornell College, Mt. Vernon, Iowa. It was a fact he was researching. He had reached no conclusion.
Countries with high income/wealth disparities and, hence, low long-term interest rate have a low unemployment rate. of course minimum wages do affect the variable too.
[5] Unemployment varies between age groups, occupations, regions, and races.
Probably cultural and historical.
It is my analysis that the authors believe that unemployment is the core of an economy's ills. Unemployment imposes a psychic cost on those who are out of a job. Although the unemployed have more free time to seek leisure, few actually want to be out of a job. Most people want to feel needed. I believe that working presents challenges that develop character, skills, and gives meaning to life.
If you rate your life with the money you are paid the conclusion is obvious.
With no credit and hence no interest rate I believe that we can reach full employment as people will be able to create businesses if the offered wage is too low without having to show they have a high credit rating or net worth.