Price Fixing: A Flawed Approach
The wrong definition of inflation has caused a lot of harm to modern day nations as well as their economies. However, one of the biggest problems created by this misinformation is the price fixing policy. Price fixing is a flawed and failed policy which has caused taxpayers to lose billions of dollars and suffer immense […]
The Growing Trend of Jobless Economic Growth
Economic growth has always been the focus of all governments. This is because it was believed that if economic growth is achieved, it will benefit the maximum number of people in the economy. Economic growth, i.e., GDP growth was closely linked to employment growth. As more people started working, the economic sentiment would become positive, […]
Economics of Human Resources Management: Hiring, Firing, and Reward Systems
The Changing Emphasis of HR Decisions Despite the widespread impression that Human Resources is distinct from the other profit generating and economic functions such as Production, Sales, Marketing, and Core Competency driven work, the HR function is indeed driven as much by concerns over hiring and retaining the best talent as well as empowering and […]
How the Gig Economy is Growing in US/Canada and What Stakeholders Need to Do?
How the US and Canada Are In the “Pole” Position for the Gig Economy/Workers The rise of the Gig Economy worldwide is one of the more notable workforce trends over the last decade or so. More so, in the United States and Canada, which are regarded as pioneers in terms of categorizing and classifying the […]
Marketing and Seasonal Demand for Goods and Services
What is Seasonal Demand ? Marketing is the process of meeting needs that are both existing as well as unmet. To explain, marketers promote and sell goods and services which the consumers want as well as determine what they want and which does not exist at the moment. In other words, marketing is all about […]
Unemployment is considered to be one of the biggest social evils that is affecting our lives today. Its economic impact is not as important as its social impact. Most people in society today depend upon jobs to earn their living. Therefore, any scenario which negatively affects the jobs of these millions of people will affect the fabric of the entire society as a whole.
Hence, we are sure about one thing i.e. unemployment is a bad thing and that it must be eradicated. However, what constitutes the word eradicated is not clearly understood. Should unemployment be managed at a given level or should it be completely removed from society? The answers to these questions are complex and therefore we will deal with them in the rest of this article.
The prevalent viewpoint in the world is that unemployment cannot and should not be completely eradicated. This notion stems from the fact that zero unemployment is an impractical goal. This goal has been followed for many decades by communist countries and the result was utter chaos and economic mayhem. The more conservative point of view suggests that unemployment is like a necessary byproduct of the modern economic system. However, it must be managed within its current levels. Failure to manage this unemployment creates problems. However, eradicating it completely is not an option at all.
This brings us to another question as to what is that optimum level of unemployment that a government must try to obtain. The answer to this isn’t straightforward either. There is no hard and fast rule that can be applied to all economies at all points of time. There are a multitude of variables that play a part in the unemployment rate. Hence, the only logical conclusion is to compare the performance of an economy to that of its peers. Most developed countries will be facing similar economic conditions and hence their unemployment rates can be compared with one another and the same logic can be applied to developing as well as third world countries.
Hence, according to modern theory, the ideal unemployment rate is not a static goal. Rather it is a dynamic goal that changes in accordance with the current situation.
Economic theory has seen many hardliners who were obsessed with the idea of zero unemployment. Their logic was that economies exist to provide human needs and serve humans. The biggest way in which they serve humans is by providing employment. Hence, zero unemployment must be the foremost (if not the only) objective driving economic policy creation. Such ideas found patronage in communist societies worldwide. However, if one sees beyond the basic argument, the flaws are readily apparent. The most obvious ones have been listed below:
The government cannot eradicate these types of unemployment until and unless it encroaches on the rights of the employers and the employees to make their own decisions. Since we live in a free market, this is not possible. Hence, the word “unemployment” as it is currently defined will always be a part and parcel of life.
Hence, it would be safe to say that the modern approach of comparing the unemployment rates with peers is relatively better than pursuing the utopian goal of 100% employment. There are some drawbacks to the peer evaluation approach as well. However, they can be managed relatively painlessly and this method is definitely the better of the two evils.
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