The Case of the Disappearing Workers (Misleading measures of unemployment)


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The Case of the Disappearing Workers (Misleading measures of unemployment)

Question 1

In this day and age, there is an increasingly high rate of unemployment due to the unemployment benefits that are offered. Following to trends in the relationship between the existence of unemployment and unemployment durations it can be concluded that among the major contributing reasons unemployment benefits top the list. The unemployment benefit money is offered to people who register as unemployed persons with the positive aim to assist and sustain them during the period that they are seeking for another job. It is meant to provide the basic needs for the individual during that period of time that they are conditioned to be finding a job. However most people think of them as a getaway from the hustle of finding another job and in the process of relaxing they rely on them for their sustainability. They take this as a guaranteed salary therefore they will try as much as possible to lengthen the period that the benefits are offered to them. In such cases people will take advantage of the situation and delay in seeking jobs. This increase on the reliability of people on the benefits creates a longer unemployment period therefore increasing the rate off employment.

The demand analysis of unemployment benefits show more than the perceived number of services are in demand and this is increasing annually. It is assumed that this is so because of the increased number of people demanding for unemployment benefits and they do not fulfill the condition of searching for a job. Therefore the balance is distorted and there is increased service demand from the relevant organizations. Opportunity cost is the assumed cost of any action that is measured through monetary value of the next best opportunity that is forgone. In relation to this question, opportunity cost would be the reliability of people on the unemployment benefit and foregoing any opportunity they might have had to get another job. It creates a dependency trend on unemployment benefits increasing the duration of unemployment and in turn increasing the unemployment rate.

Question 2

The balance between employment and unemployment rates plays an important and vital role in the overall economical stability. Drastic increase or decrease in any of them would impact the general economy differently. If there were a situation whereby there were not enough levels of unemployment due to full employment, it would result to a strained and unstable economy. To start with, this would create an overflow of money in circulation. This is because almost everyone would be employed therefore they would be entitled to salaries at the end of the month. The earned salaries would be used to purchase goods and services from the market and with the assumed amount of money in circulation; it would be so much more than the market is able to offer. This would result to more demand of goods and services from the market than there is supply in order to provide to the consumer and in this case almost everyone. This strain in the market would add to the economic imbalance caused by the high amounts of money in circulation. In the long run there would be money but the goods and services to purchase using it would be scarce therefore creating an economic crisis. On the other hand, employers would have an extremely hard time to get employees. This is because almost everyone was employed and for such a situation where there is such availability of employee positions, the salary in every business searching for employees must be comparatively high. Therefore the more the available employment positions the more the salary demand in order to beat the competition. In the long run there would be businesses in search of employees but due to the high employment rates they would have to increase their salary offers to large amounts in order to attract people even from other businesses. The employee deficit would result to business closures or companies making less money than they are using to run the businesses. This would create an economic discontinuity because there would not be balance between the high demand of employees and the availability of people to assume the positions.

Question 3

Disability social security has been the best things that happened to this group of beneficiaries. Leveling income taxes on the earnings of this group will deal them big problem. It is believed that social security for this group of people has grown over the last twenty years. This sis program designed to cater for disabled persons under the age of sixty five years. Under the social security arrangement, people can receive payments even if they don’t work. The people who were getting this money will be greatly affected as their v earnings will decline tremendously. The other group of disabled persons that will be greatly impacted by the introduction of taxes on social security is the people who have never worked the whole of their lives. If taxes are introduced to this group of people, who don’t even have experience in the labor market, their means of survival will be curtailed (The Economics of Macro Issues “ The Case of the Disappearing Workers”).

With the taxing will follow a decline in the number of beneficiaries from the scheme. Given that the amounts given had been rising steadily for the last thirty five years, the amounts are set to reduce drastically as a significant amount of the government allocation will revert back to the government in terms of taxes. The numbers of recipients will have to decline from the over eight million currently, to a figure slightly below this. It will, also mean that that people who might have worked through pain, and who had opted to instead take the social security, will have to rethink their position, if they want to draw any substantial economic gains. The taxes will reduce the numbers of people opting to join the program, because there will be less incentive.

Additionally this may make a lot of people opt for early retirement as opposed to waiting for social security that is heavily taxed by the government. Although it is mostly unlikely that people shift from social security to early retirement, most people could opt for this. This is because with early retirement one is paid his or her full amount as if he or she has worked to full age. Given that social security benefits are reduced drastically based on if the worker is getting a workers’ comp benefit or not. On the other hand the retirement benefits are not affected by workers comp benefit. It is advisable for persons who are receiving workers comp benefit and are bout age 62 to talk to their social security firm so that they can change their status from one of disability to a retired status. This is believed to guarantee the beneficiary good returns on his social security (The Economics of Macro Issues “ The Case of the Disappearing Workers”).

Question 5

First it will lead to the rise in the number of discouraged workers sin the country. Many of the people, who may have spent a lot of years looking for jobs and failed, could now be discouraged if there could be any prospect of them getting any meaningful thing in their lives. It is estimated that most of these discouraged people may opt to going back to class or just opt to do their own things at home which may not be beneficial to them financially (Holly “Social Security Disability”). This apathy ion this side of the people may lead to a general decline in the number of people seeking employment in government. This is not because they do not want to work but the conditions of work like pay and jobs are rare to come by (Achenbaum 124).

Secondly, the average duration of employment will also be altered significantly. For instance, with recession biting so hard in 2001, the unemployment rate shot by a whooping two and half million people. At the same time, the number of dissatisfied workers at the time, who wanted to change jobs increased by more than one million people. This goes to show that an increase in this time will further aggravate the problem by increasing this numbers. It is also estimated that the number of people who will opt not to work may also increase by more than fifty percent (Achenbaum 124)

Works Cited

Achenbaum, Andrew. “Social Security Visions and Revisions”. Pp.124. 1986.

Benjamin, Daniel K. Economics of Macro Issues, 5th Edition. Prentice Hall, (2011). Print

Economics of Macro Issues. “ The Case of the Disappearing Workers, Misleading

Measures of unemployment”. Chapter 9. Pp.55-60

Holly Nicholson. “Social Security Disability Benefits versus Retirement Benefits”.

AUG 26, 2012 Web.

Vuuren, Aico V. Measuring the Equilibrium Effects of Unemployment Benefits Dispersion.

Center for Economic Policy Research, (2000). Print