Unemployment in the United States has reached an extended peak that it has not seen since the end of the 1930's. People are worried that this could be the new norm, even though the rate seems to be trending down again. Unfortunately, too many people also realize that much of the downward trend comes from the federal government constantly readjusting how they gather the numbers. By taking people off of the rolls of those looking for work they are able to say that the unemployment number has decreased without actually doing anything. The fact is that while the rate seemed to be staying in the high, in the 10% range, it was actually much higher than the government was reporting. Robins (2010) reports that
"These figures contain the amount of people currently receiving benefits only. This does not include people whose benefits have run out or people who did not qualify to receive unemployment. These figures do not include part time jobs that have been lost or seasonal jobs such as holiday or summer employment."
It is not necessarily that the government is being deliberately deceptive because this is the way that the data has been collected since Ronald Reagan (who added the military to the group of employed to pad his numbers, a factor that was quickly changed (McClain, 2006)). But, it is necessary to see that the issue is much larger than the government has been reporting.
The government actually has a good reason for reporting the numbers this way. They realize that even employed people are affected by the unemployment numbers psychologically. When someone hears that the number is high and going higher, they may not spend money, thus improving the economy, because they are worried that they may soon not have a job. Thus, the government skews the numbers slightly positive to change this perception of the economy. This paper will examine the impact that unemployment has on the nation, what policy change can be made to truly lower the numbers (and the theory behind that change), and then determine whether the change would have an actual positive impact on the unemployment numbers.
It is first necessary to look at what unemployment entails to determine what impact it has on the economy and on individuals within that economy. According to the International Labor Organization (ILO) an unemployed person is defined as someone who is "aged 16 and over…out of work, want a job, have actively sought work in the last four weeks and are available to start work in the next two weeks; or are out of work, have found a job and are waiting to start it in the next two weeks" (Sinh, 2012). This definition is somewhat better defined by the United States. The Bureau of Labor Statistics (2011) says that
"Labor force measures are based on the civilian non- institutional population 16 years old and over. Excluded are persons under 16 years of age, all persons confined to institutions such as nursing homes and prisons, and persons on active duty in the Armed Forces. As mentioned previously, the labor force is made up of the employed and the unemployed."
Thus, the government includes all people who are thought capable of holding a job who are not confined to and institution and are 16 years old or more. It is interesting to note that being in high school does not exclude someone from being counted as unemployed. However, based on the manner in which the government collects the data, teens may be seen as not in the labor force if they are not actively looking for work or they are not considered family workers (BLS, 2011).
From the above analysis of the different definitions of employment, and the determination of who is considered employed and who is not, it simple to determine that there will never be a time when the population will be completely employed. It is impossible to reach 0% unemployment because there will always be someone who is transitioning from one job to another, going to high school or college and not currently looking for work, and those who are capable but just do not have the need to be employed for some reason (McBride, 1999). But this poses a problem; namely, what is considered an acceptable amount of unemployment?
Economists have been puzzling that question out for decades. The answer from the Keynesian side is generally that there is not acceptable rate of unemployment. Through government control of the economic process it is possible to achieve an actual 0% level of unemployment (McBride, 1999). However, this does not seem to be possible, even to modern Keynesians who follow the Phillips curve. This is a determination of how much the economy can be expanded so that inflation and unemployment meet (Kangas, 2005). The Phillips curve was constructed from the knowledge that when unemployment was high wages lowered, and that when unemployment was low wages went higher. This formed an easy to follow curve that seemed to show the level of unemployment should be around 4% to be considered full employment (Kangas, 2005). Economists of the classical stripe do not believe in the Phillips curve because it will only work in a perfect world in which people and the government follow the same lines of logic and increase or decrease prices at the same time and at the same rate. But classical economists do believe that there is a natural rate of unemployment that exists because people will always be in some amount of flux.
The current unemployment rate is tied to the fact that the economy greatly faltered in 2008, even though it could be said to have its beginnings with decisions made as far back as the 1960's, and that many people lost their jobs due to a snowballing effect. This meant that people who may have had the same job for decades lost it, in some cases because of the economic downturn. This caused a significant rise in unemployment, and that eventually became chronic for many. People who had advanced degrees were actually forced to look for work at low paying jobs or they had to take whatever temporary job was offered to them. This part of the current crisis is the most unusual aspect because most of the time unemployment does not affect people with education like this one has. However, since many major industries have been affected by the downturn, they have had to lay off workers who would normally be able to ride out a crisis such as this one.
The primary impact is to money. People without a job do not have any way to generate it because of their lack of a job, so they are forced to make some hard choices in the face of disaster. A person can take one of four possible avenues to survive when they are chronically unemployed. They can use savings, seek any type of work that presents itself, move in with family, or they can become homeless and live in shelters.
Seeking employment has become difficult because people are looking for work in a position that was similar to the one that they lost. Most of the time this is not possible, so these individuals become classified as under-employed. This is a term that finds its origins in the cases of people who do not look for work in a high paying sector, but are content with a lower paying job despite having the education of experience to do more. In the current case, it is not a choice, but a necessity for many people. There is also an issue for these folks when it comes to finding a job. They will often have a difficult time finding even temporary work because companies realize that they will likely look for something else if they can find it. Thus, the potential employer will reject them as potential employees because of the likelihood that they will not be around for very long.
Of course, many people will work anywhere that they can just to make enough for their family to survive on. It does not matter to this person what type of job it is, they realize that when the economy gets better that they will be able to get back to the level they had previously attained. The problem with this logic is that it causes difficulties in other sectors of the population. Many of the jobs that adults have to take now are traditionally thought of as starter jobs that a teenager would take. Because they are already occupied by more experienced workers though, many teens are now without jobs. The teen unemployment rate has been more than double that of adults for more than four years now (Adams, 2011). This could be more of an issue because according to Adams (2011) "teens who have a spell of unemployment now run a…