The labor productivity rates are expected to maintain their ascendant trend throughout the next period.
The increases in productivity can be explained through the combined actions of three forces:
improved quality of the labor and superior performances of the human resource increased quantities of organizational capitals higher efficiency of the labor process, including such forces as technological developments, socio-cultural changes, the creation of scale economies or the reallocation of labor
Cyclic Changes in Productivity
However it has been established the generalized growth tendency on the long run, the study of short terms presents the reader with evidence of cyclic behaviors in labor productivity. To better understand - the labor productivity decreases during times of economic difficulties and increases in periods of boom or economic recovery. There are various reasons why the cyclic trend is revealed in the short run; the most important three such reasons are the modifications in using labor, modifications in the usage of equipments and finally, changes in the formation of the aggregate output.
In terms of labor utilization it can be said that in times of recession, employees shift away from manufacturing to services (such as maintenance of the goods previously produced) - as a result, labor productivity decreases. In terms of plant and equipments, it has been observed that in times of economic difficulties, manufacturers do not use their gadgets at maximum capacity, once again generating a reduction in labor productivity.
Productivity and Employment
The existence of a relationship between labor productivity and employment patters has been debated for years. A common belief relative to this relationship was that increases in productivity (and labor force efficiency) imply a reduced need for labor force and therefore generate the loss of jobs and increased unemployment rates. In order to make a most informed statement, numerous scholars and practitioners have conducted studies within a multitude of industries. The results were however inconclusive and the final statement was that there is no actually observed relationship between employment and labor productivity.
Chapter 18: Employment and Unemployment
Employment and Unemployment Statistics
The statistical analyses are generally conducted by the Bureau of Census and their results are most often relevant. In order to make sure of the relevance of the statistical findings, one has to make the clear distinction between employed and unemployed individuals. They must then correlate it with the entire population, as well as the entire labor force.
In the U.S., the employment-population rate has been increasing for nearly five decades, whereas the unemployment rate has fluctuated significantly for the same period.
Macroeconomic Output and Employment Determination
In order to answer the questions of this subchapter, the author defines the concepts of aggregate supply and aggregate demand, as well as offering a graphic presentation of the two notions. The curve of aggregate supply reveals the amount of work employees are willing to put in for a given wage rate. The aggregate demand curve reveals the level of employment in terms of profit maximization, presented by each wage rate. The state of equilibrium is reached when the demand equals the supply.
Considering a situation in which equilibrium in the labor force market is in fact achieved and the communities offer sufficient jobs for the entire population, a creation rate of unemployment will exist. This is generally explained by the frictional unemployment, materialized due to five forces, as follows:
employees continually leave their current jobs in search of better ones individuals loose jobs and look for new ones students graduate and enter the workforce for the first time in search for positions individuals reenter the workforce after periods of absence (such as maternity leaves), and finally it takes 30 days for an employee to leave his current job and get to the next one
The structural unemployment is somewhat similar to the frictional one in the meaning that it is also part of the natural unemployment rates, but it occurs on shorter periods and has more damaging effects, mostly materialized in financial losses. It is generated by changes in the composition of the labor force, in terms of both supply and demand.
The punctual reasons which create structural unemployment are multiple. One could for instance name but a few of the most important ones as being: the technological innovations of the recent periods, a discrepancy between the skills and capabilities possessed by a candidate and those desired by the employer or geographical mismatches between the location of the employment facility and the residence of the candidates.
The natural unemployment rate if somewhere between 4.0 and 5.0%; the real unemployment however generally exceeds it. In 1933 for instance, towards the end of the Great Economic Depression, nearly 25% of the population was unemployed. This is also related to the cyclic unemployment and beliefs have been forwarded to link it to the declining aggregate demand of labor force. In a more simplistic formulation, reduced demand for output generates reduced demand of labor and consequently, increased unemployment.
Reducing Unemployment: Public Policies
Achieving reductions in unemployment rates has been the goal of every governing power. In the United States, numerous regulations have been implemented in this direction, such as fiscal and monetary policies. The primary purpose of these regulations is to reduce frictional, structural and demand-deficient unemployment.