Ch. 15 Reflection: Unemployment

Ch. 15 Reflection: Unemployment

Why will there always be at least some unemployment?  Give an example of a public policy that affects the unemployment rate.  One reason that there is always some unemployment in society is referred to as frictional unemployment. Frictional unemployment denotes the lag time between someone that is looking for employment and the time is naturally takes to match their unique skill and talents to the position best suited for them. This type of unemployment is neither positive or negative in my opinion, it is simply part of the process of finding a good job. However, if I had to pick one or the other, I believe that frictional unemployment could be seen as positive because it means that those searching for jobs aren’t just taking the first opening they find, but they are considering many factors related to their overall health and wellbeing. As well, employers aren’t hiring the first applicant that fills out an application, but they are considering all of the factors that will make a good fit for the company’s long-term goals.

In what ways do unions affect the natural rate of unemployment? It can be viewed that unions raise the natural rate of unemployment in America. Currently, about 11% of American workers belong to unions. Because those employees belonging to unions overall earn 10-20% higher wages, economic theory suggests that employers will hire fewer employees at the higher wages and causes more willing workers to be unemployed or take non-unionized jobs. I believe that this assumes that employers have a fixed labor budget and aren’t able to keep the same number of employees by passing the additional costs on to customers or to cut costs elsewhere. Even Henry Ford proved that higher wages can produce a more efficient, reliable and healthy workforce. 

How about human resource regulations, such as safety or age-based rules? Added safety regulations and worker equality laws can cost employers more money up front in added training, equipment, and health insurance costs. However, companies can end up saving money over the long run from expensive worker compensation lawsuits regarding unsafe work environments or being sued for discrimination. Although these measures may affect the cost of hiring employees, it will incentivize employers to vet their employees better before hiring and employees will be incentivized to stick with their jobs longer due to added benefits and protection by the law. I believe that the effects of added regulation should be considered as a part of the adoption process and business should be supported by the government with grants and loans to improve worker safety and equality. This would benefit workers and employers and create a healthier, more robust economy overall.

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