Summary (THE PROBLEM OF UNEMPLOYMENT)

Unemployment is one of the foremost macroeconomics issues that every policymaker needs to deal with. According to Dimitria Electra Gatzia (2012), author of journal entitled The Problem of Unemployment, has addressed several setbacks of unemployment. From her journal, we understand that findings and arguments of the author are mostly taken place in capitalist economy. She has accentuated that achieving zero rate of unemployment in capitalist economy is out of the question. This is due to the fact that neo-liberal economists believe low inflation rate of a nation can only be assured when there is certain figure in unemployment rate. When the real unemployment rate is higher than natural unemployment rate (which is 4%), inflation rate is deemed to be low. Negative relationship between inflation rate and natural unemployment rate has actually existed for long time. Such association can be depicted through law of supply and demand, and the automatic stabilizers of production and employment are the markets.

The author has also approached several trends which are related to unemployment, that take place in the United States. The first trend is racial dimension to the problem of unemployment, in which a well-known economist named Dean Baker has done research on the unemployment trend in all races of the United States. From the observation, unemployment rate for African American is the highest among all races in the United States. The whites, on the contrary, have the smallest share in the unemployment palette of the United States. The second trend is class dimension to the problem of unemployment. There is an obvious substantial inequality between the rich and the poor in terms of share of income, in which the catchphrase the rich get richer and the poor get poorer is best suited with such situation. The major culprit is neo-liberal economic policies. The top class gains most of the advantages of the neo-liberal economic; lower class could only obtain the residuals.

The causes of unemployment are not stated in this journal. Anyway, we could identify some. There are three types on unemployment within capitalist economy. The first type of unemployment is cyclical unemployment, which would occur during recessions. The second type of unemployment is structural unemployment. Changes in the structure of economy in terms of global competition and technological progress influence the employment pattern. Those firms or industries which are having technological obsolescence and/or less competitiveness would get eliminated, and workers under such firms or industries would be unemployed. The third type of unemployment is frictional unemployment. Turnover of labour is the sole factor of this type of unemployment: entrance and departure of people in workforce. In addition, nature of capitalist economy could also contribute to the unemployment in capitalist nations.

Unemployment brings several adverse impacts to the society. Firstly, it hurts human capital by impairing the motivation of people in their life. This perhaps is due to the matter of dignity, as well as wellbeing. When people lose their job, they might feel ashamed to interact with other people. Personal wealth will be lower when they are unemployed than when they are hired as workers. Secondly, research has proven that there is strong positive correlation between mortality rate and unemployment rate. Rate of suicide, heart disease and automobile accidents are high when the unemployment rate is high. Thirdly, immediate family of the unemployed may also get adverse impacts of unemployment, particularly children.

The author has recommended two solutions to solve unemployment in capitalist economy. Her first suggestion is that government could introduce several welfare policies to assist unemployed people. Government of capitalist countries should act as the employer of last resort (ELR). She strongly believes that ELR will benefit the society as ELR program could maintain unemployment rate as low as possible, and cause no significant inflation to take place. She mentions that quantity of ELR workers would be determined by number of workers that the private sector in capitalist economy has abandoned, whereby the ELR wage would be set by the government. Current welfare system in United States would cause the unemployed workers to be worthless, since government compensates the unemployed workers for being unemployed.

The second suggestion is that capitalist economy should have a restructuring in the nature of economy. There are three setbacks created by the capitalism, which can help society to refute the decency of capitalism. First, followed by the collapse of housing market, as well as global warming, it is absurd to claim that desirable social outcomes can be achieved by pursuing self-interest. Second, any changes (increase or decrease) in per capita GDP do not necessarily represent the economic wellbeing to exhibit similar behaviour. Third, what the individuals desire of and ponder does not represent society as a whole. She eventually, suggests that an economic system which could best suit people should be introduced. She has pointed out several characteristics of the good economy system: making no class differences and conflicts in interests, staying with a zero unemployment rate unfailingly, replacing the profit-centered production with need-centered, and reducing competitions in market to improve human relations.