1. HOW LONG WILL IT TAKE FOR THE ECONOMY'S WOUNDS TO HEAL?
Obama took office at such a depressing time and he had little choice but to act immediately to solve the financial crisis. Excerpts from Mankiw's article:
The administration’s first official forecast said economic growth, computed
from fourth quarter to fourth quarter, would average 3.5 percent in 2010
and 4.4 percent in 2011. Unemployment was supposed to fall to 7.7 percent
by the end of 2010 and to 6.8 percent by the end of 2011.
However, growth was only 2.8 percent in 2010, unemployment is well above 7.7 and is not expected to change much!
Now the blame game- aren't Obama's economists competent enough, or was it that the situation was far worse than expected.
The main focus here is thus unemployment and basic economic theory tells us that unemployment and growth are interrelated and is one of the most prominent statistic to use when evaluating economic performance, hence the over-subscribed sometimes misunderstood term 'GDP'.
A quick look on unemployment- average duration is now almost 40 weeks (twice more than previous recessions) while the long-term unemployed may well lose job skills and find their future opportunities severed. But everything is so uncertain! That reminds me of an article from The Economist, July 26th- 'Long-term unemployment is a sticky situation'
"A recent review of job vacancy postings on popular sites like Monster.com, CareerBuilder and Craigslist revealed hundreds that said employers would consider (or at least “strongly prefer”) only people currently employed or just recently laid off.
The practice is common enough that New Jersey recently passed a law outlawing job ads that bar unemployed workers from applying. New York and Michigan are considering the idea, and similar legislation has been introduced in Congress. The National Employment Law Project, a nonprofit organization that studies the labor market and helps the unemployed apply for benefits, has been reviewing the issue, and last week issued a report that has nudged more politicians to condemn these ads.
Given that the average duration of unemployment today is nine months — a record high — limiting a search to the “recently employed,” much less the currently employed, disqualifies millions."
According to the author, this employer behaviour is rational as firms are likely to see long-term unemployment as a useful signal of worker quality. Naturally, I would side the workers, hence I have built a case for them:
1. People who were laid off recently, maybe worse candidates than people who were laid off ages ago!! This is because people who have been out of work two years are longer were actually laid off during the peak of the recession, rather than incompetent workers who were fired when the economy was recovering, or in simple non-economic terms, has recovered.
2. Furthermore, layofffs are less common as there has been some job growth. People laid off in the last few months must've lost their jobs because they were incompetent, rather than being victims of the business cycle.
3. On the point of diminishing competitiveness and skill, but most lower-skilled jobs, or jobs of lesser technologies (is that even a right term to use?!) this is an irrelevant concern.
4. And according to Catherine Rampell of the NY Times:
If we are going to discriminate against workers because they're unemployed especially in the long-run, we should take the time to figure out whether the statusquo even relates to worker quality!!!
Oh yeah, did I mention I was pro government intervention? This is a clear failing of the 'market forces' of demand and supply for labour. We can chuck the whole chapter of 'Labour Economics' in my A-Level textbook out of the window. =D
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