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Every time a come across the topic of unemployment I wonder what the fundamental thing is that is broken in an economy with a high unemployment rate. I mean une
by danbruc 11y ago
Every time a come across the topic of unemployment I wonder what the fundamental thing is that is broken in an economy with a high unemployment rate. I mean unemployed people mean unused workforce and it seems that there should be a strong desire to make use of unused workforce. So what is it?
Are the unemployed not needed? Because we reached a level of efficiency and automation so that we no longer need all the available workforce to satisfy all the demand, i.e. is it a work distribution problem? This seems not to be the case because there are not enough teachers, the infrastructure is in bad shape, there are heavily overworked people and so on.
Do they have the wrong profession, one where no additional workforce is required? Is it a latency effect, i.e. available workforce in one sector lacks behind needed workforce while it is the opposite in another sector? Are they obsoleted by cheaper labor abroad?
Is it some kind of local extremum or vicious cycle in which the economy got stuck, e.g. unemployed would consume stuff if they were employed and earned money but because they are not and they do not there is less demand and in consequence the jobs to employ them are not created? This seems easily solved with loans breaking the cycle by creating the demand first.
- nkassis 11y agoWell there are multiple things going on here that lead to this. I don't think it's a single thing. It's hard to retrain people for new jobs. Productivity has been going up so demand for labor to fulfill the same output goes down. Teachers and infrastructure are government funded things. To increase teachers and infrastructure you need the political side to vote for it which isn't happening right now. There are a lot of other factors.
- slvr77 11y agoHealthy economies will always displace workers through creative destruction. For example, the internal combustion engine decreased demand for horse whip makers but increased demand for oil workers. While few horse whip makers could make the transition to oil workers a healthy economy can usually adjust. Structural problems in economies can also create sub-optimal use of labor. For example, in a debt based economy debt and savings are just call options on future labor (production). In a healthy economy the concept of debt and savings is used as a way for people to buy and sell call options on their labor. For example a student may choose to sell a call option on his labor by taking on debt for an education with the expectation that his labor will be more valuable in the future. Somebody in middle age may chose to buy a call option on the students labor with the expectation that the value of his labor will decline in his old age. However in a pathological economy structural problems can create sub-optimal use of labor. For example, if deflation becomes entrenched then all rational actors may chose to defer consumption into the future where labor will be cheaper. This can create structural unemployment like it did in the 1930's. Other examples where the available call option on future labor is smaller than the demand. For example the demand from Baby Boomers looking at retirement, demand from the 1% to maintain their relative wealth, corporate coffers that can't be repatriated due to tax minimization strategies and sovereign wealth funds may exceed the productive capacity of the future labor pool. In that case the economic system may be 'signaling' to the rising generation to defer their labor but in a way that exceeds their actual capacity to defer the labor creating sub-optimal use of labor.