Despite the end of the Great Recession in 2009 and the overall economic activities showing signs of recovery, the conditions in the labor market have been disappointing. According to the article, “Jobless Recoveries: causes and consequences” by Kolesnikova & Liu, the payroll employment has been experiencing slow recovery. The article further points out that the current average period of unemployment is still at its highest in history. Furthermore, the rate of unemployment is predicted to remain more than 7.8 percent by 2013. The situation has caused concerns among the economists that the economy of the United States is stuck in another jobless recovery, a period of economic growth but high rate of unemployment.
Kolesnikava and Liu provide an explanation on the previous experiences on the labor markets during previous economic recoveries in regard to unemployment. The aim of the analysis is to show the difference between the situation which is considered as a jobless recovery and the one not considered as a jobless recovery. In the article, the situation not considered as a jobless recovery is given by the analysis of two recessions. They indicated that immediately after 15 month into the end of the 1973-1975 and 1984-1982 economic recessions, there was a decline in the rate of unemployment. There was a significant decline in the rate of unemployment. On the other hand, the jobless recovery is equivalent to the period when the US experienced two recessions, in 1990s, and early 2000s. During that two recessions, the rate of unemployment continued to rise 15 months into the end of the recessions. Kolesnikava and Liu further argue that the jobless recovery cases and the current developments taking place in the labor market are similar. Data shows that the rate of unemployment still remains high after the end of Great Recession in 2009. In 2009, it was 10 percent, in 2010, it was still above 9.4 percent, and in February 2011, it remained 8.9 percent. The unemployment rate after the Great Recession is much higher than any recovery that occurred since 1970s.
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According to Kolesnikava and Liu, one of the reasons for continuous high rate of unemployment is due to mismatch in the labor market. They point out that polarization in job growth, restructuring of organizations and reallocation of industries led to severe mismatch between the workforce available and the job opportunities available and appropriate for the workforce. This forces many unemployed people to search for other employment opportunities in different occupations, locations, and industries. Kolesnikava and Liu further discuss that long period of being unemployed has detrimental consequences to the unemployed people, their families, and on the growth of the economy. The consequences include college graduates go through life frustrations, increase in the rate of crime, people negatively changing their eating habits, and undermining the welfare of children because of increasing cases of family instability.
Causes of unemployment
One of the major cause unemployment is due to increase in polarization in terms of skills, and wages. The labor market has gone through significant changes in the last three 3 decades. The growth of employment in the United States has been polarized into high wage jobs, high skills jobs, low skills jobs, and low wage jobs. This kind of polarization has caused middle skilled routing jobs to decline significantly (Autor). In addition, the introduction of computer information systems has resulted in loss of jobs because computer information systems have automated many office jobs that were previously handled by many people. In industries also, robots are increasingly used in roles that were previously handled by human beings rendering many people jobless. Many other jobs such especially in the manufacturing sector have been moved to overseas countries or location due to the availability of cheap labor and raw materials. For instance, China has been the recipient such manufacturing companies due to availability of cheap labor. Most of this problems are attributed to Great Recession, which resulted into a decline of between 7 and 17 percent of the middle skilled and middle waged occupations.
In addition, many organizations have restructured their organizations structure which has led to elimination of unnecessary labor. This has commonly happened in small firms especially during the Great recession, and after the recession. Some other companies have restructured their organizations to create new job opportunities while eliminating others (Layard). However, recreating new job opportunities results in a company taking more time to rehire than to retain the employees who were eliminated after the restricting.
Effects of unemployment
Unemployment is various detrimental effects on both the individuals and the economy as a whole. According to Lisa Khan, a Yale economists, college graduates go through life frustrations because of lack of opportunities. Others end up accepting low paying and low skilled jobs because there are few opportunities relevant to their field of study in the labor market. Moreover, unemployment results in increased cases of crime because of lack of money for people to fend for themselves, and desperation especially among the youths (Kolesnikava and Liu). Family structures are also broken due to differences that may arise as a result of joblessness.
Conclusion
Therefore, despite the end of the Great Recession in 2009 and the overall economic activities showing signs of recovery, the conditions in the labor market have been disappointing. The rate of unemployment has not significantly declined since 2009 despite the government effort to formulate economic policies to ensure creation of more employment opportunities. Unemployment is caused by increase in polarization in terms of skills and wages, and restructuring of organizations eliminating more jobs. Unemployment affects the social structure of the society. Consequently, the overall impact of employment is felt across the social, cultural, political and economic perspectives.
- Autor, D. (2010). “The Polarization of Job Opportunities in the U.S. Labor Market.” The Hamilton Project, April 2010
- Kolesnikava, N. & Liu, Y. (2012). “Jobless Recoveries: Causes and Consequences”, Federal Reserve Bank of St. Louis: Central to America’s Economy. April, 2011. Web. 16 March 2012
- Layard, R. (2005). Unemployment: Macroeconomic Performance and the Labor Market. Oxford University Press, 2005. Print
