The Pros And Cons Of Unemployment

In the United States, unemployment is a topic that is constantly brought up. This is especially so during elections, as each candidate will typically make a variety of promises to create jobs and reduce unemployment. These claims are made because citizens deeply care about unemployment. High unemployment sends a message to everyone that there simply isn’t enough jobs, and that causes unease for both the unemployed and the employed who worry about their job security. Because of this, it is especially important for voters to truly understand what unemployment is, how fiscal policy can affect it, and how unemployment affects the nation’s gross domestic product, or GDP. A voter should be able to analyze unemployment separate from politics, and thus this paper will avoid divulging into specific politics and arguments. According to Roger LeRoy Miller, in the Economics Today textbook, unemployment is the number of adults that are able to work, are currently looking for a job, but have not yet found one. There are four main types of unemployment: frictional, structural, cyclical, and seasonal. Frictional unemployment is where the

Authur Okun proposed this law in 1962, which shows an inverse relationship between changes in unemployment rate and the gap between actual real GDP and potential real GDP (Miller). The gap between actual real GDP and potential real GDP is how close we are to reaching our potential maximum output. This gap can be seen as our growth. As unemployment rates grow, the gap becomes smaller, implying that we are not able to grow as an economy with the current rates (Miller). Naturally, if unemployment rates start to decline, our potential to grow increases. Lower unemployment rates mean that there are more workers actively working within the labor force, meaning that more contributions are going to be potentially made to the real GDP. Okun’s law coincides with this