Ashley Stoots

 

I read an article that talks about the high cost of unemployment. The article states that unemployment is not just a tragedy because of the aggregate output loss that comes with unemployment but it is also a tragedy because of the personal and emotional to the unemployed. Economists from the past thought that things would be much more leisurely by this point. John Maynard Keynes for example, speculated that within 100 years, which would be 2030, higher incomes would reduce the average work day to only a mere three hours. Obviously, he was wrong, even if there is seventeen years left. This article states that unemployment is a product of capitalism. People who are no longer needed are simply just let go. One way to help the unemployment problem is by something called work-sharing. Work-sharing can keep people marginally attached to their jobs during a time of recession, which could help preserve peoples self -esteem. Instead of a company laying of a percentage of its workers they could just reduce an employee’s hours from eight hours to six hours. With work-sharing it would be a more likely possibility that more people would be able to keep their jobs. Although this sounds ideal, like anything else, there are problems that come along with work-sharing, especially if it is increased too suddenly. One problem would be that some employees have fixed costs such as, transportation to work that do not decline when hours are cut. Another example could be is that the employee could have bought a smaller house if they had known that their hours were going to be reduced. Another major problem is that it would be difficult to reduce every employee’s job by the same amount because some jobs scale up and down with production while others do not.  Truman Bewley interviewed different managers that are involved with wage setting to try to get answers to these types of questions. One thing that he discovered was that the managers believed  that a serious morale problem would result in reducing every employee’s hours and pay because all of the employees would feel like they did not have a job. He also discovered that, at least from the managers, that the pain of reduced unemployment is focused on people whose grumbling is not heard by the remaining employees. This happens because employers are more focused on the moral of the workplace, than the moral of the employees that are being laid off.

 

Shiller, Robert. The High Cost of Unemployment. 2013. Web. <http://www.slate.com/articles/business/project_syndicate/2013/06/we_need_stimulus_not_austerity_to_combat_unemployment.html>.