Tuesday, May 5, 2020
Local Labor Market Effects of Import Competition - Free samples
Question: Describe about the Local Labor Market Effects of Import Competition. Answer: Macroeconomics is that branch of economics that studies the behavior of the aggregate economy. Activities and topics such as inflation, unemployment and gross domestic product are studied in the theory of macroeconomics. The author critically analyzes the article titled as Wage Rise as U.S. Unemployment Rate Falls Below five percent. The article was published by Nelson D. Schwartz in February 2016. Unemployment is a situation of joblessness where the employees do not have any source of income for a certain period of time. The main concern of the article is to discuss whether the rise in wages reduces unemployment in the economy especially in America. The rise in the wages that is salary that workers get for the work they do led to a fall in the unemployment rate in America (Schwartz, 2016). The unemployment rate in America is falling from 2013 and is currently below five percent according to labor bureau of statistics. The main reason for rise in wages in America is that companies want to retain the employees that are efficient. The market of America is efficient despite of economic activities such as disturbances in stock market, slow market of china and risks due to growing emerging market. The labor market is growing despite of turmoil in financial market (Schwartz, 2016). The efficiency wage theory can be used to describe such scenario where the companies are ready to pay higher wages to retain the experienced employees. The interest rate is likely to increase in next fiscal year because of the downward pressure on prices from strong dollar and slow pace of hiring (Weiss, 2014). The minimum wage is the wage that the employers have to pay the employees and cannot pay less than that. The rise in the minimum wages also one of the factors that led to a rise in the salary of employees. The main fear of the corporate in America is that rise in wages could decrease the profit margin as the cost of production would rise. The economy of America is likely to have lees effect of recession because of the rise in income, employment and home values (Low Pay Commission, 2013). Slow growth of chinas market, collapse of oil prices and decrease in sales are some of the economic activities that are likely to affect the economy. Fall in the prices of oil led many workers jobless as some of energy industries could not maintain the profit level. The wage rate was rising and the oil prices were falling due to which the cost of production was high (David et al., 2013). The recovery of the American market began in 2009 and its biggest achievement was rise in wages and fall in unemployment. The amount of job creation has fallen. However, seasonal and cyclical unemployment do exists where the workers are laid off due to changes in economic activities. For example a rise in the price of oil can lead to unemployment as the companies are not able to cop up with the cost. Figure: unemployment rate in America (Source: Schwartz, 2016). The government of America should increase the wage rate not much as it will then lead to unemployment. As the cost of production rises the producers will stop hiring the employees. This will lead to a rise in unemployment. In order to solve the problem of unemployment government of America should open more jobs for the youth of the country. Government should also concentrate on providing training and development and invest on education so that employers does not have to think twice before hiring the employees. References David, H., Dorn, D., Hanson, G. H. (2013). The China syndrome: Local labor market effects of import competition in the United States.The American Economic Review,103(6), 2121-2168. Low Pay Commission. (2013).National Minimum Wage: Low Pay Commission Report 2013(Vol. 8565). The Stationery Office. Schwartz, N. (2016). Wages Rise as U.S. Unemployment Rate Falls Below 5%. Nytimes.com. Retrieved 20 July 2016, from https://www.nytimes.com/2016/02/06/business/economy/jobs-report-unemployment-january-fed-interest-rates.html?_r=0 Weiss, A. (2014).Efficiency wages: Models of unemployment, layoffs, and wage dispersion. Princeton University Press.