Public policy question related to a macroeconomic indicator such as unemployment - Essay Example

Public policy question related to a macroeconomic indicator: Unemployment Unemployment refers to a situation in the economy in which there are peopleof a specific age group who are willing to work at the existing wage level but are currently “without work” (Main statistics- Unemployment). An important distinction is made between micro and macro economics by the virtue of the aspect of the economy they cover. Microeconomics is concerned about measurement of individual units in an economy like consumers and producers.

On the other hand the focus of macroeconomics is on the whole economy. Here unemployment falls under macroeconomics as this phenomenon is viewed from the perspective of the entire economy and not from individual point of view (Miles & Scott, 3). An increasing rate of unemployment is considered to be bad for the economy and it has an adverse impact on the country’s national income. There is also a negative impact on the mental and physical health of the person who is experiencing unemployment (Stein, Linn & Sandifer).

Hence it is essential to keep a check on the rate of unemployment and design policies to avoid unfavorable outcomes. Unemployment in an economy can be caused due to lack of aggregate demand or due to imperfections in the labor market. The decrease in aggregate demand is observed when there is inflation and economic recession. Inflation increases the price of exports which in turn reduces the demand. As a result production is reduced and it results in unemployment. Similarly lack of demand during recession contributes to unemployment as it has been observed in the US economy.

It has been observed that post recession job growth has been less due to the stagnation of the economy (Fred). Unemployment adversely affects the economy and even the rate of economic growth is also affected. Further educated students suffer as no jobs are available (Wolverson). Economist Veblen had explained unemployment in terms of business cycles and he had identified deficient aggregate demand and increasing production cost as contributory factors to unemployment. Hence he has spoken in favor of governments spending for education so as to develop efficient workforce.

It is believed that through education and training the productivity of laborers can be enhanced. The Federal government can assist the state governments in providing employment opportunities. Moreover if foreign direct investment can be directed towards the economy then it would generate employment for the people (Mouhammed, 223). Keeping the long run in mind the Federal should spend considerable amount on civil economy instead of spending on military economy. Apart from that spending on infrastructure will also generate employment.

This rationale is being followed by the find governments and they are now spending a considerable portion of their budget on education. However according to Robert Morrison this system of government funding in education will not work for the US as the education department in US is inadequate. He had even criticized Obama’s public policy in education where he had proposed to increase the education budget by 68 billion dollars in 2012 (Morrison). References Fred, Magdoff. The Jobs Disaster in the United States.

Monthly Reviews: An Independent Socialist Magazine, (2011) 63.2, 24-37, Linn, M.W, Sandifer, R. & Stein, S. Effects of unemployment on mental and physical health. American Public Health Association, (1985) 75.5, 502-506, October 25, 2011 from: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1646287/ “Main statistics (annual) - Unemployment”, ILO, n.d, October 25, 2011 from: http://laborsta.ilo.org/applv8/data/c3e.html Miles, David & Scott, Andrew. Macroeconomics: understanding the wealth of nations, New Jersey: John Wiley & Sons, 2005 Wolverson, Roya. Now What? Time, (2011) 177.24, 34-39. Mouhammed, Adil.H. Veblen’s Theory of Unemployment and Public Policies.

International Research Journal of Finance of Finance and Economics, (2011) 70. 218-226 October 25, 2011 from: http://www.eurojournals.com/IRJFE_70_15.pdf Morrison, Robert. Abolish Flunking Department of Education. Human Events, (2011) 67.10, 22