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Economics
The employment rate is the crucial aspect of any economy it determines the growth rate of the nation. When the employment opportunities increase the chances for the people to get the dream job also increases. However, there are a numbers of factors that determine the opportunities level to introduce new jobs in the nation. America has shown an increase in employment levels in the market which is a good sign for the citizen. There is a strong correlation between the inflation level and employment. Any country with high inflation faces different problems. It is because inflation has an adverse impact on the growth of the economy. It affects the exchange rate, cost of borrowing, prices, and overall economy of the country. Besides, inflation has negative over the growth of the economy however it leaves a positive impact on the employment level. In the article, explanation for weak wage growth is discussed that affects the conditions of the employment level. Author claimed that central bank should look inti the matter and control the wage growth to control the unemployment level ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"64Aqi7Yc","properties":{"formattedCitation":"(Fairless)","plainCitation":"(Fairless)","noteIndex":0},"citationItems":[{"id":1028,"uris":["http://zotero.org/users/local/rVaVAHaF/items/FR9BJN7U"],"uri":["http://zotero.org/users/local/rVaVAHaF/items/FR9BJN7U"],"itemData":{"id":1028,"type":"article-newspaper","title":"One Explanation for Weak Wage Growth: Workers’ Reluctance to Switch Jobs","container-title":"Wall Street Journal","section":"Economy","source":"www.wsj.com","abstract":"Fewer workers switching jobs may explain why wages have been rising only slowly and inflation staying low, despite low unemployment, some economists say.","URL":"https://www.wsj.com/articles/one-explanation-for-weak-wage-growth-workers-reluctance-to-switch-jobs-11573999201","ISSN":"0099-9660","shortTitle":"One Explanation for Weak Wage Growth","language":"en-US","author":[{"family":"Fairless","given":"Tom"}],"issued":{"date-parts":[["2019",11,17]]},"accessed":{"date-parts":[["2019",12,16]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Fairless).
The primary concept that has been discussed is the relationship between unemployment level and wage growth with the help of the Philips curve. These are the economic concept from the course and important to understand. Inflation leads to a change in various economic factors that result in lowering the unemployment level. Philips curve is the curve that indicates the negative correlation between inflation and unemployment level. For instance, whenever inflation increases it leads to a decrease in the unemployment level and when the inflation rate decreases it results in an increase in the unemployment level. Economists and the government always try to maintain or decrease the inflation rate because it has a negative impact on the economy. When the inflation rate increases it results in an excessive amount of money in the hand of consumers. When consumers get more money to spend, they demand more goods and services. To control the high demand for goods and services producers, stakeholders either increase the price of the existing supply of goods or services or increase production. It is difficult to increase the production level in the short run therefore increase in the price becomes an easy way to control the supply and it increases the profit of the producers. With an increase in production, demand for more labor increases. In other words, producers get the opportunity to expand their production and provide more jobs. This is how inflation leads to an increase in the employment level.
The above graph indicates the relationship between unemployment and inflation with the help of the Phillips curve. At the point, The unemployment rate is 6% with only 2% of inflation. When inflation rises to five percent at point B, the unemployment rate decreased to only 3%. However, the author discussed that the Phillips curve does not seem to be operated in the real world but somehow it is working in the US economy as it had been developed. The reason behind the unrealistic framework of the Philips curve is that inflation not always hit the unemployment level; there are various factors that eliminate the impact of inflation from the unemployment level. For instance, when inflation leads to an increase in aggregate demand it results in an increase in real GDP. Therefore, the producer hires more labor to meet the aggregate demand by providing a sufficient supply of goods and services ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"zQagGJ2l","properties":{"formattedCitation":"(\\uc0\\u8220{}Phillips Curve - Economics Help\\uc0\\u8221{})","plainCitation":"(“Phillips Curve - Economics Help”)","noteIndex":0},"citationItems":[{"id":480,"uris":["http://zotero.org/users/local/rVaVAHaF/items/EWSQAMLY"],"uri":["http://zotero.org/users/local/rVaVAHaF/items/EWSQAMLY"],"itemData":{"id":480,"type":"webpage","title":"Phillips Curve - Economics Help","container-title":"Economics Help","abstract":"Definition of Phillips Curve (trade off between inflation and unemployment). Graphs to show how and why it can occur. real life data. Also different views on Phillips Curve Keynesian vs Monetarist. - short-term and long-term.","URL":"https://www.economicshelp.org/blog/1364/economics/phillips-curve-explained/","language":"en-GB","accessed":{"date-parts":[["2019",4,10]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (“Phillips Curve - Economics Help”). However, at a particular point, the economy reaches the full capacity, where no labor can be hired anymore. At this stage, producers increase the wages of the labor which results in wage inflation. In addition, they increase the prices of goods and services which leads to a constant rate of unemployment. Economists believe this phenomenon more realistic as producers prefer to increase prices first then increasing the number of labor. However, the report shared in the article indicates that the Philips curve is working in the economy to lower the unemployment rate. The government is trying to maintain the inflation rate by increasing the interest rate.
As the report has been discussed regarding the employment rate fluctuation in America. The major reason for the wage rises is the increase in the competition that is developing the condition of do or die for the producers. Data indicates that 6.5% fall in the unemployment rate is recorded that reached to 3.6% previous month ADDIN ZOTERO_ITEM CSL_CITATION {"citationID":"64Aqi7Yc","properties":{"formattedCitation":"(Fairless)","plainCitation":"(Fairless)","noteIndex":0},"citationItems":[{"id":1028,"uris":["http://zotero.org/users/local/rVaVAHaF/items/FR9BJN7U"],"uri":["http://zotero.org/users/local/rVaVAHaF/items/FR9BJN7U"],"itemData":{"id":1028,"type":"article-newspaper","title":"One Explanation for Weak Wage Growth: Workers’ Reluctance to Switch Jobs","container-title":"Wall Street Journal","section":"Economy","source":"www.wsj.com","abstract":"Fewer workers switching jobs may explain why wages have been rising only slowly and inflation staying low, despite low unemployment, some economists say.","URL":"https://www.wsj.com/articles/one-explanation-for-weak-wage-growth-workers-reluctance-to-switch-jobs-11573999201","ISSN":"0099-9660","shortTitle":"One Explanation for Weak Wage Growth","language":"en-US","author":[{"family":"Fairless","given":"Tom"}],"issued":{"date-parts":[["2019",11,17]]},"accessed":{"date-parts":[["2019",12,16]]}}}],"schema":"https://github.com/citation-style-language/schema/raw/master/csl-citation.json"} (Fairless). The author explained that the above factors can lead to a change in the employment ratio. Various economics terms like interest rate, inflation, recession, the great depression, investment, and Philips curve are being discussed to figure out the actual reason for the significant increase in employment level. The author argued that inflation is the main factor that is a disturbing investment, interest rate, and somehow employment level by increasing the supply of money in the economy.
The article is important to understand the pattern of economic growth especially the fluctuation in the unemployment level but authors have ignored the one important aspect which shows that inflation is not the only element that impacts the employment level. The element is the investment level. Therefore, it is concluded that the employment level is higher in America and the author thinks that its inflation playing its role. The author discussed other economic factors like great recession, interest rate, investment, and wage rate. However, he focused on the inflation rate and discussed the Phillips curve that is resulting in lowering the unemployment level. The author created a strong argument where the inflation rate affects the number of economic indicators including employment level. There is an inverse relationship between inflation and unemployment. However, the author did not highlight the importance of investment level which also provides opportunities to develop a new job. Also, it stabilizes the inflation rate and economic growth becomes sustainable.
Work Cited
ADDIN ZOTERO_BIBL {"uncited":[],"omitted":[],"custom":[]} CSL_BIBLIOGRAPHY Fairless, Tom. “One Explanation for Weak Wage Growth: Workers’ Reluctance to Switch Jobs.” Wall Street Journal, 17 Nov. 2019. www.wsj.com, https://www.wsj.com/articles/one-explanation-for-weak-wage-growth-workers-reluctance-to-switch-jobs-11573999201.
ADDIN ZOTERO_BIBL {"uncited":[],"omitted":[],"custom":[]} CSL_BIBLIOGRAPHY Jayaraman, T. K., and Baljeet Singh. Foreign Direct Investment and Employment Creation in Pacific Island Countries: An Empirical Study of Fiji. p. 18.
“Phillips Curve - Economics Help.” Economics Help, https://www.economicshelp.org/blog/1364/economics/phillips-curve-explained/. Accessed 10 Apr. 2019.
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