The low-wage jobs explosion - Macroeconomics IA Commentary

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Internal Assessment

Macroeconomics

Word count: 750

Title: The low-wage jobs explosion

Source: CNN

http://money.cnn.com/2012/08/31/news/economy/low-wage-jobs/index.html?cnn=yes

This article describes the situation in America, where after the Great Recession, the number of low-wage jobs available have fallen significantly.

Unemployment is defined as people of working age and ability who are without work, available for work, and actively seeking work. The unemployment rate is the number of people who are unemployed expressed as a percentage of the total labor force. The labor market represents the demand and supply for all labor in an economy.

Neoclassical beliefs are based on the idea that the free-market economy is able to achieve full equilibrium output in the long-run. Government intervention is seen to be only capable of making things worse, and the only role a government should have is to make sure that nothing prevents the market from working freely.

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One of the theories that neoclassical economics is based on is the free market theory. This is the idea that if an economy is left to itself, it will always tend towards full employment equilibrium. If there is unemployment present due to a surplus of labor, then wages for workers will fall. This in turn will lead to an increased demand for labor, as it will be cheaper for firms to hire workers. As a result, the level of unemployment will decrease. This is illustrated in the diagram below.

The diagram shows that there is full employment equilibrium ...

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