• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

The low-wage jobs explosion - Macroeconomics IA Commentary

Extracts from this document...

Introduction

´╗┐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. ...read more.

Middle

If wages are dropped to W2, there will be a new demand curve D1. This will result in a new equilibrium at W2 and L1. Any unemployment left in the economy will be purely voluntary ? people who have chosen not to work at the current real wage rate. The article states that after the Great Recession, approximately 60% of the jobs lost were mid-wage positions and 19% were higher-wage positions. More than half of the people who lost their jobs during the recovery period and have since found new ones are now working for lower wages, and about one-third of these workers have taken a pay cut of 20% or more. This supports the neoclassical theory that trade union and government intervention is unnecessary. According to neoclassicists, if people lose their jobs and become unemployed, they will settle for new jobs with lower wages than before. ...read more.

Conclusion

Also, unemployed people with lower incomes will pay less tax as a result, which means less government revenue available. The government might therefore have to spend more money to solve the various social problems created by unemployment. An argument against the neoclassical belief that falling real wage rates are beneficial to the economy in terms of reducing unemployment is the negative effect they have on low-income workers. These are the people who are most affected by falling wage rates, as it further reduces what low incomes they already had. This in turn is likely to decrease their living standards. High-income workers are not affected as severely, as the decrease in wage rates has less of an impact on their incomes. In conclusion, this article supports the neoclassical belief that falling real wage rates is a solution to solving unemployment, and that the government should not interfere with the working of the market. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Economics essays

  1. IB Economics IA - Commentary 2 (Mortgage Rates Down)

    Between the week of Oct. 9 and Oct. 16, the 30-year fixed-rate mortgage posted its biggest weekly jump since April 1987, rising from 5.94% to 6.46% "Long-term mortgage rates fell slightly this week as signs the overall economy is weakening brought interest rates down market-wide," according to a statement by Frank Nothaft, Freddie Mac vice president and chief economist.

  2. Economics HL - IA

    The equilibrium will be at Em, thus the price is at Pm and the quantity at Qm. If the extra cost is included, which it in fact is, the supply will be represented by SSocial Cost. This will result in a new price at POptimum and quantity at QOptimum.

  1. IB Macroeconomics Commentary

    The state, which has become a trading center for the Southeast and globally, has also suffered from loss of trade-related jobs. Meanwhile, manufacturing - which has lost jobs for a decade - has continued its long, painful slide. The mix has been toxic.

  2. IB Economics IA Commentary. Title of Extract: Economys gains fail to lower jobless ...

    Employers are less likely to hire the long-term unemployed, in part because many workers' skills deteriorate the longer they are out of work.

  1. Strategic and Operational Performance Assessment at Petrom

    Enhance value of integration, key element to value creation We derive our value from integration in our business model and we constantly endeavour to identify and make the most of the synergies along our value chain. To this end, we focus on restructuring measures while constantly pursuing financial discipline and strict cost management to maximise operational efficiency and earnings strength.

  2. Economics IA Commentary - Market Failure. Household energy bills will increase by 50 ...

    Simon Less, Policy Exchange's head of environment and energy, said that the various environmental charges should be considered taxes by another name. "The funding for these policies may come through energy bills, rather than the tax man, but it is a tax, and an increasingly large one paid by individual households and firms.

  1. Economics Coursework on Macroeconomics

    The American producers supply the rest which is now Q3-Q4. They now receive higher price, but smaller quantity, their revenue falls.

  2. Demand and Supply IA

    This is because the mills demanding cotton is increasing. This will not only increase mill use in China, but it will also drive the selling pressure of cotton to increase whilst the U.S stocks of cotton to furthermore decrease. The price elasticity of demand of cotton (PED)

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work