Using Fiscal Policy to Improve Employment.

Authors Avatar

Nichol Ivanoski

Econ. 2301.007

April 26, 2004

Using Fiscal Policy to Improve Employment

Thesis Statement:  Government spending, a form of fiscal policy should be implemented to help create or reform job training to improve the unemployment rate and thus decreasing government spending on unemployed citizens.

        There are many unemployed Americans that have given up on searching or training for jobs because they rely heavily on government support.  Many of these people would face reality if in fact this support system faded.    Maybe some would make it, but what happens to those who have grown accustomed to this “government benefit.”  The government must either improve or implement a new job training program that would ensure a smoother and more permanent transition back into the labor force.

        The American labor force consists of 146.7 million people. The number of unemployed persons is 8.4 million and the current unemployment rate in the United States sits at 5.7 percent. Both measures remain below their recent highest unemployment rate in June 2003, but it is still not the ideal percent for this economic giant.  The United States is usually content with an unemployment rate that is between four and five percent (Appendix A). The recent increase in this rate has caused a rise in the cost of assistance needed.  The Department of Labor's Unemployment Insurance (UI) programs provide unemployment benefits to eligible workers who become unemployed through no fault of their own, and meet certain other eligibility requirements.  The United States in 2003, spent $41,780,052 in Unemployment Insurance Benefits.  Extended Benefits are available to workers who have exhausted regular unemployment insurance benefits during periods of high unemployment. The basic Extended Benefits program provides up to 13 additional weeks of benefits when a State is experiencing high unemployment.  In 2003, the United States spent $147,988 to Extended Benefits (Appendix B). These statistics are evidence of the need for a reform in our government’s unemployment assistance.

Join now!

        Who pays when people remain unemployed?  The unemployed could be producing goods and services and if they are not, then GDP is lower than it could be.  There is a loss of output to the economy.  Unemployed people are not earning and they therefore aren't paying tax.  This causes a loss of tax revenue.  We already know it increases government expenditure when the government has to pay out benefits to support the unemployed. Along with the loss of tax this is a 'double whammy'.  With higher employment, firms are likely to do better and make better profits. If they make less ...

This is a preview of the whole essay