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Summary (THE PROBLEM OF UNEMPLOYMENT)

Unemployment is one of the foremost macroeconomics issues that every policymaker


needs to deal with. According to Dimitria Electra Gatzia (2012), author of journal entitled
The Problem of Unemployment, has addressed several setbacks of unemployment.
From her journal, we understand that findings and arguments of the author are mostly
taken place in capitalist economy. She has accentuated that achieving zero rate of
unemployment in capitalist economy is out of the question. This is due to the fact that
neo-liberal economists believe low inflation rate of a nation can only be assured when
there is certain figure in unemployment rate. When the real unemployment rate is
higher than natural unemployment rate (which is 4%), inflation rate is deemed to be low.
Negative relationship between inflation rate and natural unemployment rate has actually
existed for long time. Such association can be depicted through law of supply and
demand, and the automatic stabilizers of production and employment are the markets.
The author has also approached several trends which are related to
unemployment, that take place in the United States. The first trend is racial dimension to
the problem of unemployment, in which a well-known economist named Dean Baker has
done research on the unemployment trend in all races of the United States. From the
observation, unemployment rate for African American is the highest among all races in
the United States. The whites, on the contrary, have the smallest share in the
unemployment palette of the United States. The second trend is class dimension to the
problem of unemployment. There is an obvious substantial inequality between the rich
and the poor in terms of share of income, in which the catchphrase the rich get richer
and the poor get poorer is best suited with such situation. The major culprit is neo-liberal
economic policies. The top class gains most of the advantages of the neo-liberal
economic; lower class could only obtain the residuals.
The causes of unemployment are not stated in this journal. Anyway, we could
identify some. There are three types on unemployment within capitalist economy. The
first type of unemployment is cyclical unemployment, which would occur during
recessions. The second type of unemployment is structural unemployment. Changes in
the structure of economy in terms of global competition and technological progress

influence the employment pattern. Those firms or industries which are having
technological obsolescence and/or less competitiveness would get eliminated, and
workers under such firms or industries would be unemployed. The third type of
unemployment is frictional unemployment. Turnover of labour is the sole factor of this
type of unemployment: entrance and departure of people in workforce. In addition, nature
of capitalist economy could also contribute to the unemployment in capitalist nations.
Unemployment brings several adverse impacts to the society. Firstly, it hurts
human capital by impairing the motivation of people in their life. This perhaps is due to
the matter of dignity, as well as wellbeing. When people lose their job, they might feel
ashamed to interact with other people. Personal wealth will be lower when they are
unemployed than when they are hired as workers. Secondly, research has proven that
there is strong positive correlation between mortality rate and unemployment rate. Rate
of suicide, heart disease and automobile accidents are high when the unemployment rate
is high. Thirdly, immediate family of the unemployed may also get adverse impacts of
unemployment, particularly children.
The author has recommended two solutions to solve unemployment in capitalist
economy. Her first suggestion is that government could introduce several welfare policies
to assist unemployed people. Government of capitalist countries should act as the
employer of last resort (ELR). She strongly believes that ELR will benefit the society
as ELR program could maintain unemployment rate as low as possible, and cause no
significant inflation to take place. She mentions that quantity of ELR workers would be
determined by number of workers that the private sector in capitalist economy has
abandoned, whereby the ELR wage would be set by the government. Current welfare
system in United States would cause the unemployed workers to be worthless, since
government compensates the unemployed workers for being unemployed.
The second suggestion is that capitalist economy should have a restructuring in
the nature of economy. There are three setbacks created by the capitalism, which can
help society to refute the decency of capitalism. First, followed by the collapse of housing
market, as well as global warming, it is absurd to claim that desirable social outcomes
can be achieved by pursuing self-interest. Second, any changes (increase or decrease) in

per capita GDP do not necessarily represent the economic wellbeing to exhibit similar
behaviour. Third, what the individuals desire of and ponder does not represent society as
a whole. She eventually, suggests that an economic system which could best suit people
should be introduced. She has pointed out several characteristics of the good economy
system: making no class differences and conflicts in interests, staying with a zero
unemployment rate unfailingly, replacing the profit-centered production with needcentered, and reducing competitions in market to improve human relations.