American economic recession
American economic recession
It is becoming common knowledge that the U.S economy is going through a hard time. In 2001, there was progress in the markets which was dragged down again by the tragedies which occurred in September the same year. The economists gave hopeful predictions that the economy would turn around in the two first quarters of 2002. Unfortunately, this did not happen since there was very little if any improvement. There was an increase in consumer spending which reduced the effects of the recession to a minimal extent. However, the effects of recession can now be felt in full. With many companies filing for bankruptcy while others are shutting down, the rate of unemployment is escalating (Burkett, 2005). These are carrying other effects like homelessness, increased need for Medicaid and unemployment benefits. All these need financing and with the government expenditure being more than its revenue, even the funds to help the unemployed might run out (Erickson Mitchell, 2007). This paper will analyze American economic recession in general and the effects of unemployment to the nation as a result of recession in particular.
Effects of economic recession
The economic recession has compelled many organizations to make applications for their contingency plans. These include retrenching the employees. Other firms have gone ahead to completely shut down operations further increasing the rate of unemployment. There are cases where multinational firms were known to apply for bankruptcy. At the same time, the fresh graduates no longer get employment opportunities and they are rendered jobless even before they join the workforce. These only indicate that the issue of recession is serious and should be reckoned with. There are many effects of recession but the scope of this paper will be limited to the issue of unemployment and how it has impacted on the Americans.
Research shows that among the most people affected by the economic recession are the youth. Out of five, one black man is neither in school nor working. The most of these jobless young people are aged between twenty and twenty four years. Since the beginning of the economic recession back in 2007, Teenagers and young adults are finding it harder to find jobs. Although every one is affected, the young people who come from families which get low incomes and the black youths are the hardest hit. The minority and low income youths who have been depending on part time jobs as a way to be employed in the future are being compelled to get out of the job market. They have also been made economically marginalized. In the late 2009, only a 26 of U.S. teens had jobs. Researchers claimed that this is a low record in comparison with the previous years going back to 1948.
According to statistics, the employment count is made on the basis of the number of people who have jobs as a proportion of the work force in totality. On the other hand, the rate of unemployment excludes the people who out of discouragement have stopped searching for jobs. The latest statistics showed that in America, the rate of unemployment is 10. Reports claim that the people who are mostly affected by unemployment are high school dropouts who are not in school and are not holding any kind of job. Reports also indicate that the family income is a major contributor to the same. In 2008, the percentage of the low income black teenagers who were working in Illinois was 13. However, the percentage of the non- Hispanic and the affluent white teens that had jobs were 48. This shows that familys background contributes to youths getting jobs or not. In 2007, the percentage of the Americans who are between twenty and twenty four but are neither working nor in school was 17. In 2008, the percentage of the same type of people has increased to 28. If the youths in prison could be included, then the percentage of the jobless youths could be even higher (Simos, 2009).
Unemployment as a result of economic recession has caused changes in many peoples lives in America. The people who have been affected by the same are usually put in a position where they can no longer support the economy since their purchasing power has gone down. It increases the poverty level of the affected. When someone is retrenched, he can not manage to give financial support to his family anymore. Since the other companies are also not employing, such a person is disabled form accommodating the needs of his family. Once such person exhausts the savings, he suffers together with his family and such people end up depending on welfare for survival (Deaton Paxson, 1997).
There are studies which show a connection between unemployment and problems related to mental health. They claim that half of the employees who lose their jobs get mental health problems. There is also claimed negative behavior change for the children of 40 of such people. 25 of the unemployed workers are also said to be receiving food stamps. Generally, there are many social implications that are related to unemployment. Records show that for a whole year since November 2008, there is a 12 increase in homelessness in nineteen out of twenty four cities. It is claimed that the number has continued rising as more people keep losing their jobs due to the recession. The homeless are claimed to be more than seven hundred thousand people. Among these, 20-25 is thought to be mentally ill. Most of these people suffer from stress and then go into depression. These conditions are related to job loss and the chain of effects which come after like paying bills, education, health care and food among other life expenses (Simos, 2009).
There are estimates that the people enrolling for Medicaid will increase by 6.6 due to recession. Last year, the enrollment went up by 5.4 on average. This exceeds the 3.6 increase which had been projected at the beginning of 2009. The growth of Medicaid spending was 7.9 on average and this was higher than the 5.8 growth which had been projected. This is said to be the highest rate in the past six years. Such increases in the people who are in need of Medicaid has strained the state budgets and are making the officials to be pressurized into cutting cost despite getting financial assistance from the federal government. It was projected that in 2010, Medicaid enrolment will increase by 6.6. The survey also showed that across states, Medicaid spending would increase by 6.6 or more. However, the officials in most states feel that the appropriations might not be enough and this has led to budget shortfalls. Job loss is continuing in America and the people who lose the health cover as a result can only rely on Medicaid. The biggest challenge for the states is to get enough money for the same when due to the bad economic times the state revenues have drastically dropped (Simos, 2009).
Generally, involuntary unemployment leads into poverty. It makes people not to afford the kind of life they were used to. The loss of employment leads to the loss of employment benefits like housing, car, security among others. It also makes people not to afford quality education for their children. This means that such children can not do the kind of courses which would make them to be the preferred employees in different companies. This forces them to take part time and low paying jobs which might not support even their expenses. This kind of situation makes people to take two or more jobs in order to earn more and live comfortably. However, this also has its chain of effects like being absent from home most of the time thus not witnessing as their children grow. Breakage of families have also been caused by a spouse working most of the time thus making the partner to spend as single yet married life. Children to such a parent are likely to misbehave since the parent is not always there to correct them. All these kinds of demands increase the stress levels in such a worker who might end up reducing the productivity level. This places him at the top of the list when the company is forced to release some workers. The cycle of poverty repeats itself time and again (Deaton Paxson, 1997).
Government efforts
There are many strategies which governments use in order to get to recover from a recession. These are dependent on the economic school that the policy makers choose to work with. The economists who are Laissez-minded advocate that the government should leave the market forces to operate on their own without interfering with them. The Supply side economists would suggest that tax be reduced as a way of promoting investments. The Keynesian economists may suggest to the government to increase its spending in order to make the economy to grow. On the other hand, the monetarists would advocate for the use of the monetary policy. A government can as well combine aspects from different economic schools in order to get rid of a recession (Simos, 2009).
The government is helping the unemployed through the use of unemployment insurance (UI). This is a program that is usually financed by the payroll taxes of the state and federal employer. Through Federal Unemployment Tax Act (FUTA), a fund is created from which the states can borrow and also pay the unemployment benefits. When the rate of unemployment is high, the federal government loans the state government money to be used for unemployment insurance. The UI program assists in countering the economic fluctuations. When there is growth in the economy, the program increases its income due to the risen tax revenues. At the same time, the programs spending falls since less people are unemployed. The practice of collecting more money in terms of tax and spending less reduces the demand in the economy. It also contributes to the creation of a surplus which the UI program can use in case of a recession. When a recession occurs, there is increase in UI spending and a fall in its revenue due to the increased rate of unemployment. When the UI program pays more unemployed workers the unemployment benefits, more funds are added to the economy and this reduces the impact of earnings losses.
The president had given hope to the Americans about the same issue at the beginning of his term. He had talked of extension to the employment benefits for the people that need it in America. He spoke of outsourcing and giving provision of benefits to the corporations that will keep jobs in America. He also spoke about universal health care which would help many people. While some of these have been accomplished, others are still to be achieved. The government is working to alleviate the problem of unemployment according to reports. There are proposals to begin job programs for the youths which are to be funded by the government. There is also a proposal to increasing funding which will be used to assist the school dropouts to resume school. Work internships will as well have expansions to be funded by the government. This will ensure that they can accommodate more youths (Simos, 2009).
Conclusion
It seems that economic recession might take longer than predicted. Measures to deal with it continue to be undertaken but the solutions have not yet been achieved. The number of people languishing as a result of recession is increasing as days go by. Investors are withdrawing their money in fear of losing more of it. This is making companies to continue closing down and increasing the rates of unemployment. It is even harder to start businesses at such a time when peoples purchasing has been greatly reduced. This shows that everyone is affected by the recession in one way or another. Not unless the government, non governmental organizations and private firms create jobs as a first step to alleviate the problem, more people will suffer. Individuals should as well be creative enough to come up with ways of making money however little it is. If Americans will wait for the government to solve all their problems, their wish might not come true. The problem of economic recession can only be reduced by everybody becoming a solution.