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Breaking The Vicious Circle of Unemployment

Unemployed Great DepresionPresident Obama is moving quickly to pass a stimulus package. Employment should be the top priority. The economic, psychological and deglobalization effects of unemployment can be devastating. These effects can come quickly and are difficult to reverse.

The Job Impact of The American Recovery and Reinvestment Plan,” by Christine Romer and Jared Bernstein at the time, Chair Nominee—Designate Council of Economic Advisers and Office of the Vice President Elect respectively, analyzes the effects of job creation by timing, industry, demography and type. This report examines the manner various components of the Plan effect the size and speed of job growth. The Plan’s goal (in its present form) is to increase jobs by 3 million by the end of 2010.

While this report acknowledges the current steep decline in employment, it is generally optimistic and holds that this trend can be quickly reversed. This report considers the effects between government purchases (job creation) verses tax cuts and shows by a table that purchases produce faster and greater growth in the GDP. This report discusses effect by industry and acknowledges the higher wages and increased positive multiplier effects—the chain of good economic events—of green jobs.

This report does not examine the vicious circles of continued unemployment or does it distinguish the duration of unemployment. Sort-term unemployment can mean opportunity to move to a better job. Long-term unemployment can be devastating to individual self-esteem and community spirit. Eventually, the long-term unemployed will blame foreigners for taking their jobs. This can lead to protectionism and its disastrous effects.

While the Hawley Smoot Tariff Act was passed in 1930 to protect American jobs against foreign trade, it was extremely counterproductive. Henry Ford and J. P. Morgan begged Herbert Hoover to veto Hawley Smoot, but the wave of public opinion as a result of a high rate of long-term unemployment was unstoppable. Most economists now believe that Hawley Smoot exasperated the Great Depression and contributed to deglobalization and the rise of nationalism.

The report considers the need for healthcare not dependent on employment, expanded unemployment benefits, and food stamps to ease unemployment. The report does not address the housing issue.

We need to develop a new attitude towards unemployment. It must not be stigmatized. The unemployed should be compensated not by charity but by a sustainable wage. This will eliminate the worse vicious circle of unemployment—despair.

We should drop the designation “unemployed.” Short-term “unemployment” is necessary for a dynamic economy. It is a resource.

Also See:

Obama:s American Recoevery and Reinvestmnet Plan

Are Green Collar Jobs The Answer to Our Current Economic Dilemma?

Obama’s Green Job Plan x 10

Photo Credit: Juniper Image


Written by Fred Etcheverry

Fred Etcheverry lives in Santa Cruz, California with his wife Elsa. He is a freelance high-tech B2B (Business-to-Business) copywriter usually for clients in the nearby Silicon Valley. He is also an engineering consultant and teaches courses in industry and college on computers and electronics. When he is doing none of the above, he swims in the Monterey Bay, hikes in the Santa Cruz redwood forests, visits his adult children, or goes to art galleries, plays and operas with Elsa and friends.


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