Beyond unemployment statistics | The underground economy With Review Questions

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Beyond unemployment statistics

Beyond unemployment statistics

The difference between recession and depression , according to one time Honor’s definition, is this: when your neighbor is out of work, it’s a recession; when you’ re out of work, it ‘s a depression. The joke may be a bit thin, but there’ s no doubt that a key indicator of how well our economy is doing is the unemployment rate.
In 1933, in the depths of the Great Depression, almost 25 percent of the labor force was out of work. Unemployment today is far below that horrendous figure, but it is a serious problem. In fact, government unemployment figures don’t tell the whole story.
As you already know, for instance, the Bureau of labor statistics doesn’t count the so- called ” discouraged workers,” people who have simply given up looking for a job. Yet they are estimated to have numbered over a million in the late 1970s
In addition, the BLS counts as employed those who work far less than a normal work week; as little as one hour of paid labor weekly qualifies someone as employed. These so-called ” unemployed ” were thought to total around 3 million in the late 1970s.

More on unemployment statistics

In order to be eligible for these transfer payments, recipients may have to make a show of looking for work- by putting in an appearance at a state employment office, for example- although they don’t really want to find a job. ( For instance, because low – cost day care facilities are scarce, many unskilled single parents with young children would stand to lose money by taking a job and relinquishing warfare.) Such people, in other words, cannot be said actively seeking employment.
Because an accurate picture of hard to come by, President Carter set up a commission to consider improvement in measurement procedures. The commission, which did recommend some changes in the collection and tabulation of statistics, also proposed an addition category, a ” hardship index.” This would be a measure of income on terms of a person’s family needs.
The new classification wouldn’t change the unemployment statistics but it would provide an extra reading of how well the economy is meeting people’ s needs.

The underground economy

One big chunk of money that the GNP does not include is the billions of dollars that change hands in the so-called ” underground economy.
The biggest single employer in the underground economy is organized crime. It is a big business indeed, with annual receipts exceeding those of any legitimate multinational corporation. Along with legal operations ( trucking, vending machines, construction, laundries, and so no), it has monopoly on a host of illegal activities : the drug trade, gambling and black marketeering.
Unreported income earned by the self – employed or by small business that deal in cash is another component of the underground economy. It includes professionals ( doctors, dentists, lawyers), skilled workers ( carpenters , plumbers and the like), and proprietors of bars food stores, news paper stands, and so on.
In addition, part of the income received by waiters, waitresses, cab drivers, and similar services workers in the form of tips often goes unreported.

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Finally, thousands of Americans work ” off the books ” an arrangement whereby employer and employee agree that income will not be reported . Individuals frequently pay their cleaning help in unreported cash. Dodo employers of the growing number of illegal aliens who labor in sweatshops, food- processing industries, and menial cleaning and maintenance jobs.
Of course, transactions i in the underground economy escape all forms of taxation: personal and corporate income tax sales tax, and so on. Therefore they deprive government of millions, perhaps billions, in revenues. As for the individuals involved, some do reap fortunes. But u counted numbers are working without the safety net provided by unemployment compensation, medical insurance and pensions

Review Questions

Give your awesome Answers for other learners to get to know you more with the questions below…

1. What is structural unemployment?
2. What is the effect of inflation on cyclical unemployment?
3. What is the difference between a recession and a depression?
4. Discuss some of the causes of inflation.
5. Define stagflation. What is the relationship between slow re-productivity growth and stagflation?
6. Briefly discuss Keynesian economics and explain why it hasn’t been much help in solving our current economics problems.
7. What is the key assumption underlying supply- side economics?
8. What is the psychology of inflation and why is it an obstacle to slowing down the rate of inflation?

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