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How Unemployment, Underemployment And Discouraged Workers Affect The Gdp In An Economy?

1336 words - 5 pages

Sephora Kodjo
Nancy M. Bright
Macroeconomics 2105
Monday, April 1st, 2014
How unemployment, underemployment and discouraged workers affect the GDP in an economy?
“We blacks were the first people embracing Obama, long before the people at expensive fundraisers were supporting him. We gave him his first love, 96 percent of blacks voted for him in 2008. Yet today, we are the number one in unemployment, with 16 percent of American blacks out of work.” (Jesse Jackson 2011) The economy in United States is more and more decreasing over the time. The unemployment is becoming a big issue since many years. When we talk about unemployment, we talk about the situation of an individual who is actively looking for a job during the four weeks. The underemployment refers to an employment situation that is insufficient in some important way for the worker, relative to a standard. Discouraged workers are a marginally attached workers who have not made specific effort to find a job within the past four weeks because of previous unsuccessful attempts to find a job. However, unemployment is often used as a measure of health of the economy which is GDP. By definition, the GDP (Gross Domestic Product) is the market value of all the final goods and services produced within a country in a given period of time period. How unemployment, underemployment and discouraged workers affect the GDP in an economy?
To begin with, there is a big relation between unemployment and GDP. Employment represents a necessary condition, not sufficient however, which guarantees a social stability. Conversely, a society in which a large part of the population is unemployed, is in the process of disintegration for a simple reason: the individual socially exists in the trading system only if he has an economic value, otherwise if his working capacity is recognized according to the criteria of the system. Indeed, the market system cannot conceive of the individual as merely a human being, but as a factor of production. This status has the “advantage” to provide to everyone a live hood which is the salary. Therefore, unemployment is a macroeconomic phenomenon that directly affects people. When a member of a family is unemployed, automatically the family feels a loss of income and a lower standard of living. Understanding what unemployment is really important for both the economist and the consumer because most people rely on their income to maintain their standard of life, loss of a job is often directly threaten to reduce this level of life. In economic terms, unemployment is harmful too. Unemployed is the ability of lost production. This means that the economy produces fewer goods and services that could happen. This also means that there is less money spent by consumers, which has the potential to lead to more unemployment, to start a new cycle. Secondly, the unemployment can easily affect the GDP. According to Okun’s law, GDP levels are driven by the principles of demands and supply. An...

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