Gm545 Project2

Business Economics GM545

Fall session 2013, November 30, 2013

Chapter 16 Question 5

The losses to our society and the economy when people are unemployed are felt by everybody on some level. When workers lose wages the economy declines because of that loss of revenue it needs to keep business in our economy stimulated. This has a ripple down effect. The government is affected by benefits paid out and loss of tax earnings, businesses are affected by less consumer spending, the unemployed face loss of ability to survive, and every working individual has to pick up the expenses through their taxes (McClelland & Macdonald, 1998). Less consumer spending can further harm a failing economy by affecting other workers to lose their jobs, and increasing the unemployment rate.

People are counted as unemployed if they do not have a job, but are available for work and have been actively seeking work for the previous four weeks (Stone, Gerald, 2011, pg. 398). Changes in a business cycle will cause unemployment as seen when an economy falls into a recession, sales decline, and employers are forced to lay off workers, so unemployment grows, (Stone, 2011, pg. 402). Some factors like lack of private investment, increased labor cost, and depression in the world economy can cause unemployment (EconomyWatch, 2010). This is seen when private companies do not grow their business either because of the high capital required to pay their employees, or lack of demand in the economy for their products. If labor costs are too high, or increase too fast then companies will not be able to pay their employees. When employee layoffs occur this reduces the amount of revenue that is flowing through the economy. The private companies then lay off workers or shut down their facilities, and further contribute to the unemployment rate as less consumer spending is seen because of less money further affecting other businesses that rely on that consumer spending.

Unemployment...