how to reduce unemployment essay brainly

Unemployment during the pandemic: How to avoid going for broke

Key takeaways.

• Without significant policy changes, employers will be hit with hefty tax increases to pay for mounting unemployment insurance (UI) claims.
• Thinning tax bases make financing UI more challenging.
• Having state UI trust funds in the red may make it much harder for job markets to recover.

Since the onset of the COVID-19 pandemic in late February, tens of millions of Americans have lost their jobs. Anxiety among many employers and consumers is still high — suggesting little hope of a rapid recovery.

This leaves state and local governments with gaping budget shortfalls amid falling income and sales tax revenues while demand for public services rises. A particularly fast-growing area of state expenditure is the payment of unemployment insurance (UI) benefits.

There has been extensive discussion among policymakers and the media regarding the trade-offs of more generous or longer-lasting UI benefits, such as the federal government’s provision of an additional $600 per week that expired July 31. But there has been very little talk about the tax hikes they will incur.

Many states have depleted their UI trust funds in the current crisis and have started to borrow from the federal government to pay their residents’ UI benefits. In the absence of additional policy changes, employers will be hit with significant UI tax increases over the next few years. And that will likely prevent some of the jobs that were lost from coming back.

In this policy brief, we explain how state unemployment insurance programs are financed and the threats to their solvency. We also discuss two reforms: one to relieve employers faced with crippling payroll tax increases in the coming years, and another to ensure that state UI trusts have enough money for future payouts.

Understanding unemployment insurance

Unemployment insurance is one of the largest social insurance programs in the United States, with each state running its own UI program to pay benefits to people laid off from their jobs. In most states, UI replaces about half of a worker’s earnings up to a weekly benefit maximum ($443 in the median state) for a maximum of 26 weeks (6 months).

While providing a needed cushion to workers, UI leaves policymakers with a difficult balancing act. As benefits become more generous, many recipients reduce their efforts to find and maintain jobs, reducing total income and burdening other workers (Johnston and Mas 2018). But if benefits become stingier, the cushion provides less support leaving some unemployed vulnerable to fall behind on their bills or lose their housing (Ganong and Noel 2019). [1]

Benefits are generally paid to people with relatively low saving rates, so the money that is distributed is quickly spent, providing short-term stimulus for consumer goods. This leads economists to refer to UI as an “automatic stabilizer.” Without the need for additional legislation, states  automatically  spend more money on unemployment benefits when economic conditions deteriorate, and spending naturally retracts as the economy recovers.

During the strong labor market leading up to the pandemic, just 220,000 workers filed new UI claims in the typical week. In late February, the unemployment rate was at 3.5 percent — a 60-year low — ­and about 1.7 million Americans were receiving UI benefits.

But two months later, the pandemic’s sudden and massive shock to the economy vaulted the U.S. unemployment rate to 14.7 percent — an 80-year-high. This April, rates varied substantially across states, from a high of 28.2 percent in Nevada to a low of 8.3 percent in Nebraska.

During the last week of March, 6.9 million Americans filed new claims for UI benefits. As demonstrated in Figure 1, this was  10 times higher  than the corresponding peak in new UI claims during the depths of the Great Recession more than a decade ago. By early May of this year, more than 25 million Americans were receiving UI payments and in every week since early March, new UI claims have exceeded the Great Recession peak of 660,000.

Figure 1: Weekly Initial Unemployment Insurance Claims (Thousands)

From March through the end of July, the federal CARES (Coronavirus Aid, Relief, and Economic Security) Act increased unemployment benefits for each recipient by $600 per week. That meant the average UI recipient was paid one-third  more  in unemployment than she earned while working (Ganong et al. 2020).

This raised concerns that workers had little incentive to return to work or find a new job, a condition necessary for labor market restructuring and recovery. [2]  This additional UI funding expired at the end of July after lawmakers were unable to agree on another round of federal spending. President Trump attempted to provide a $300-dollar weekly “top-up” by executive order (with states given the option to provide an additional $100). Whether and when that happens is unclear given that states have to apply for the funding. [3]

UI benefits are financed by a payroll tax on employers. Unlike other taxes, UI tax rates are “experience-rated,” which means that an employer’s future tax rate rises if its employees claim UI benefits, and its tax rate falls when the firm avoids layoffs. This gives employers a strong incentive to balance the demand for layoffs with the cost that they impose on the UI system.

One consequence of experience-rating UI taxes is that tax rates increase as the economy begins to recover from recession. This significantly raises the cost of hiring new workers or retaining old ones, likely weighing down recovery of the labor market.

As shown in Figure 2, the average UI tax rate increased by more than 50 percent from 2009 to 2012 as the recovery was haltingly underway.  This increase was especially high in middle-class industries — like construction and manufacturing — that were hit hardest during the Great Recession.  As this same figure shows, average tax rates were more than 2.5 times as high among employers in construction as among all employers in the years following the three most recent recessions.

Figure 2: Average UI Tax Rate on Total Wages (1990-2018)

Surviving firms have to cover the UI costs generated by the employers that went out of business — causing them to be doubly burdened. Given the much larger increase in UI claims during the current recession relative to previous ones and the likely greater rate of firm exit, the increase in UI taxes could be substantially higher over the next few years than in the years following the Great Recession. This will encourage outsourcing and automation, induce some firms to shut down, and impede employment.

Softening the blow to businesses

Unless employment recovers with impressive speed, each claim will draw an average of $7,000 in payments from state UI trust funds. Those payments will transform into an estimated $270 billion dollars in payroll tax increases on firms over the next few years, reducing the ability of firms to resume normal hiring and employment and further stalling a labor market comeback. [4]

In March and April of this year, 20 states suspended experience rating to shield their employers from an avalanche of additional UI taxes in the upcoming years. These states span the political spectrum as well as geography, including Arizona, Georgia, Idaho, Maine, Maryland, Ohio, Texas, and Washington. [5]

While this policy change will — all else equal — hasten the labor market recovery in these states, it may also lead to a substantial increase in layoffs since it removes firms’ financial incentives to retain workers. Consistent with this, a comparison of five states that suspended experience rating with five neighboring states that did not reveals that layoff rates (defined as new UI claims divided by the workforce) were 30 percent higher in the five that shut down experience rating. [6]

States are therefore in a bind. By maintaining experience rating, a wave of future tax increases may hamper the economic recovery and prolong unemployment. But suspending experience rating may induce additional layoffs today, when things are most dire.

To soften the blow over the next few years while maintaining the incentives for employers to retain their workforce, states could adjust each company’s UI costs so that they are temporarily evaluated based on conditions in their industry — reducing the scope for tax increases that were out of the firm’s control.

For the next few years, employers would essentially be graded on a curve, comparing their layoff history with industry peers rather than a non-existent perfect firm. For example, since restaurants have been hit especially hard during the pandemic while the average technology firm has thrived, a restaurant that laid off 10 percent of its workers would face a smaller tax increase than a computer software company that did the same.  Employers would have essentially equal incentives to maintain their workforce, but would not face crushing tax increases if they happen to be in an industry that was differentially hit by the COVID pandemic and the resulting lockdowns.

The benefits of such a policy could be substantial. Research suggests that employment is highly sensitive to UI tax increases in part because they hit firms that are already on the proverbial ropes. Anderson and Meyer (1997) find that a 1 percent increase in costs from UI taxes reduces employment by 2 percent. More recent research by Johnston (2020) finds even larger effects.

Shoring up the trust funds

The pandemic has shed light on the vulnerability of UI financing. Better maintenance of UI trust funds is vital to prepare states for the next economic downturn and improve prospects for future recoveries.

There is a large and growing gap in UI tax costs across jurisdictions. States like California and Florida have a low maximum tax rate and an annual tax base of around $7,000 — the lowest allowed by federal law — resulting in maximum potential UI taxes of about $400 per worker. In contrast, states like Washington and Oregon maintain large tax bases ($52,700 and $42,100, respectively) resulting in potential UI taxes of more than $2,000 per worker. [7]

In good times, states store revenues from UI taxes in a trust fund and that fund is drawn down in the depth of recessions. In recent years, however, state trust funds have been low even in good times — a function of benefits that are more generous than their financing (von Wachter 2016). The Department of Labor’s 2020 Solvency Report shows that despite a 10-year economic expansion, 21 state UI trust funds were below the minimum recommended reserve, just prior to the pandemic (U.S. Department of Labor 2020). [8]  As of August 2020, 11 states have already depleted their UI trust funds and have started to receive loans from the federal government to pay UI benefits. [9]

These deficits may contribute to lethargic recoveries. When trust funds are low, states must steeply raise rates to recover their costs and pay benefits. The timing of these increases could not be worse. Weak trust funds also undermine experience rating. When a state trust fund is in debt to the federal government, federal UI taxes rise on all firms in that state until the federal loan is repaid, regardless of the firm’s layoffs.

In California, for instance, the large loan balance accrued during the 2008 recession was not repaid in full until 2018, hiking payroll taxes for employers across the board. This weakens the intended incentives of experience rating to encourage employment stability and curb abuse of the UI system. According to the same Labor Department Solvency Report cited above, California’s UI trust fund was in the worst position of all 50 states just prior to the pandemic (Appendix Figure 1). [10]

The thinning tax base is a leading cause of low UI reserves. States choose how much of a worker’s earnings are exposed to UI taxation, but the federal government can “update” the minimum requirement to keep pace with inflation and the rise in average earnings. The current federal requirement of $7,000 has —remarkably — not been updated since 1982, eroding the tax base unless states have legislated increases or proactively linked their taxable UI earnings base to inflation or wage growth.

Another important consequence of a small tax base is that UI taxes become much more regressive. This can reduce the employment opportunities for part-time workers or those with low earnings since firms essentially pay an equal tax for each worker (Guo and Johnston 2020). In a state like California, an employer would pay the same UI tax for a worker who earned $8,000 annually as for one who earned $40,000.

But the latter worker is eligible for a weekly UI benefit that is five times larger ($400 per week versus just $80 per week for the lower-paid worker). Expanding the UI program’s taxable wage base in states like California would reduce the implicit penalty on hiring low-wage earners (principally seasonal and part-time workers as well as students).

To restore the health of UI trust funds, governments should expand their tax bases to be proportional to the level of benefits in their state. A basic reform to shore up trust funds could be to require states to have taxable wage bases at least half as large as their annual insurable earnings.  

Figure 3 plots the ratio of insured wages to taxable wages across the country, with larger values indicating greater insurance than funding.

Figure 3: Ratio of Annual Insured Wages to Taxable Wages (2015)

In California the UI-insurable income is $47,000, more than six times greater than the tax base of only $7,000. This reform would naturally link revenues to the generosity of the state’s UI system, allow states to lower tax rates, and bring in sufficient revenues to cushion workers the next time there is an economic shock. Harmonizing tax bases across states would also reduce the incentive for multi-state firms to reallocate jobs and operations based on state UI tax differences (Guo 2020).

Time for action

The COVID-19 crisis has put unemployment insurance at center stage of American politics and economic policy. It has provided a lifeline for tens of millions of workers who have lost their jobs since the pandemic’s onset six months ago, while at the same time exposing the system’s vulnerabilities. Given the complexity of UI financing and the scarcity of empirical evidence on which to rely, this is an important area for additional work and exploration.

Unless policymakers take steps to reform how the states’ unemployment insurance trust funds are financed, tax hikes will hurt labor market recoveries across the country — and with them, the American worker.

Mark Duggan is the Trione Director of SIEPR and the Wayne and Jodi Cooperman Professor of Economics at Stanford. Audrey Guo is an assistant professor of economics at Santa Clara University’s Leavey School of Business. Andrew C. Johnston is an assistant professor of economics, as well as applied econometrics at the University of California at Merced.

The authors are grateful to Isaac Sorkin for his helpful feedback.

1  States differ in where they choose to fall on that trade-off. The maximum weekly benefit varies substantially across states, from a low of $235 in Mississippi to a high of $790 in Washington.  Some states also have a maximum duration of less than 26 weeks.

2  Recent research suggests that, at least in the short term, the disincentive effects of the increases in UI benefits (caused by the CARES Act) were minimal (Altonji et al. 2020).

3  More than half of states had applied or signaled their intention to apply as of August 21. Only South Dakota announced that it would not be applying (Iacurci 2020).  States that are approved are guaranteed just three weeks of federal funding for the enhanced UI benefits, though more federal funding may be available.

4  For this calculation, we extrapolate weekly UI claims through the end of the year and assume that half of those claims become benefit spells. We use data on average weekly benefit amounts and average UI spell durations to calculate the typical cost of a UI benefit spell at a little over $7,000. The product of these two values is an estimate of the UI benefit costs that will factor into UI taxes over the coming years. The actual average value could be substantially higher if the recovery is slow, as this would lead to longer and more costly average UI benefit periods.

5  These 20 states are Alabama, Arizona, Georgia, Idaho, Iowa, Louisiana, Maine, Maryland, Minnesota, Missouri, Montana, Nebraska, North Carolina, North Dakota, Ohio, Pennsylvania, South Carolina, Texas, Utah, Washington, and the District of Columbia.

6  The matched pairs are — with the states that suspended experience rating listed first — Alabama and Mississippi, Ohio and Indiana, North Dakota and South Dakota, Arizona and New Mexico, and Idaho and Oregon.

7  Appendix Table 1 lists the UI tax base in each state in 2020 along with each state’s maximum per-worker tax and maximum weekly UI benefit.

8  The Department of Labor recommends that states have reserves in their trust funds that are at least as large as the highest recent years of UI benefit payout.

9  As of August 25, 2020, 11 states have borrowed $24.4 billion from the federal unemployment account. California, New York, and Texas account for 82% of that borrowing .

10  As shown in Appendix Figure 1, California’s solvency ratio of 0.21 was lower than the other 49 states, the District of Columbia, and Puerto Rico.

Altonji, Joseph, Zara Contractor, Lucas Finamor, Ryan Haygood, Ilse Lindenlaub, Costas Meghir, Cormac O’Dea, Dana Scott, Liana Wang, and Ebonya Washington. “Employment Effects of Unemployment Insurance Generosity during the Pandemic.”  Working Paper (2020).

Anderson, Patricia M., and Bruce D. Meyer. "The effects of firm specific taxes and government mandates with an application to the U.S. unemployment insurance program."  Journal of Public Economics  65, no. 2 (1997): 119-145.

Ganong, Peter, and Pascal Noel. "Consumer spending during unemployment: Positive and normative implications."  American Economic Review 109, no. 7 (2019): 2383-2424.

Ganong, Peter, Pascal Noel, and Joseph S. Vavra.  U.S. Unemployment Insurance Replacement Rates During the Pandemic , no. w27216. National Bureau of Economic Research (2020).

Guo, Audrey. "The effects of unemployment insurance taxation on multi-establishment firms." Working Paper (2020).

Guo, Audrey, and Andrew C. Johnston. "The Finance of Unemployment Compensation and its Consequence for the Labor Market." Working Paper (2020).

Iacurci, Greg. “ This Map Shows Where States Stand on the Extra $300 Weekly Unemployment Benefits. ” CNBC, August 21, 2020. 

Johnston, Andrew C. “Unemployment Insurance Taxes and Labor Demand: Quasi-experimental Evidence from Administrative Data.” Forthcoming at  American Economic Journal: Economic Policy  (2020).

Johnston, Andrew C., and Alexandre Mas. "Potential unemployment insurance duration and labor supply: The individual and market-level response to a benefit cut."  Journal of Political Economy  126, no. 6 (2018): 2480-2522.

U.S. Department of Labor. State Unemployment Insurance Trust Fund Solvency Report 2020.  February 2020.  

Von Wachter, Till. “ Unemployment Insurance Reform: A Primer. ” Washington Center for Equitable Growth. October 2016.   

Appendix  Table A

Source:  US Dept of Labor Significant Provisions of State Unemployment Insurance Laws 2019

*For single workers. Some states offer additional dependent allowances

Appendix Figure 1 - State UI Trust Fund Solvency (as of 1/1/2020)

Source: U.S. Department of Labor Trust Fund Solvency Report 2020

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Low Inflation and Low Unemployment: How Can it Be?

The situation the United States currently enjoys—low unemployment, low inflation, and rapid growth—has left economists struggling for an explanation in light of its apparent incongruity with the tenets of two predominant economic theories of the past 40 years, the Phillips curve and the “natural rate of unemployment.” Although the theories differ, they both assume an inverse relationship between inflation and unemployment, and agree that to hold inflation in check, it is necessary to prevent unemployment from dropping too low, which in turn means restraining the pace of economic growth.

This issue of IRConcepts explains these two theories. It also explores structural changes in the economy that may help explain why the United States is enjoying both low unemployment and low inflation, and whether the current situation signals merely a pleasant interlude or permanent change.

Current Economic Situation

For the past six-and-a-half years, the U.S. economy has been growing—at different rates at different times, but uninterruptedly. Corporate profits have soared, millions of new jobs have been created, and unemployment has plunged. The year 1997 was spectacular, what with an accelerated pace of growth, an unemployment rate that dropped to 4.6 percent in November, its lowest level in 30 years, and a falling inflation rate. In 1997, gross domestic product was up 3.8 percent (2.8 percent in 1996), unemployment was at 4.9 percent (5.4 percent in 1996), and the consumer price index—the main indicator of inflation—was up 2.3 percent (3 percent in 1996). (See Figure 1.) Despite the boom, the Federal Reserve, except for one small jump in interest rates, has allowed the economy to move forward.

Economic Theories of Inflation

Over the years, there have been some economists who have not seen inflation as a serious problem. Indeed, they claim that this overemphasis on achieving price stability has come at the cost of other national objectives. In their view, faster economic growth, even if it caused the inflation rate to rise, would enable the nation to raise living standards, add still more jobs, and, in general, better deal with other national problems. The late Harvard economist Sumner Slichter argued that a moderately rising price level is beneficial because it encourages businesses to invest in capital and increase production. His views are echoed by Nobel laureate James Tobin of Yale, who sees a little inflation as helping to “grease the wheels” of the economy.

Most economists are less sanguine about rising prices, particularly when the pace accelerates. They point to the following problems that come with higher inflation rates:

• The major difficulty is that inflation complicates the process of making rational spending and investment decisions. In an effort to protect the value of their money, people tend to invest in more speculative ventures, and resources are channeled away from productive pursuits. Inflation also redistributes income within the population, because all incomes do not rise at the same rate.
• While the income of some people rises faster than prices and they become better off, others fall behind and suffer a reduction in living standards. Generally, those with higher income are better able to protect themselves from inflation, but people on a fixed income, at any level, suffer.
• On the international level, if the prices of U.S. products rise faster than those of other nations because of inflation, U.S. goods and services lose out in the global marketplace. Exports decline as consumers abroad cut their purchases of more costly U.S. products and, as the relative prices of imports drop, U.S. consumers substitute cheaper imports for domestically produced goods.

Inflation: Demand-Pull or Cost-Push?

Concentrating on U.S. data for this century reveals that the worst periods of inflation have occurred in times of war (e.g., World War I, World War II, and Vietnam), when prices rose because there was too much demand relative to the supply of goods and services. Such “demand-pull” inflation has been due to the unwillingness of society to pay for the cost of war through higher taxes; it inevitably pays through higher prices.

While few economists would quarrel with this explanation of inflation as being related to periods of supply-demand imbalance, some would disagree that it accounts for rising prices at other times. Some economists diagnosed the situation as a new form of inflation, calling it “cost-push” inflation. In their view, prices rose because competitive forces could not overcome institutional barriers—e.g., unions and management negotiating big wage settlements, which were subsequently included in product prices—and not because of an excess of money chasing a shortage of goods.

The Phillips Curve

Studying the course of wage changes in the United Kingdom from 1861 to 1957, A.W. Phillips of the London School of Economics discovered a correlation between the rate of change of money wages and the unemployment rate (a measure of how much slack there was in the labor market). His findings, published in 1958, are illustrated in Figure 2. The unemployment rate and the rate of change in money wages for each year are shown by a dot, and the resulting array of dots appears to form a pattern: When unemployment was high, wage increases were low, and when unemployment was low, wage increases were high. At the 1959 meeting of the American Economic Association, Nobel laureates Paul Samuelson and Robert Solow of MIT coined the term “Phillips curve” to describe this inflation-unemployment relationship.

Economists testing Phillips’s findings in other situations tended to confirm his hypothesis. Researchers then turned their attention to estimating equations that would determine money wages and prices. The prevailing opinion was that there was a clear trade-off between inflation and unemployment and that society could choose how much of each it was willing to tolerate.

Instead of society’s having that choice, some economists proposed that the freedom of unions and management to set wages and companies to set prices be curbed via “incomes policy”: something less than wage and price controls, but a general agreement to follow government guidelines. The aim of incomes policy was to shift the Phillips curve so that less unemployment could be achieved with a lower rate of wage increase. The basic idea was that if pay increases could be held down, then government could conduct an expansionary fiscal and monetary policy. Incomes policy blossomed in Europe and, with the Kennedy wage-price guideposts of 1962-1965, the United States had a version as well.

Many economists believed incomes policy caused a misallocation of resources and that when it did work, it was only for a limited period. In the United States, the whole discussion of the desirability of the wage-price guideposts died out in 1966 when the inflationary period ushered in by the escalation of the Vietnam War broke the back of the stabilization effort. (The nation, however, would try again under Presidents Nixon and Carter.)

The Phillips curve paradigm dominated economic theory for a decade. As is often the case, however, empirical results often did not conform to theory. When that happened, the Phillips curve advocates came up with variations on the theory to explain the discrepancies. This became harder to do as the discrepancies increased in size; the Phillips curve theory lost adherents in the 1970s when inflation and unemployment increased at the same time.

The “Natural Rate of Unemployment”

Among the economists who challenged the Phillips curve hypothesis were Nobel laureate Milton Friedman of the University of Chicago and Edmund S. Phelps of Columbia University, who offered a different hypothesis—the “natural rate of unemployment.” (The term was coined by Friedman in his 1968 American Economic Association presidential address.) Because of market friction, e.g., the time it takes to match an available worker with an available job, and structural change, there always will be some unemployment, even if the economy is in general equilibrium. At the equilibrium rate of unemployment—when demand and supply are in balance in the various markets—there is no tendency for prices to rise or fall. Therefore, the “natural” rate has become known as the Non-Accelerating Inflation Rate of Unemployment (NAIRU).

According to the natural rate hypothesis, the long-run Phillips curve is vertical and there is no permanent inflation-unemployment trade-off. Government policy designed to bring unemployment below its natural rate by creating additional demand will work only temporarily and, at the same time, generate inflation. As workers see rising prices eroding their real purchasing power, they demand higher wages. When their wages go up as much as prices, the incentive that led employers to add jobs is removed, and so unemployment returns to its initial level.

As can be seen in Figure 3, the economy starts from the equilibrium point X on the short-run Phillips curve P1, at which the natural rate of unemployment is OA. Then equilibrium is moved to point Y through the creation of additional demand; unemployment drops to OB, but the wage level will gradually rise from OC to OD. At the new wage level unemployment starts rising until it is again at its natural rate OA, at point Z on the short-run Phillips curve P2. The long-run Phillips curve is represented by the vertical line AE. Under these assumptions, the only way that lower unemployment could be sustained would be if the government continued to create excess demand.

Application of Theory

Trying to keep unemployment below its natural rate requires a continuous boosting of aggregate demand, which in turn will lead to accelerating inflation. The policy implication is that society must choose either to adjust unemployment or to stabilize inflation, but it cannot do both. Starting in 1980, the choice became to stabilize inflation and, with fiscal policy no longer an option because of huge budget deficits, the task fell to monetary policy and the Federal Reserve.

The Federal Reserve, under the chairmanship of Paul Volker, took steps to end the inflationary spurt that had come with the second oil shortage crisis (1979). By slamming on the monetary brakes, the Fed successfully curbed inflation, but the policy also resulted in a deep recession. The ballooning of the federal deficit during the Reagan administration effectively ended discretionary fiscal policy in the United States, and the government has continued to rely on monetary policy to keep inflation in check. The Federal Reserve, assessing the nation’s supply of physical and human resources and its rate of productivity improvement, came to the conclusion that a noninflationary rate of growth in gross domestic product would be just over 2 percent. Therefore, if GDP started to accelerate beyond that rate, the Federal Reserve would tighten monetary policy. Indeed, the Fed’s raising of interest rates has been blamed for the 1992 economic slowdown.

As adherents of the Phillips curve had tried to determine the precise trade-off between inflation and unemployment, the devotees of the new theory sought to discover what the NAIRU actually was, even though Friedman had conceded that it was not fixed. In the early 1980s, estimates placed it at 7.25 percent, but events did not bear out the predictions; lower unemployment did not lead to accelerating inflation. So they started to lower their estimates of the NAIRU, attributing the reduction to structural changes in the economy. By the 1990s, the NAIRU was placed at 6 percent, and with it came the warning from these economists that any prolonged period of unemployment below that level would spell a new inflationary cycle. However, the unemployment rate dropped steadily, to its present 4.7 percent, without any consequent spurt in inflation.

Lower unemployment became possible because the Federal Reserve apparently no longer adhered to the natural rate hypothesis and did not jam on the monetary brakes as joblessness fell. If the events of the 1970s undid the Phillips curve approach, those of the 1990s have been equally unkind to the NAIRU view, leading to today’s uncertainty and the inability of the existing theories to explain the current situation.

Recent Changes in the U.S. Economy

A review of some changes in the U.S. economy may help shed some light on the current economic environment. Because some of these variables were not taken into account—indeed a few were considered impossible when the predominant economic theories were first devised—their effect was not calculated into economists’ formulas.

Labor Force Elasticity

An assumption of the theories linking unemployment with inflation is that the supply of labor is limited in the short run. Thus, as economic growth accelerates, the pool of potential workers from which employers can draw dries up; to continue to attract workers, employers bid up the price of labor. The higher production costs then force companies to raise prices, and, unless the pace of growth is lowered, the inflationary cycle is under way.

Lately, however, the labor force has been growing 50 percent faster than the population, indicating that the labor supply is more elastic than previously assumed. As discussed in the last issue of IRConcepts, “The Changing American Labor Force,” the upsurge in female participation raised the total labor force participation rate more than 6 percentage points, from 60.2 to 66.6 percent, between 1971 and 1993. Since female participation is almost as high as that of males, the Bureau of Labor Statistics had expected it to increase much more slowly in the 1990s. However, in this period of economic ebullience, women have continued to pour into the labor market. Moreover, there are signs of reversal in the trend of male workers leaving the labor force at ever younger ages; older men have been jumping at job opportunities. Indeed, labor force participation is rising among all demographic groups.

Other factors also augment the supply of labor. The Americans with Disabilities Act has been accompanied by an increase in the number of employees who are disabled. Welfare reform is pushing people into the labor market. Immigration, legal and illegal, boosts the number of workers. In effect, employment can grow faster than had been assumed without causing labor shortages.

Elasticity of Supply of Physical Resources

The supply of other resources has proven to be more elastic than traditionally assumed as well. Again, economic theory has held that the supply of physical capital is inelastic in the short run—during a boom one of the most closely watched pieces of information is the utilization of plant capacity. If aggregate demand exceeds the capacity to meet it, then prices simply are bid up and the traditional demand-pull inflation situation ensues.

New technology and economic globalization, however, have eased the supply shortage problem. Computerized processes often provide companies with the flexibility to shift their manufacturing processes from one product to another. Thus, when demand for a given product begins to outpace the demand for others, the company can reprogram its operations to meet that demand. The enhanced flexibility of the new technology thus helps to ease supply shortages.

Globalization is of still greater importance with respect to supply shortages. For U.S.-based multinational companies with plants throughout the world, capacity bottlenecks at U.S. plants may be overcome by shifting production to offshore facilities. This has been particularly true recently, when the U.S. economy has been growing at a healthy pace but those of other industrial regions—Japan and Europe—are expanding much more slowly and thus have excess capacity. Nonmultinational companies also can take advantage of foreign production capacity by importing intermediate products and components from abroad when their domestic suppliers run short.

Economic Globalization and Price Increases

Historically, most product markets were national, and for capital-intensive industries they tended to be oligopolistic, i.e., dominated by a few major producers. Under those conditions, when demand rose, one company in an industry would raise its price for a product and if it stuck, the others would quickly follow suit. With the spread of technology and the lowering of trade barriers—the heart of what we call economic globalization—many product markets have become international. This means that domestic producers, even when they encounter surging demand for their output, are constrained from raising prices lest foreign manufacturers undercut them and take away business. Thus worldwide competition has become the predominant factor in pricing.

Worker Fear of Job Loss

Prices normally rise when firms encounter increased costs. A major source of higher production costs has been compensation. In a booming economy, when labor shortages develop, employers are forced to raise pay rates to attract workers. When collective bargaining was more common, unions also took advantage of tight labor markets to negotiate high wage and benefit settlements.

Unionized or not, workers today are cognizant of the increased domestic and foreign competition faced by their employers. They know that if their company’s labor costs increase because of high wage demands, the company may not be able to transfer those costs to customers. An employer will take some action to maintain its competitive position, such as relocating production to another plant. Even if the firm cannot shift production, a surge of lower-priced imports may undercut its sales. Fear of the resulting job loss restrains compensation increases, even in economically heady periods.

In the winter 1997 issue of the Journal of Economic Perspectives (JEP), Joseph Stieglitz, former chairman of the Council of Economic Advisers and now chief economist of the World Bank, offers another explanation of current employee behavior, which he calls the wage-aspiration effect. Workers’ wage aspirations are linked in a given period to the rate of productivity improvement, but they do not change quickly in response to changes in productivity. Thus, in the 1970s, when labor productivity improvement dropped perceptibly from its former rate of about 3 percent, workers still demanded high real-wage increases. Now, however, they have adjusted their real-wage aspirations down to reflect slower productivity growth.

Accuracy of Statistical Data

Trying to understand today’s unemployment-inflation situation is complicated by the possibility that the data may be inaccurate, particularly those relating to productivity, that is, output per man-hour. Official BLS data show no improvement in productivity growth from the 1 percent rate of the past two decades. Moreover, there are internal discrepancies between sets of data, with national output as measured by income being higher than output as measured by goods and services (GDP). Economists were therefore dismayed when the revisions of GDP data for the past few years released in the summer of 1997 did not show greater output than originally reported, which would have indicated a higher rate of productivity growth.

Many economists, including Federal Reserve chairman Alan Greenspan, believe that the data relating to prices and productivity are no longer reliable. Industry’s heavy investment in capital equipment in the past decade or so is reflected in the higher productivity reported in manufacturing, but not in the data for the service sector, even though it too has been buying computerized processes. Any undercounting in the service sector, of course, affects overall productivity trends. Admittedly, it is difficult to measure productivity in services, but many are convinced that the gains are grossly underestimated. They point to low inflation in the service sector, which does not square with poor productivity growth. If output per employee is growing faster than reported, then firms are under less pressure to raise prices, a phenomenon that would contribute immensely to holding the line on inflation.

Decline of Unionism and Collective Bargaining

Part of the reason for the moderation of the inflation rate, despite tight labor markets, has been attributed to the decline of unions and collective bargaining. Unlike the situation in Europe, union wage pressure has not been accused of instigating inflationary bouts in the United States. In fact, the United States following World War II enjoyed a modest rate of inflation, except during periods of extreme conditions, such as war and the oil embargo and price hikes of the 1970s, which economists refer to as supply shocks. Once a supply shock occurred and triggered inflation, however, collective bargaining helped perpetuate it. For example, when the 1973 oil embargo and quadrupling of prices by the Organization of Petroleum Exporting Countries (OPEC) ignited inflation, unions demanded wage hikes for their millions of members on top of their contractual cost-of-living adjustments. As employers encountered higher labor costs they raised prices, and the all-too-familiar wage-price spiral was set in motion. Today, on the other hand, cost-of-living clauses have disappeared from most collective bargaining agreements and many fewer establishments are unionized. The decline of unionism has been a factor in moderating wage rises. Nonunion establishments do not face union wage demands, and organized ones are under less pressure because unions have lost bargaining power.

Even the need to raise the pay of some workers can currently be contained. In a boom period, the more skilled employees tend to be in short supply; to attract them employers offer higher compensation. Historically, those increases then would spread to the rest of the workforce. This was particularly true under collective bargaining, but even nonunion firms, in pursuit of internal wage equity, followed the practice. Furthermore, rising wages in one industry do not spill over to others, as they once did. We see the change today in the high-tech sectors of the economy, in which wages have been rising at above-average rates, but the pay boosts have not spread elsewhere, nor have they been translated into higher prices, since high tech also enjoys above-average productivity gains.

Conclusions

Some analysts dismiss the idea that the current situation is due to a fundamental change in the economy. Looking at the record, they attribute today’s low inflation to the absence of supply shocks suffered in prior periods, and to some temporary windfalls, such as a stronger dollar holding down prices of imports, lower oil prices, and subdued rises in health benefit costs. Those who claim that we have not achieved a new paradigm therefore warn that windfalls could quickly dissipate, that shocks could reappear, and that high inflation could return, despite globalization and union decline.

Are Economic Theories Really Wrong?

Returning to the economic theories relating unemployment and inflation, some economists contend that they are basically correct and that there just may be a time lag between the current low unemployment and higher inflation; as the old Brooklyn Dodger fans used to say, “Wait till next year.” Defenders of the Phillips curve claim that it is still valid, and that their models of the 1970s were off only because they did not take supply shocks into account. In fact, they report that their improved econometric models reveal a stable Phillips curve over the long run. The basic idea that there must be a relationship between labor market slack and wage rises is reasonable, yet unemployment has declined without a jump in inflation. Even with elasticity in the supply of labor, however, rapid economic growth will eventually produce severe enough shortages to force wages up; the point at which this happens, however, won’t be known until after the fact.

The current period also has wreaked havoc with the natural rate of unemployment hypothesis, since it has not be able to predict what that rate is. The assumption that the NAIRU was fixed at about 6 percent has been proven wrong, but that does not mean that the NAIRU does not exist. Common sense suggests that there is some level of employment at which a nation simply runs out of potential new entrants into the labor force. Indeed, during World War II, were it not for wage and price controls, wages and prices would have skyrocketed.

Accepting the fact that the NAIRU is not fixed and that changes in the economy have lowered it still leaves the problem of trying to determine at what actual level of unemployment inflation will set in. Economist James K. Galbraith of the University of Texas has termed the attempts to estimate the NAIRU “a professional embarrassment” for economics (JEP). Douglas Staiger and James H. Stock of Harvard and Mark W. Watson of Princeton state that “the natural rate probably lies between 4.3 and 7.3 percentage points of unemployment” (JEP). That band is wide enough to uphold Galbraith’s caustic comment, but, more importantly, it means that the NAIRU provides no guidance whatsoever to policymakers.

Economic theory has failed in another way—by focusing on unemployment as the sole predictor of future inflation, for there obviously are other and possibly better indicators, e.g., utilization of manufacturing capacity, index of new orders, and the federal funds rate, particularly for longer-run periods. The fact that two things are related, moreover, does not mean that one is necessarily the cause of the other and, in fact, they both may be the effects of a third factor. Looking at U.S. history of the past half century, it seems that shocks to the economic system have been the major culprit with respect to inflation, as demonstrated with the jumps in the price of oil in the 1970s.

Adopting a Commonsense Approach

Even the assumption of our entry into a period of a new economic paradigm does not mean that there can never be a problem of labor shortages causing higher wages and, consequently, higher prices. Adopting a commonsense approach to the issue of inflation and unemployment therefore starts with the understanding that there is some trade-off between them, as posited by the Phillips curve theorists. Similarly, when the supply of additional labor runs out, the curve becomes vertical, as claimed by the natural rate proponents. With that much knowledge, about all that can be concluded is that policymakers should be careful in attempting to push either unemployment or inflation down too far, lest it cause the other to rise inordinately. Indeed, this is precisely the policy that the U.S. government and Federal Reserve have been following, quite successfully.

Essay on How to Reduce Unemployment

Students are often asked to write an essay on How to Reduce Unemployment in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on How to Reduce Unemployment

Understanding unemployment.

Unemployment means when people who can work don’t have a job. It’s a big problem globally.

Improving Education

Encouraging entrepreneurship.

Promoting entrepreneurship can create more jobs. If more people start businesses, they can hire others.

Government Policies

Government can help by making policies that encourage job growth. They can invest in industries that create jobs.

250 Words Essay on How to Reduce Unemployment

Introduction.

Unemployment is a significant socio-economic issue that affects both individuals and nations. It leads to wasted human capital, reduced economic growth, and increased social problems. To mitigate unemployment, a multi-faceted approach is required.

Enhancing Education and Training

Education is the cornerstone of employability. A well-educated population is more likely to be employed. Therefore, improving the quality of education and aligning it with market needs can significantly reduce unemployment. Additionally, vocational training programs can equip individuals with skills that are in high demand in the job market.

Promoting Entrepreneurship

Entrepreneurship is a key driver of job creation. By fostering a conducive environment for startups and small businesses, governments can stimulate job growth. This can be achieved through policies that ease business registration, provide access to funding, and offer tax incentives.

Investing in Infrastructure

Investing in infrastructure can create jobs both directly and indirectly. Directly, through the construction and maintenance of infrastructure, and indirectly, by improving the business environment and attracting investment.

Encouraging Innovation and Technology

Innovation and technology can create new industries and jobs. Governments and educational institutions should promote research and development, and encourage the adoption of new technologies.

500 Words Essay on How to Reduce Unemployment

Unemployment is a pressing issue in many economies worldwide, affecting both the individual’s well-being and a nation’s economic health. It is a multifaceted problem with no single solution. However, by implementing strategic policies and initiatives, we can significantly reduce unemployment rates.

Education and Skill Development

The first step in reducing unemployment is investing in education and skill development. The labor market is increasingly demanding a skilled and educated workforce. Thus, ensuring citizens have access to quality education and vocational training is paramount. This approach not only prepares individuals for the job market but also fosters innovation and entrepreneurship, leading to job creation.

Promoting entrepreneurship is another effective strategy to curb unemployment. By offering incentives such as tax breaks, grants, and low-interest loans, governments can motivate individuals to start their own businesses. This not only creates jobs but also stimulates economic growth. Additionally, providing entrepreneurship education and mentorship programs can equip individuals with the necessary skills and knowledge to run successful businesses.

Labor Market Policies

Investing in infrastructure can stimulate job growth in two ways. First, the construction phase creates jobs, particularly for low-skilled workers. Second, improved infrastructure can attract businesses, leading to long-term job creation. This is particularly effective in rural areas, where unemployment rates are often higher.

Supporting Job Search Efforts

Reducing unemployment is a complex task that requires a multifaceted approach. By investing in education and skill development, encouraging entrepreneurship, implementing labor market policies, investing in infrastructure, and supporting job search efforts, we can make significant strides towards reducing unemployment. While these strategies require substantial investment and time, the long-term benefits for individuals and the economy as a whole are well worth the effort.

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Unemployment Essay

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Introduction

Unemployment can be defined as the condition where citizens of a country are jobless and have in the recent past been involved in searching work without a success. Unemployment rate can be defined as the prevalence of unemployment opportunities in a country. The unemployment index is calculated by dividing the number of unemployed individuals by the number of individuals in the labour force (Arestis & John 15).

I have chosen the unemployment situation because of the increasing and prevalent unemployment rates in various countries.

Recent statistics indicate that, the rate of unemployment is on the increase and there is a lot of information to cover the complex area of unemployment. There are various reasons which cause unemployment in a country. The following are some of the reasons that cause unemployment rate in a country (Arestis & John 20).

• Advances in new technologies. New technologies to a large extent replace the human labour force which renders most human beings as unemployed.
• Population increase. The level of unemployment is believed to go up as population in a country increases. Increase in population leads to an increased pressure on the available resources. These limited resources are few and cannot accommodate the increasing demands of the population
• National policies. Some countries have stringent national policies that favour the increase in the unemployment levels in a country. These national policies will always restrict the participation of certain gender groups in specific employment sectors. For example, some countries restricts the participation of women in many employment sectors especially the building, and construction sector.
• Political environments also play a major role towards increasing the rate of unemployment. Political environments that increase the rate of unemployment are quite dominant especially in the developing countries. Such environments will enhance political vices such as nepotism and corruption which undermines the possibility of having fair distribution of employment opportunities to citizens.
• Economic depression. Economic depression is a form of economic recession that is long-term which is characterized by a downturn in the various economic activities in a country.

In analyzing this complex situation of unemployment, it is of vital importance to consider the application of various system analyzing tools such as “tools, methods, methodology and many techniques”. This will make the analysis of the complex situation being analyzed to be understood easily.

In my research I will analyze the complex process of unemployment with the aim of creating a sustainable environment in the employment sector.

The research will encompass the various causes of unemployment rates, the challenges being encountered in the process of reducing unemployment rates. The research will critically analyze the various types of unemployment and, the mechanisms which can be adopted in order to reduce the prevalent rates of unemployment.

Unemployment is a complex problem facing many countries presently. The process of reducing unemployment rates can be a daunting process fraught with disappointments. As a summary of the major findings of the research, the major cause of unemployment is lack of information among citizens, and poor governance policies in a country (Arestis & John 30).

Various citizens are ignorant on how to effectively utilize the available natural and human resources to create employment. They lack a sense of creativity which could possibly create employment opportunities. Also, most citizens are ignorant on how to effectively participate in democratic governance process.

This ignorance eventually creates autocratic governance regimes which fosters nepotism and corruption. These political vices reduce the availability of employment opportunities in a country, leading to unemployment (Arestis & John 15).

One key requirement of a good system practitioner is the ability of the system practitioner to apply the various models, methods and theories of system practitioner into the real life.

My undertaking of this project will assist me to apply the various system practitioner concepts learnt in class to the real life complex scenario of unemployment (Jacques & Stephen, 1994, pg. 21). In analyzing the complexity associated with unemployment, I will consider the various theories of complex management which I will discuss along with the development of this paper.

Applying hard systems method

Before analyzing the complex process of unemployment, it is important to make a distinction between hard and soft systems. Hard systems can be defined as those problems that deal with the “how” questions. For example, the question of how to increase the rate of employment is an example of a hard problem.

A hard problem is always characterized by the fact that there is a distinct solution, and there are a number of defined goals that are well defined which should be accomplished. On the other hand, a soft system is a problem that encompasses both the “how” and “what” questions (Jacques & Stephen, 1994, pg. 27)

The complex process of unemployment could be well analyzed using the hard system method of approach. The hard system method tries to analyze a complex problem through many stages which will be discussed in this paper.

There are various advantages that are associated with the use of the hard system methodology of concept analysis. The following are some of the advantages of using the hard system method (Jacques & Stephen, 1994, pg. 35)

• It provides a deeper understanding and analysis of the problem of unemployment and answers the question of how to mitigate the unemployment problem.
• Hard system analysis provides answers to other complex problems related to unemployment like how to use technology to increase the rate of employment.

The following diagram indicates the application of hard system in the analysis of unemployment.

The above diagram indicates the various processes that will be undertaken in the analysis of the unemployment problem.

Stage 1. System description

System description will always indicate the current position and status of the problem being analyzed. Currently we are experiencing a high rate of unemployment which is characterized by the increasing population rate. The world population is estimated at 7 billion people.

The available limited employment resources are not sufficient to carter for the demands of the 7 billion individuals. This eventually piles up pressure on the resources that could be used to create employment opportunities, hence leading to an increased level of unemployment (Steger, Maznevski & Wolfgang 39).

The following table illustrates the world population by continent by 2011.

The alarming increase in the level of unemployment creates a need for analyzing the complex concept of unemployment with the aim of unmasking the strategies to be adopted in order to reduce unemployment rates (Arestis & John 55).

The following table indicates the world top ten countries by unemployment rate

The above data directly underpins the fact that unemployment is a complex prevalent issue. If much is not done to contain the issue, then, the issue will become out of control and cause adverse effects to the limited human, and natural resources available (Arestis & John 60).

Stage 2. Identification of constraints and objectives

The main objective of this sturdy is to identify the various causes of unemployment and any relevant measure that can be adopted to mitigate the problem of unemployment. Also, the sturdy is aimed at identifying the reasons as to why there is a huge gap between the unemployment rates in developed countries and the developing countries (Steger, Maznevski & Wolfgang 40).

The major projected constrain is the political environments and government policies and ideologies governing the utilization of resources, and the creation of employment opportunities.

Stage 3. Generation of routes to objectives

• Governments and relevant stakeholders should ensure that, there is gender equity and equality in the allocation of employment opportunities.
• Governments should adopt various strategies that will involve the citizens in the creation of employment opportunity for self-sustainability. A self-sustenance economy should be adopted which can be achieved through promotion of innovation and creativity.
• Removal of political and governance ideologies that promote nepotism, and corruption.
• Creation of public awareness and increased public participation in the governance process.

Stage 4. Formulating measures for performance

Measures of performance will measure to what extent has the research objectives been met. In order to measure the performance, the unemployment index will be recorded for the next five years after the activities stipulated in the routes to objectives have been undertaken.

The unemployment index obtained will then be compared to unemployment index done before undertaking this research. The comparison will give vital information as to whether there is been an improvement in the unemployment index after the adoption of the routes to objectives (Zimmer & Jake 44).

Stage 5. Modeling

The modeling process will involve those activities that are geared towards determining the outcomes of the research (Zimmer & Jake 51). In order to identify the outcomes, a survey will be carried out after every year for the next five years to find out the rate of unemployment.

This will be calculated by dividing the number of employed individuals by the number of unemployed individuals. The index obtained will then be compared in order to determine whether there is an improvement or a decline in the unemployment rate (Arestis & John 31).

Stage 6. Evaluation

The evaluation stage is the most important stage in the analysis of the complex issue. Evaluation will involve the analysis of the outcomes obtained from the modelling stage. The evaluation will involve the analysis of the disparities that will be recorded in the research.

This will involve the sturdy of what factors are causing the disparity and how to re-align and reconfigure the process routes in order to achieve the research objectives. Evaluation process might also include the prototyping technique where the routes are tested, and retested in order to determine their viability before being fully implemented (Zimmer & Jake 71).

Stage 7. Selecting the best routes to objectives

After the evaluation process, the best route towards achieving the objectives should be selected. The route chosen should ensure that the research objectives have been met to a large extent. In the analysis of unemployment, the best route that was identified was the creation of awareness and involving the individuals in the governance process (Steger, Maznevski & Wolfgang 59).

This route will increase the level of democracy in a country hence creating equal employment opportunities for both women and men. Also, creating public awareness will ensure that citizens are well equipped with knowledge of how to effective utilize resources and create employment opportunities.

Also, public participation in the governance process will ensure that the governance policies adopted foster democracy which is a key ingredient towards reducing the rate of unemployment (Arestis & John 75).

Stage 8. Implementation of the selected routes

The implementation process will involve the process of adopting and enrolling the best selected route. In the case of unemployment, the selected route of creating awareness and increasing public participation in the governance process will be adopted.

Creating awareness will involve conducting of seminars to enlighten the public on how to effectively use the available resources, and how to create employment opportunities through innovation (Steger, Maznevski & Wolfgang 69).

Public participation in the process of policy formulation will be achieved through promotion of civic education among citizens on how to carefully vote and chose leaders with integrity.

Also, the civic education will be aimed at increasing public participation in government related projects, and governance processes starting from the grassroots government structures. Also, the civic education will aim at educating citizens on how they can get access to public funds and amenities.

Stakeholders involved

Stakeholders can be described as those people who are in one way or the other affected by the problem of unemployment. Also, stakeholders in one way or the other affect the entire problem of unemployment. Stakeholders can negatively or positively be affected by the unemployment concept.

On the other hand, stakeholders can positively or negatively influence the prevalence of unemployment concept (Jacques & Stephen, 1994, pg. 75)

The following tables indicates a summary of the how stakeholders are affected/affect the unemployment concept

Ethicality statement

As a system practitioner I fully commit myself to the various ethical guidelines that should be followed whenever undertaking any research work. I will consider the following ethical consideration I my research undertaking:

• The data collected will be solely used for the purpose of the research, and no client data will be used for any other purposes not stipulated in the research.
• The clients will be fully informed on the purpose of the research, and the duration the research is going to take.
• The participation of subjects in the research will be voluntary, and out of consent. Where approval is required, then, the relevant approving bodies will be sought.

Conclusion and recommendations

In conclusion, it is evident from the research that unemployment is a complex issue that can be solved abstractly. With the increasing levels of unemployment, much has to be done in order to mitigate and reduce the rate of unemployment. This calls for public awareness, and participation in the entire process of creating employment. Such a complex issue should not be entrusted in the hands of greedy and selfish leaders.

Project log

The entire project will be spread over a period of six weeks with the first two weeks dealing with the preparation process and the last four weeks dealing with the data collection and analysis. The five weeks have been broken into three phases.

The following table indicates the project log phases.

Week 1 and week 2

During the first two weeks, I was involved in the process of consulting my colleagues and tutor to try and sought out their opinion about the topic. This gave a chance to discuss the various available methodologies that could be used in the sturdy. Also, this gave a chance to identify whether unemployment is a complex process or not.

Also, during the first week, I was able to undertake a literature review in order to determine what other researchers have done about the unemployment concept. The literature review sufficed me with relevant information about the unemployment concept.

Also, the information obtained was useful in avoiding mistakes done by previous researchers. The literature review involved researching the relevant literature materials like the internet, books, journals, and articles. I also obtained a chance of visiting various libraries in order to find out more information about the unemployment concept.

Week 3, 4 and 5

Most of the research work was conducted during the third, fourth and the fifth week. Various data was collected about the unemployment rate of individuals. Also, clients were required to fill in a survey form and a questionnaire in order to determine the causes of unemployment. Also, the subjects were required to give their individual opinions about what could be done in order to reduce the rate of unemployment.

Various data collections methods were employed in the process of data collection which includes the following methods; survey forms, questionnaires, and interviews.

Subjects were required to fill in questionnaires which sought to find out what were the causes of unemployment and what could be done to reduce the unemployment rates. Subjects were also required to fill in a survey form to determine whether the government is doing much to contain the problem of unemployment.

A series of interviews were also conducted with the aim of finding more first-hand information about the problem of unemployment. A total of three interviews were conducted during the entire period of the project. The following are the interviews that were conducted during the time of research.

The sixth week of the research was purely dedicated to data analysis and the sturdy of the findings. The data collected was analyzed and compared to previous data that was collected by other researchers on the same subject. The data analysis stage involved the application of the hard system on the complex process of unemployment. Various stages of the hard system methodology were studied in respect to unemployment.

Also, the compilation of the results obtained was done on the sixth week. This was the last week of the project undertaking, and due consultation was made to ensure that the project is up to date and with the relevant requirements.

I also, spent some time with my project supervisor in order to discuss the application of TMA in the complex process of unemployment. My supervisor advice helped a lot in the development of the project in the sense that, the information I was given largely assisted in the ensuring the realization of the research objectives.

Summary of the project log

In this section of the report, I will cover a brief summary of what I have been able to undertake during my six weeks of undertaking the project.

Undertaking the T306 course has largely helped build more on the concept that I learnt in my previous course, T205-An approach to system thinking. Managing complexity has equipped me with knowledge of how to apply various managing complexity theories, systems, and methodology in analyzing complex situations.

During the first five weeks of my project undertaking, I was extensively involved in the process of data collection and literature review. This introduced me to a number of literature and concept regarding the problem of unemployment. It also introduced me to a wide range of knowledge regarding data collection methods like interviews, questionnaires, and surveys.

The last week of the project was dedicated to data analysis. During this period of data analysis, various data analysis techniques were employed to analyze the data. This introduced me to a wide range of scientific data analysis methods of analyzing data.

Client report

The major client in the above research is the unemployed citizen or individual. They are the ones who are largely affected by the rising unemployment rate. Most of the unemployed individuals or citizens have the common ideology that it is the responsibility of government and private sectors to create employment.

Such an ideology is wrong because the process of creating employment opportunities is neither a government responsibility nor the responsibility of the private sector. It is a collective responsibility that has to be done by the collaboration of the citizens, the private sector, and the government.

There are various forms of employment that currently exists. One can be self employed which means that, they are their own employers. This form of employment fosters renovation and a spirit of entrepreneurship among citizens. This spirit eventually promotes innovation and creativity which eventually creates employment opportunities.

Also, citizens should be made to understand that, democracy plays a major role towards creation of employment opportunities. Democracy ensures accountability and transparency towards the use of resources, hence creating avenues for more employment opportunities. On the other hand, corruption, nepotism, and violence lead to misuse of resources which eventually blocks avenues for creating employment opportunities.

In order to reduce the adverse effects associated with unemployment, citizens should engage in innovation and creative activities. This will enhance the proper utilization of resources and eventually creating employment opportunities. One major desirable aspect of a good economy is the ability to be self sustainable.

A self sustainable economy will ensure that citizens have the services and products they require. One way of ensuring a self sustaining economy is by having citizens engage in innovative and creative activities. Such activities will lead to specialization, and creation of more job, and employment opportunities.

Works Cited

Arestis, Philip & McCombie, John. Unemployment: Past and Present . Basingstoke: Palgrave Macmillan, 2009. Print.

Jaques, Elliott, and Stephen, Clement. Executive Leadership: A Practical Guide to Managing Complexity . Malden, Mass: Blackwell, 1994. Print.

Steger, Ulrich & Maznevski, Martha & Wolfgang, Amann. Managing Complexity in Global Organizations . Chichester, West Sussex, England: John Wiley & Sons, 2007. Print.

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Bibliography

IvyPanda . "Unemployment." May 21, 2019. https://ivypanda.com/essays/unemployment-essay/.

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AP®︎/College Macroeconomics

Course: ap®︎/college macroeconomics   >   unit 2.

• Unemployment rate primer
• Natural, cyclical, structural, and frictional unemployment rates
• Worked free response question on unemployment

Lesson summary: Unemployment

• Unemployment
• Types of unemployment and the natural rate of unemployment

Lesson overview

Key takeaways

The labor force participation rate (lfpr), limitations of the unemployment rate, three types of unemployment, the natural rate of unemployment, changes in the natural rate of unemployment (nru), key equations, the labor force:, the unemployment rate (ur).

Common Misperceptions

• Not everyone who is out of work is unemployed. In order to be counted as unemployed you have to be out of work, looking for work, and able to accept a job if one is offered to you. If you are out of work and not looking, then you are considered “not in the labor force” rather than unemployed.
• We tend to think of unemployment as an undesirable thing, but a certain amount of unemployment is actually part of a healthy economy. Structural unemployment occurs when new industries are created and old industries become obsolete. For example, when we moved from using horses and buggies to using cars to get around, this put a lot of buggy makers in the structurally unemployed category.
• Frictional unemployment might not seem very fun, but consider what it means to have zero unemployment—nobody ever looks for a job, they just remain in whatever job they are given! In fact, a number of dystopian novels have been written in which everyone in a society is automatically assigned a fixed career (such as the Divergent series). Those societies have zero frictional unemployment, but they are also quite unpleasant if you are unhappy with that career!
• A decrease in the unemployment rate isn’t necessarily a sign of an improving economy. When people stop looking for jobs and drop out of the labor force as discouraged workers, the unemployment rate will decrease even though the true employment situation hasn’t gotten any better. This is why it is important to look at both changes in the unemployment rate and changes in the labor force participation rate. Looking at both changes let’s you get a more complete idea about changes in the employment situation.

Discussion Questions:

• An inventor in Burginville developed a fantastic new dictation machine that perfectly records speech and turns it into a typed document. Unfortunately, that meant that unemployment increased among typists working in offices. Which type of unemployment is this? Explain. Solution, please. This is structural unemployment because typists skills are no longer desired. The changing structure of office work has resulted in people losing their jobs.
• The nation of Fitlandia has 120 , 000 ‍   people. Of these, 20 , 000 ‍   are children under the age of 16, 72,000 ‍   have jobs, 8,000 ‍   don’t have jobs and are looking for work, and 20,000 ‍   people are retired. Assuming that these are all noninstitutionalized civilians, calculate the labor force participation rate and the unemployment rate. I think I got it. Can I check my work? L F = # Employed + # Unemployed = 72,000 + 8,000 = 80,000 L F P R = L F Eligible Population × 100 % = 80,000 100,000 × 100 % = 80 % U R = # Unemployed # Labor Force × 100 % = 8,000 80,000 × 100 % = 10 % ‍  
• Explain why a decrease in the unemployment rate can actually signal a tough job market.

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FACT SHEET: President   Biden Announces New Actions to Keep Families   Together

Since his first day in office, President Biden has called on Congress to secure our border and address our broken immigration system. As Congressional Republicans have continued to put partisan politics ahead of national security – twice voting against the toughest and fairest set of reforms in decades – the President and his Administration have taken actions to secure the border, including:

• Implementing executive actions to bar migrants who cross our Southern border unlawfully from receiving asylum when encounters are high;
• Deploying record numbers of law enforcement personnel, infrastructure, and technology to the Southern border;
• Seizing record amounts of fentanyl at our ports of entry;
• Revoking the visas of CEOs and government officials outside the U.S. who profit from migrants coming to the U.S. unlawfully; and
• Expanding efforts to dismantle human smuggling networks and prosecuting individuals who violate immigration laws.

President Biden believes that securing the border is essential. He also believes in expanding lawful pathways and keeping families together, and that immigrants who have been in the United States for decades, paying taxes and contributing to their communities, are part of the social fabric of our country. The Day One immigration reform plan that the President sent to Congress reflects both the need for a secure border and protections for the long-term undocumented. While Congress has failed to act on these reforms, the Biden-Harris Administration has worked to strengthen our lawful immigration system. In addition to vigorously defending the DACA (Deferred Action for Childhood arrivals) policy, the Administration has extended Affordable Care Act coverage to DACA recipients and streamlined, expanded, and instituted new reunification programs so that families can stay together while they complete the immigration process.  Still, there is more that we can do to bring peace of mind and stability to Americans living in mixed-status families as well as young people educated in this country, including Dreamers. That is why today, President Biden announced new actions for people who have been here many years to keep American families together and allow more young people to contribute to our economy.   Keeping American Families Together

• Today, President Biden is announcing that the Department of Homeland Security will take action to ensure that U.S. citizens with noncitizen spouses and children can keep their families together.
• This new process will help certain noncitizen spouses and children apply for lawful permanent residence – status that they are already eligible for – without leaving the country.
• These actions will promote family unity and strengthen our economy, providing a significant benefit to the country and helping U.S. citizens and their noncitizen family members stay together.
• In order to be eligible, noncitizens must – as of June 17, 2024 – have resided in the United States for 10 or more years and be legally married to a U.S. citizen, while satisfying all applicable legal requirements. On average, those who are eligible for this process have resided in the U.S. for 23 years.
• Those who are approved after DHS’s case-by-case assessment of their application will be afforded a three-year period to apply for permanent residency. They will be allowed to remain with their families in the United States and be eligible for work authorization for up to three years. This will apply to all married couples who are eligible.  
• This action will protect approximately half a million spouses of U.S. citizens, and approximately 50,000 noncitizen children under the age of 21 whose parent is married to a U.S. citizen.

Easing the Visa Process for U.S. College Graduates, Including Dreamers

• President Obama and then-Vice President Biden established the DACA policy to allow young people who were brought here as children to come out of the shadows and contribute to our country in significant ways. Twelve years later, DACA recipients who started as high school and college students are now building successful careers and establishing families of their own.
• Today’s announcement will allow individuals, including DACA recipients and other Dreamers, who have earned a degree at an accredited U.S. institution of higher education in the United States, and who have received an offer of employment from a U.S. employer in a field related to their degree, to more quickly receive work visas.
• Recognizing that it is in our national interest to ensure that individuals who are educated in the U.S. are able to use their skills and education to benefit our country, the Administration is taking action to facilitate the employment visa process for those who have graduated from college and have a high-skilled job offer, including DACA recipients and other Dreamers. 

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Chapter 13 Introductory Essay: 1945-1960

Written by: patrick allitt, emory university, by the end of this section, you will:.

• Explain the context for societal change from 1945 to 1960
• Explain the extent to which the events of the period from 1945 to 1960 reshaped national identity

Introduction

World War II ended in 1945. The United States and the Soviet Union had cooperated to defeat Nazi Germany, but they mistrusted each other. Joseph Stalin, the Soviet dictator, believed the Americans had waited too long before launching the D-Day invasion of France in 1944, leaving his people to bear the full brunt of the German war machine. It was true that Soviet casualties were more than 20 million, whereas American casualties in all theaters of war were fewer than half a million.

On the other hand, Harry Truman, Franklin Roosevelt’s vice president, who had become president after Roosevelt’s death in April 1945, believed Stalin had betrayed a promise made to Roosevelt at the  Yalta summit  in February 1945. That promise was to permit all the nations of Europe to become independent and self-governing at the war’s end. Instead, Stalin installed Soviet  puppet governments  in Poland, East Germany, Czechoslovakia, Rumania, Hungary, and Bulgaria, the parts of Europe his armies had recaptured from the Nazis.

These tensions between the two countries set the stage for the Cold War that came to dominate foreign and domestic policy during the postwar era. The world’s two superpowers turned from allies into ideological and strategic enemies as they struggled to protect and spread their systems around the world, while at the same time developing arsenals of nuclear weapons that could destroy it. Domestically, the United States emerged from the war as the world’s unchallenged economic powerhouse and enjoyed great prosperity from pent-up consumer demand and industrial dominance. Americans generally supported preserving the New Deal welfare state and the postwar anti-communist crusade. While millions of white middle-class Americans moved to settle down in the suburbs, African Americans had fought a war against racism abroad and were prepared to challenge it at home.

The Truman Doctrine and the Cold War

Journalists nicknamed the deteriorating relationship between the two great powers a “ cold war ,” and the name stuck. In the short run, America possessed the great advantage of being the only possessor of nuclear weapons as a result of the Manhattan Project. It had used two of them against the Japanese cities of Hiroshima and Nagasaki to end the war in the Far East, with destructive power so fearsome it deterred Soviet aggression. But after nearly four years of war, Truman was reluctant to risk a future conflict. Instead, with congressional support, he pledged to keep American forces in Europe to prevent any more Soviet advances. This was the “ Truman Doctrine ,” a dramatic contrast with the American decision after World War I to withdraw from European affairs. (See the  Harry S. Truman, “Truman Doctrine” Address, March 1947   Primary Source.)

President Harry Truman pictured here in his official presidential portrait pledged to counter Soviet geopolitical expansion with his “Truman Doctrine.”

The National Security Act, passed by Congress in 1947, reorganized the relationship between the military forces and the government. It created the National Security Council (NSC), the Central Intelligence Agency (CIA), and the office of Secretary of Defense. The Air Force, previously a branch of the U.S. Army, now became independent, a reflection of its new importance in an era of nuclear weapons. Eventually, NSC-68, a secret memorandum from 1950, was used to authorize large increases in American military strength and aid to its allies, aiming to ensure a high degree of readiness for war against the Soviet Union.

What made the Soviet Union tick? George Kennan, an American diplomat at the U.S. Embassy in Moscow who knew the Soviets as well as anyone in American government, wrote an influential article titled “The Sources of Soviet Conduct.” Originally sent from Moscow as a long telegram, it was later published in the journal  Foreign Affairs  under the byline “X” and impressed nearly all senior American policy makers in Washington, DC. The Soviets, said Kennan, believed capitalism and communism could not coexist and that they would be perpetually at war until one was destroyed. According to Kennan, the Soviets believed communism was destined to dominate the world. They were disciplined and patient, however, and understood “the logic of force.” Therefore, said Kennan, the United States must be equally patient, keeping watch everywhere to “contain” the threat.

Containment  became the guiding principle of U.S. anti-Soviet policy, under which the United States deployed military, economic, and cultural resources to halt Soviet expansion. In 1948, the United States gave more than $12 billion to Western Europe to relieve suffering and help rebuild and integrate the economies through the Marshall Plan. The Europeans would thus not turn to communism in their desperation and America would promote mutual prosperity through trade. The Berlin crisis of 1948–1949 was the policy’s first great test. (See the  George Kennan (“Mr. X”), “Sources of Soviet Conduct,” July 1947  Primary Source.)

Berlin, jointly occupied by the major powers, lay inside Soviet-dominated East Germany, but access roads led to it from the West. In June 1948, Soviet forces cut these roads, hoping the Americans would permit the whole of Berlin to fall into the Soviet sphere rather than risk war. Truman and his advisors, recognizing the symbolic importance of Berlin but reluctant to fire the first shot, responded by having supplies flown into West Berlin, using aircraft that had dropped bombs on Berlin just three years earlier. Grateful Berliners called them the “raisin bombers” in tribute to one of the foods they brought.

After 11 months, recognizing their plan had failed, the Soviets relented. West Berlin remained part of West Germany, making the first test of containment a success. On the other hand, the United States was powerless to prevent a complete Communist takeover in Czechoslovakia, whose government had shown some elements of independence from Moscow’s direction. (See  The Berlin Airlift  Narrative.)

Alarm about the Czech situation hastened the American decision to begin re-arming West Germany, where an imperfect and incomplete process of “de-Nazification” had taken place. The United States also supervised the creation in 1949 of the North Atlantic Treaty Organization (NATO), an alliance of Western nations to forestall Soviet aggression in central Europe. The U.S. government also continued research on and development of new and more powerful nuclear weapons. Americans were dismayed to learn, in 1949, that the Soviets had successfully tested an atomic bomb of their own, greatly facilitated by information provided by Soviet spies. Europe and much of the world were divided between the world’s two superpowers and their allies.

U.S. Secretary of State Dean Acheson along with the foreign ministers of Canada and 10 European nations gathered to sign the North Atlantic Treaty on April 4 1949 founding NATO.

Postwar Uncertainty

The postwar years were politically volatile ones all over the world, due to widespread decolonization. Britain, though allied with the United States during World War II, had been weakened by the conflict and could no longer dominate its remote colonies. The British Empire was shrinking drastically, and this made the Truman Doctrine all the more necessary. In 1947, an economically desperate Britain reluctantly granted India and Pakistan the independence their citizens had sought for years. Britain’s African colonies gained independence in the 1950s and early 1960s. The United States and the Soviet Union each struggled to win over the former British colonies to their own ideological side of the Cold War. (See the  Who Was Responsible for Starting the Cold War?  Point-Counterpoint and  Winston Churchill, “Sinews of Peace,” March 1946  Primary Source.)

Israel came into existence on May 14, 1948, on land that had been a British-controlled  mandate  since the end of World War I. The Zionist movement, founded in the 1890s by Austro-Hungarian journalist Theodore Herzl, had encouraged European Jews to immigrate to Palestine. There, they would buy land, become farmers, and eventually create a Jewish state. Tens of thousands, indeed, had migrated there and prospered between 1900 and 1945. Widespread sympathy for the Jews, six million of whom had been exterminated in the Nazi Holocaust, prompted the new United Nations to authorize the partition of Palestine into two states, one Jewish and one Arab. From the very beginning, these two states were at war, with all the neighboring Arab states uniting to threaten Israel’s survival. President Truman supported Israel, however, and in the ensuing decades, most American politicians, and virtually all the American Jewish population, supported and strengthened it.

In 1949, a decades-long era of chaos, conquest, and revolution in China ended with the triumph of Mao Zedong, leader of a Communist army. Against him, America had backed Chiang Kai-Shek, the Chinese Nationalist leader, whose defeated forces fled to the offshore island of Taiwan. American anti-communist politicians in Washington, DC, pointed to the growing “red” (Communist) areas of the map as evidence that communism was winning the struggle for the world. Domestically, Truman and the Democrats endured charges that they had “lost” China to communism.

War in Korea

Korea, one of the many parts of Asia that Japan had conquered in the earlier twentieth century but then lost in 1945, was now partitioned into a pro-Communist North and an anti-Communist South. In June 1950, the Truman administration was taken by surprise when North Korea attacked the South, overpowering its army and forcing the survivors back into a small area of the country’s southeast, the Pusan perimeter. Truman and his advisors quickly concluded they should apply the containment principle to Asia and procured a resolution of support from the United Nations, which was unanimous because the Soviet representatives were not present in the Security Council during the vote. See the  Truman Intervenes in Korea  Decision Point.)

U.S. troops were sent to Korea shortly after Truman’s decision to apply containment to the region. Pictured is a U.S. gun crew near the Kum River in July 1950.

An American invasion force led by General Douglas MacArthur thus made a daring counterattack, landing at Inchon, near Seoul on the west coast of the Korean peninsula, on September 15, 1950. At once, this attack turned the tables in the war, forcing the North Koreans into retreat. Rather than simply restore the old boundary, however, MacArthur’s force advanced deep into North Korea, ultimately approaching the Chinese border. At this point, in October 1950, Mao Zedong sent tens of thousands of Chinese Communist soldiers into the conflict on the side of North Korea. They turned the tide of the war once again, forcing the American forces to fall back in disarray.

After a brutal winter of hard fighting in Korea, the front lines stabilized around the  38th parallel . MacArthur, already a hero of World War II in the Pacific, had burnished his reputation at Inchon. In April 1951, however, he crossed the line in civil-military relations that bars soldiers from dabbling in politics by publicly criticizing one of President Truman’s strategic decisions not to expand the war against the Chinese. MacArthur was so popular in America, he had come to think the rules no longer applied to him, but they did. Truman fired him with no hesitation, replacing him with the equally competent but less egotistical General Matthew Ridgway. The war dragged on in a stalemate. Only in 1953, after the inauguration of President Dwight D. Eisenhower, was a truce declared between the two Koreas. It has held uneasily ever since. (See  The Korean War and The Battle of Chosin Reservoir  Narrative.)

Prosperity and the Baby Boom

The late 1940s and early 1950s were paradoxical. They were years of great geopolitical stress, danger, and upheaval, yet they were also a time of prosperity and opportunity for millions of ordinary American citizens. Far more babies were born each year than in the 1930s, resulting in the large “ baby boom ” generation. Millions of new houses were built to meet a need accumulated over the long years of the Great Depression and the war. Suburbs expanded around every city, creating far better and less-crowded living conditions than ever before. Levittown housing developments were just one example of the planned communities with mass-produced homes across the country that made homeownership within the reach of many, though mostly white families, thanks to cheap loans for returning veterans (See the  Levittown Videos, 1947–1957  Primary Source). Wages and living standards increased, and more American consumers found they could afford their own homes, cars, refrigerators, air conditioners, and even television sets—TV was then a new and exciting technology. The entire nation breathed a sigh of relief on discovering that peace did not bring a return of depression-era conditions and widespread unemployment. (See  The Sound of the Suburbs  Lesson.)

Television became a staple in U.S. households during the 1940s and 1950s.

Full employment during the war years had strengthened trade unions, but for patriotic reasons, nearly all industrial workers had cooperated with their employers. Now that the war was over, a rash of strikes for better pay and working conditions broke out. In 1945, Truman expanded presidential power by seizing coal mines, arguing it was in the national interest because coal supplied electricity. He then forced the United Mine Workers to end their strike the following year.

Although coal miners won their demands, the power of organized labor waned over the next few decades. Republican members of Congress, whose party had triumphed in the 1946 mid-term elections, passed the Taft-Hartley Act in 1947, aiming to curb the power of unions by banning the closed shop, allowing states to protect the right to work outside the union, setting regulations to limit labor strikes and excluding supporters of the Communist Party and other social radicals from their leadership. Truman vetoed the act, but Congress overrode the veto. In 1952, Truman attempted to again seize a key industry and forestall a strike among steelworkers. However, the Supreme Court decided in  Youngstown Sheet & Tube Co. v. Sawyer  (1952) that Truman lacked the constitutional authority to seize private property, and steelworkers won significant concessions.

Watch this BRI AP U.S. History Exam Study Guide about the Post-WWII Boom: Transition to a Consumer Economy to explore the post-World War II economic boom in the United States and its impacts on society.

Joseph McCarthy and the Red Scare

Fear of communism, not only abroad but at home, was one of the postwar era’s great obsessions. Ever since the Russian Revolution of 1917, a small and dedicated American Communist Party had aimed to overthrow capitalism and create a Communist America. Briefly popular during the crisis of the Great Depression and again when Stalin was an American ally in World War II, the party shrank during the early Cold War years. Rising politicians like the young California congressman Richard Nixon nevertheless discovered that anti-Communism was a useful issue for gaining visibility. Nixon helped win publicity for the House Committee on Un-American Activities (HUAC), whose hearings urged former communists to expose their old comrades in the name of national security, especially in government and Hollywood. In 1947, President Truman issued Executive Order No. 9835, establishing loyalty boards investigating the communist sympathies of 2.5 million federal employees. (See  The Postwar Red Scare  and the  Cold War Spy Cases  Narratives.)

The most unscrupulous anti-communist was Senator Joseph R. McCarthy (R-WI), who used fear of communism as a powerful political issue during the early Cold War. He made reckless allegations that the government was riddled with communists and their sympathizers, even including Secretary of State George Marshall. Intimidating all critics by accusing them of being part of a great communist conspiracy, McCarthy finally overplayed his hand in publicly televised hearings by accusing the U.S. Army of knowingly harboring communists among its senior officers. The Senate censured him in December 1954, after which his influence evaporated, but for four years, he had been one of the most important figures in American political life. Although he was correct that the Soviets had spies in the U.S. government, McCarthy created a climate of fear and ruined the lives of innocent people for his own political gain during what became known as the “Second Red Scare.” (See the  McCarthyism DBQ  Lesson.)

Senator Joseph McCarthy (left) is pictured with his lawyer Roy Cohn during the 1950s McCarthy-Army clash.

Be sure to check out this  BRI Homework Help video about The Rise and Fall of Joseph McCarthy  to learn more about Joseph McCarthy and his battle against communists in the U.S. government.

Several highly publicized spy cases commanded national attention. Klaus Fuchs and other scientists with detailed knowledge of the Manhattan Project were caught passing nuclear secrets to the Soviet Union. In 1950, Alger Hiss was prosecuted for perjury before Congress and accused of sharing State Department documents with the Soviets. Julius and Ethel Rosenberg were tried for espionage in 1951 and executed two years later. Julius was convicted of running a spy ring associated with selling atomic secrets to the Russians, though the case against Ethel’s direct involvement was thinner.

From Truman to Eisenhower

After the 1946 midterm election, in which Republicans won a majority in the House and the Senate, the Democratic President Truman struggled to advance his domestic program, called the Fair Deal in an echo of Franklin Roosevelt’s New Deal. For instance, Truman was the first American president to propose a system of universal health care, but the Republican Congress voted it down because they opposed the cost and regulations associated with the government program and called it “socialized medicine.” Truman did succeed in other areas. He was able to encourage Congress to pass the Employment Act of 1946, committing the government to ensuring full employment. By executive order, he desegregated the American armed forces and commissioned a report on African American civil rights. He thus played an important role in helping advance the early growth of the civil rights movement.

Truman seemed certain to lose his re-election bid in 1948. The Republicans had an attractive candidate in Thomas Dewey, and Truman’s own Democratic Party was splintering three ways. Former Vice President Henry Wallace led a Progressive breakaway, advocating a less confrontational approach to the Cold War. Strom Thurmond, a South Carolina senator, led the southern “Dixiecrat” breakaway by opposing any breach in racial segregation. The  Chicago Daily Tribune  was so sure Dewey would win that it prematurely printed its front page with the headline “Dewey Defeats Truman.” One of the most famous photographs in the history of American journalism shows Truman, who had upset the pollsters by winning, holding a copy of this newspaper aloft and grinning broadly.

President Truman is pictured here holding the Chicago Daily Tribune with its inaccurate 1948 headline.

Four years later, exhausted by Korea and the fierce stresses of the early Cold War, Truman declined to run for another term. Both parties hoped to attract the popular Supreme Allied commander, Dwight D. Eisenhower, to be their candidate. He accepted the Republicans’ invitation, defeated Adlai Stevenson in November 1952, and won against the same rival again in 1956.

Rather than roll back the New Deal, which had greatly increased the size and reach of the federal government since 1933, Eisenhower accepted most of it as a permanent part of the system, in line with his philosophy of “Modern Republicanism.” He worked with Congress to balance the budget but signed bills for the expansion of Social Security and unemployment benefits, a national highway system, federal aid to education, and the creation of National Aeronautics and Space Administration (NASA). In foreign policy, he recognized that for the foreseeable future, the Cold War was here to stay and that each side’s possession of nuclear weapons deterred an attack by the other. The two sides’ nuclear arsenals escalated during the 1950s, soon reaching a condition known as “ mutually assured destruction ,” which carried the ominous acronym MAD and would supposedly prevent a nuclear war.

At the same time, Eisenhower and Secretary of State John Foster Dulles supported the “New Look” foreign policy, which increased reliance on nuclear weapons rather than the more flexible but costly buildup of conventional armed forces. Despite the Cold War consensus about containment, Eisenhower did not send troops when the Vietnamese defeated the French in Vietnam; when mainland China bombed the Taiwanese islands of Quemoy and Matsu; when the British, French, and Egypt fought over the Suez Canal in 1956; or when the Soviets cracked down on Hungary. Instead, Eisenhower assumed financial responsibility for the French war effort in Vietnam and sent hundreds of military advisers there over the next several years. (See the  Dwight D. Eisenhower, Farewell Address, January 1961  Primary Source.)

Birth of the Civil Rights Movement

Encouraged by early signs of a change in national racial policy and by the Supreme Court’s decision in  Brown v. Board of Education  (1954) , African American organizations intensified their efforts to challenge southern segregation. Martin Luther King Jr., then a spellbinding young preacher in Montgomery, Alabama, led a Montgomery bus boycott that began in December 1955. Inspired by the refusal of Rosa Parks to give up her seat on a city bus, African Americans refused to ride Montgomery’s buses unless the company abandoned its policy of forcing them to ride at the back and to give up their seats to whites when the bus was crowded. After a year, the boycott succeeded. King went on to create the Southern Christian Leadership Conference (SCLC), which practiced nonviolent resistance as a tactic, attracting press attention, embarrassing the agents of segregation, and promoting racial integration. (See the  Rosa Parks, Martin Luther King Jr., and the Montgomery Bus Boycott  Narrative and the  Rosa Parks’s Account of the Montgomery Bus Boycott (Radio Interview), April 1956  Primary Source.)

In 1957, Congress passed the first federal protection of civil rights since Reconstruction and empowered the federal government to protect black voting rights. However, the bill was watered down and did not lead to significant change. In August, black students tried to attend high school in Little Rock, Arkansas, but were blocked by National Guard troops. Over the next few weeks, angry crowds assembled and threatened these students. President Eisenhower decided to send in federal troops to protect the nine black students. In the postwar era, African Americans won some victories in the fight for equality, but many southern whites began a campaign of massive resistance to that goal.

Check out this BRI Homework Help video about Brown v. Board of Education to learn more about the details of the case.

Thus, the pace of school desegregation across the south remained very slow. White southerners in Congress promised massive resistance to the policy. When it came to the point, however, only one county, Prince Edward County, Virginia, actually closed down its public schools rather than permit them to be desegregated. Other districts, gradually and reluctantly, eventually undertook integration, but widespread discrimination persisted, especially in the South.

Mexican Americans, like African Americans, suffered from racial discrimination. Under the  bracero  program, inaugurated during the 1940s, Mexicans were permitted to enter the United States temporarily to work, mainly as farm laborers in the western states, but they too were treated by whites as second-class citizens. They were guest workers, and the program was not intended to put them on a path to U.S. citizenship. (See  The Little Rock Nine  Narrative.)

Pictured are Mexican workers waiting to gain legal employment and enter the United States as part of the “ bracero ” program begun in the 1940s.

The Space Race

The desegregation of schools was only one aspect of public concern about education in the 1950s. The Soviet Union launched an artificial orbiting satellite, “Sputnik,” in 1957 and ignited the “ Space Race .” Most Americans were horrified, understanding that a rocket able to carry a satellite into space could also carry a warhead to the United States. Congress reacted by passing the National Defense Education Act in August 1958, devoting $1 billion of federal funds to education in science, engineering, and technology in the hope of improving the nation’s scientific talent pool.

NASA had been created earlier that same year to coordinate programs related to rocketry and space travel. NASA managed to catch up with the Soviet space program in the ensuing years and later triumphed by placing the first person on the moon in 1969. Better space rockets meant better military missiles. NASA programs also stimulated useful technological discoveries in materials, navigation, and computers. (See the  Sputnik and NASA  Narrative and the  Was Federal Spending on the Space Race Justified?  Point-Counterpoint.)

Another major initiative, also defense related, of the Eisenhower years was the decision to build the interstate highway system. As a young officer just after World War I, Eisenhower had been part of an Army truck convoy that attempted to cross the United States. Terrible roads meant that the convoy took 62 days, with many breakdowns and 21 injuries to the soldiers, an experience Eisenhower never forgot. He had also been impressed by the high quality of Germany’s autobahns near the war’s end. A comprehensive national system across the United States would permit military convoys to move quickly and efficiently. Commerce, the trucking industry, and tourism would benefit too, a belief borne out over the next 35 years while the system was built; it was declared finished in 1992. See  The National Highway Act  Narrative and the  Nam Paik,  Electronic Superhighway , 1995  Primary Source.)

New Roles for Women

American women, especially in the large and growing middle class, were in a paradoxical situation in the 1950s. In one sense, they were the most materially privileged generation of women in world history, wealthier than any predecessors. More had gained college education than ever before, and millions were marrying young, raising their children with advice from Dr. Spock’s best-selling  Common Sense Book of Baby and Child Care  (1946), and enjoying labor-saving domestic devices and modern conveniences like washing machines, toasters, and electric ovens. Affluence meant many middle-class women were driving cars of their own. This  1950s advertisement for Ford automobiles  persuaded women to become a “two Ford family.” At the same time, however, some suffered various forms of depression and anxiety, seeking counseling, often medicating themselves, and feeling a lack of purpose in their lives.

This situation was noticed by Betty Friedan, a popular journalist in the 1950s whose book  The Feminine Mystique , published in 1963, helped ignite the new feminist movement. Its principal claim was that in America in the 1950s, women lacked fulfilling careers of their own, and material abundance was no substitute. (See the  Dr. Benjamin Spock and the Baby Boom  Narrative.) A feminist movement emerged in the 1960s and 1970s seeking greater equality. In the postwar period, however, not all women shared the same experiences. Millions of working-class and poor women of all races continued to work in factories, retail, domestic, or offices as they had before and during the war. Whether married or single, these women generally did not share in the postwar affluence enjoyed by middle-class, mostly white, women who were in the vanguard of the feminist movement for equal rights for women.

By 1960, the United States was, without question, in a superior position to its great rival the Soviet Union—richer, stronger, healthier, better fed, much freer, and much more powerful. Nevertheless Eisenhower, in his farewell address, warned against the dangers of an overdeveloped “military-industrial complex,” in which American traditions of democracy, decentralization, and civilian control would be swallowed up by the demands of the defense industry and a large, governmental national security apparatus. He had no easy remedies to offer and remained acutely aware that the Cold War continued to threaten the future of the world.

Timeline of events in the postwar period from 1945 to 1960.

Additional Chapter Resources

• Eleanor Roosevelt and the United Nations Narrative
• The G.I. Bill Narrative
• Jackie Robinson Narrative
• The Murder of Emmett Till Narrative
• The Nixon-Khrushchev Kitchen Debate Narrative
• William F. Buckley Jr. and the Conservative Movement Narrative
• Truman Fires General Douglas MacArthur Decision Point
• Eisenhower and the Suez Canal Crisis Point-Counterpoint
• Richard Nixon “Checkers” Speech September 1952 Primary Source
• Critics of Postwar Culture: Jack Kerouac On the Road (Excerpts) 1957 Primary Source
• Kennedy vs. Nixon: TV and Politics Lesson

Review Questions

1. The major deterrent to Soviet aggression in Europe immediately after World War II was

• that the Soviets lost 20 million people during the war
• the Truman Doctrine
• the United States’ possession of atomic power
• the presence of U.S. troops in western Europe after World War II was over

2. Why did the United States maintain large armed forces in Europe after World War II?

• To stop renewed German aggression
• To halt Soviet aggression despite the wartime alliance
• To help the British relinquish their empire
• To maintain high levels of employment at home

3. The memorandum NSC-68 authorized

• the formation of the CIA
• the creation of the Department of Defense
• increases in the size of U.S. military forces
• the formation of an independent air force

4. The United States’ first successful application of its policy of containment occurred in

• Prague Czechoslovakia
• Moscow U.S.S.R.
• Berlin Germany
• Bombay India

5. During the late 1940s the Truman Administration supported all the following countries except

• Republic of Korea
• People’s Republic of China

6. When North Korea invaded South Korea the Truman Administration resolved to apply which strategy?

• The Truman Doctrine
• Containment
• A plan similar to the Berlin Airlift
• The bracero program

7. Events in which European country led the United States to allow the re-arming of West Germany?

• East Germany
• Czechoslovakia

8. The Taft-Hartley Act was most likely passed as a result of

• fear of labor involvement in radical politics and activities
• concern that strong labor unions could rekindle a depression
• fear that labor would restrict the freedom of workers
• desire to make the labor strike illegal

9. Why was it reasonable to expect Truman to lose the presidential election of 1948?

• McCarthyism was creating widespread dislike of the Democratic Party.
• Truman had been unable to win the Korean War.
• The Democratic Party split into three rival branches including one dedicated to racial segregation.
• The Democrats had controlled Congress since 1933.

10. Why were many middle-class women dissatisfied with their lives in the 1950s?

• They were excluded from most career opportunities.
• The cost of living was too high.
• Fear of losing their traditional roles caused them constant anxiety.
• They opposed the early civil rights movement.

11. All the following were Cold War based initiatives by the Eisenhower Administration except

• the creation of NASA
• the National Defense Highway Act
• the National Defense Education Act
• the Taft-Hartley Act

12. Anti-communist crusader Senator Joseph McCarthy overplayed his advantage in the Red Scare when he

• claimed members of the president’s Cabinet were known communists
• charged Martin Luther King Jr. with being a communist
• asserted the U.S. Army knowingly protected known communists in its leadership
• hinted that President Eisenhower could be a communist

13. As a presidential candidate Dwight Eisenhower recognized the significance of all the following except

• the success of some New Deal programs
• the Cold War’s impact on U.S. foreign policy
• racial integration
• mutually assured destruction (MAD)

14. Which of the following statements most accurately describes the United States’ foreign policy during 1945-1960?

• The United States distanced itself from the global free-market economy.
• The United States based its foreign policy on unilateral decision-making.
• The Cold War was based on military policy only.
• The United States formed military alliances in reaction to the Soviet Union’s aggression.

15. Betty Friedan gained prominence by

• supporting women’s traditional role at home
• promoting the child-rearing ideas of Dr. Benjamin Spock
• researching and writing about the unfulfilling domestic role of educated women
• encouraging more women to attend college

16. Before leaving the office of the presidency Dwight D. Eisenhower warned the nation of the danger of

• falling behind in the space race
• having fewer nuclear weapons than the Soviet Union
• allowing the growth of the military-industrial complex
• overlooking communists within the federal government

Free Response Questions

• Explain President Harry Truman’s reaction to the Taft-Hartley Act.
• Describe President Truman’s role in advancing civil rights.
• Describe Dwight D. Eisenhower’s reaction to the New Deal programs still in existence when he was elected president.
• Explain the main reason for the United States’ military participation in Korea.

AP Practice Questions

Political cartoon by Clifford Berryman regarding civil rights and the 1948 election.

1. The main topic of public debate at the time this political cartoon was published was the

• deployment of U.S. troops in Korea
• dropping of the atomic bomb on Japan
• integration of the U.S. military

2. Which of the following groups would most likely support the sentiments expressed in the political cartoon?

• Progressives who argued for prohibition
• William Lloyd Garrison and like-minded abolitionists
• Antebellum reformers in favor of free public education
• Members of the America First Committee

“It would be an unspeakable tragedy if these countries which have struggled so long against overwhelming odds should lose that victory for which they sacrificed so much. Collapse of free institutions and loss of independence would be disastrous not only for them but for the world. Discouragement and possibly failure would quickly be the lot of neighboring peoples striving to maintain their freedom and independence. Should we fail to aid Greece and Turkey in this fateful hour the effect will be far reaching to the West as well as to the East. We must take immediate and resolute action. I therefore ask the Congress to provide authority for assistance to Greece and Turkey in the amount of $400 0 000 for the period ending June 30 1948.”

President Harry S. Truman The Truman Doctrine Speech March 12 1947

3. President Truman’s speech was most likely intended to increase the public’s awareness of

• rising tensions over oil reserves in the Middle East
• the Cold War and the struggle against Communism in Europe
• the United States’ need for access to the Black Sea
• the need to rebuild Europe after World War II

4. The immediate outcome of the event described in the excerpt was that

• the United States unilaterally rebuilt Europe
• worldwide freedom of the seas was guaranteed for all nations
• the United States’ foreign policy of containment was successfully implemented
• Europe was not as vital to U.S. interests as initially believed

5. Based on the ideas in the excerpt which of the following observations of U.S. foreign policy in the post World War II years is true?

• The United States was making a major shift in foreign policy from its stance after World War I.
• More people opposed the idea of U.S. involvement in world affairs.
• A majority believed that U.S. foreign policy was being dictated by the United Nations.
• The United States needed to reassert the “Good Neighbor Policy” but with a focus on Europe.

“Women especially educated women such as you have a unique opportunity to influence us man and boy and to play a direct part in the unfolding drama of our free society. But I am told that nowadays the young wife or mother is short of time for the subtle arts that things are not what they used to be; that once immersed in the very pressing and particular problems of domesticity many women feel frustrated and far apart from the great issues and stirring debates for which their education has given them understanding and relish. . . . There is often a sense of contraction of closing horizons and lost opportunities. They had hoped to play their part in the crisis of the age. . . . The point is that . . . women “never had it so good” as you do. And in spite of the difficulties of domesticity you have a way to participate actively in the crisis in addition to keeping yourself and those about you straight on the difference between means and ends mind and spirit reason and emotion . . . In modern America the home is not the boundary of a woman’s life. . . . But even more important is the fact surely that what you have learned and can learn will fit you for the primary task of making homes and whole human beings in whom the rational values of freedom tolerance charity and free inquiry can take root.”

Adlai Stevenson “A Purpose for Modern Women” from his Commencement Address at Smith College 1955

6. Which of the following best mirrors the sentiments expressed by Adlai Stevenson in the provided excerpt?

• Women should be prepared to return to a more traditional role in society.
• The ideals espoused by Republican Motherhood should be upheld.
• The United States would not have won World War II if women had not worked in factories.
• Women had the opportunity to influence the next generation of citizens.

7. The reference that “many women feel frustrated and far apart from the great issues and stirring debates for which their education has given them understanding and relish” is a reference to the ideas espoused by

• Martin Luther King Jr.
• Betty Friedan
• Dr. Benjamin Spock

Primary Sources

Eisenhower Dwight D. “Eisenhower’s Farewell Address to the Nation.” http://mcadams.posc.mu.edu/ike.htm

Eisenhower Dwight D. “Interstate Highway System.” Eisenhower proposes the interstate highway system to Congress. https://www.presidency.ucsb.edu/documents/special-message-the-congress-regarding-national-highway-program

“‘Enemies from Within’: Senator Joseph R. McCarthy’s Accusations of Disloyalty.” McCarthy’s speech in Wheeling West Virginia. http://historymatters.gmu.edu/d/6456

Friedan Betty. The Feminine Mystique . New York: W. W. Norton 1963.

Hamilton Shane and Sarah Phillips. Kitchen Debate and Cold War Consumer Politics: A Brief History with Documents . Boston: Bedford Books 2014.

Kennan George F. American Diplomacy . New York: Signet/Penguin Publishing 1952.

King Martin Luther Jr. “(1955) Martin Luther King Jr. ‘The Montgomery Bus Boycott.'” http://www.blackpast.org/1955-martin-luther-king-jr-montgomery-bus-boycott

King Martin Luther Jr. Stride Toward Freedom: The Montgomery Story . New York: Harper & Brothers Publishers 1958.

MacLean Nancy. American Women’s Movement 1945-2000: A Brief History with Documents . Boston: Bedford Books 2009.

Marshall George C. “The ‘Marshall Plan’ speech at Harvard University 5 June 1947.” http://www.oecd.org/general/themarshallplanspeechatharvarduniversity5june1947.htm

Martin Waldo E. Jr. Brown v. Board of Education: A Brief History with Documents . Boston: Bedford Books 1998.

Schrecker Ellen W. The Age of McCarthyism: A Brief History with Documents . Boston: Bedford Books 2016.

Story Ronald and Bruce Laurie. Rise of Conservatism in America 1945-2000: A Brief History with Documents. Boston: Bedford Books 2008.

Truman Harry. “A Report to the National Security Council – NSC 68 April 12 1950.” https://www.trumanlibrary.gov/library/research-files/report-national-security-council-nsc-68

Truman Harry. “The Fateful Hour (1947)” speech. http://www.americanrhetoric.com/speeches/harrystrumantrumandoctrine.html

Suggested Resources

Ambrose Stephen and Douglas Brinkley. Rise to Globalism: American Foreign Policy since 1938. Ninth ed. New York: Penguin 2010.

Branch Taylor. Parting the Waters: America in the King Years 1954-63 . New York: Simon and Schuster 1988.

Brands H.W. American Dreams: The United States Since 1945 . New York: Penguin 2010.

Brands H.W. The General vs. the President: MacArthur and Truman at the Brink of Nuclear War . New York: Anchor 2016.

Cadbury Deborah. Space Race: The Epic Battle Between American and the Soviet Union for Dominion of Space. New York: Harper 2007.

Cohen Lizabeth A. A Consumers’ Republic: The Politics of Mass Consumption in Postwar America . New York: Vintage 2003.

Coontz Stephanie. The Way We Never Were: American Families and the Nostalgia Trap . New York: Basic Books 2016.

Dallek Robert. Harry S. Truman . New York: Times Books 2008.

Diggins John Patrick. The Proud Decades: America in War and Peace 1941-1960 . New York: W. W. Norton 1989.

Fried Richard. Nightmare in Red: The McCarthy Era in Perspective . Oxford: Oxford University Press 1991.

Gaddis John Lewis. The Cold War: A New History . New York: Penguin 2005.

Halberstam David. The Coldest Winter: America and the Korean War. New York: Hyperion 2007.

Hitchcock William I. The Age of Eisenhower: America and the World in the 1950s. New York: Simon and Schuster 2018.

Johnson Paul. Eisenhower: A Life. New York: Penguin 2015.

Lewis Tom. Divided Highways: Building the Interstate Highways Transforming American Life. Ithaca NY: Cornell University Press 2013.

May Elaine Tyler. Homeward Bound: American Families in the Cold War Era . New York: Basic 2008.

McCullough David. Truman. New York: Simon and Schuster 1993.

Patterson James T. Grand Expectations: The United States 1945-1974. Oxford: Oxford University Press 1996.

Whitfield Stephen J. The Culture of the Cold War. Baltimore MD: Johns Hopkins University Press 1996.

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Supporters cheered for former President Donald J. Trump at a campaign rally in Wildwood, N.J., in May. Credit... Hiroko Masuike/The New York Times

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By Charlie Savage ,  Maggie Haberman and Jonathan Swan

• June 8, 2024

Former President Donald J. Trump routinely blames President Biden for higher prices at the grocery store and everywhere else Americans shop, and promises to “fix it.”

But Mr. Trump has offered little explanation about how his plans would lower prices. And several of his policies — whatever their merits on other grounds — would instead put new upward pressure on prices, according to interviews with half a dozen economists.

Mr. Trump says he plans the “largest domestic deportation in American history,” which would most likely increase the cost of labor. He intends to impose a new tariff on nearly all imported goods, which would probably raise their prices and those of any domestic-made competitors.

And he not only wants to make permanent the entire deficit-financed tax cut law he and congressional Republicans enacted in 2017, but also to add some kind of new “ big tax cut ” for individuals and businesses, which would stimulate an economy already at full employment.

As a matter of textbook economics, each of those three signature Trump policy plans would be likely to raise prices. Some could even cause continued, rather than one-time, price increases — adding to the possibility of inflation.

“I think we can say with a lot of confidence that President Trump’s trade policies and immigration policies would result in price spikes,” said Michael Strain, the director of economic policy studies at the right-leaning American Enterprise Institute.

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