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Determining Cause and Effect

In: Business and Management

Submitted By Tanika1989
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Determining Cause and Effect

Eng. 115
Professor Matthew Norsworthy
February 22, 2014

Rising unemployment may lead to a reduction in the supply capacity of the economy. If workers remain unemployed for a sustainable time, they may lose their skills, thus reducing their human capital. High rates of long-term unemployment in the economy may mean there is a mismatch between those skills that workers possess, and those for which there is a need. I believe that unemployment in your 20's has a huge effect on living standards for people in their 50's. This includes: increased health risks (particularly for long term unemployed) (Richard, V).
The longer the duration of unemployment, the lower the chances of finding fresh employment. Also, losing income involuntary has a significant impact. Many people have major commitments (mortgage, credit agreements, etc.) that fall in real living standards. Other things being equal the greater the amount of goods and services produced, the greater the labor required for production. Economic growth and employment go hand in hand. Regulation and taxation that discourage the operation of business will also reduce the need for labor. Entrepreneurs face regulations that force allocation of resources away from production. For example, rather than purchasing raw materials needed for final production, managers must instead purchase equipment mandated by OSHA or EPA. Rather than using clerks to expedite sales, they must use clerks to fill out forms required by the state. Regulations and taxes may have an especially strong impact on smaller companies since they have less access to capital markets than larger enterprises.
When fewer small businesses start and when larger firms curtail expansion, jobs that otherwise might be created never come to be. Regulations sometimes overlooked in their impact on unemployment are those dealing…...

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