American Unemployment

In the wake of economic crisis, American unemployment hovers over 10%. Many debates appear about why it happens and how to solve it.

On paper experts do not agree a single explanation about the causes of unemployment. Keynesians point out that it is caused by insufficient demands of goods and services. Other experts of structural unemployment put forward that mismatch between demand and skills of workers. And there are more other explanations as well.

At present American government has launched economic stimulus to handle unemployment. It still doesn't work. Some economist, Paul Krugman included, the stimulus fund disbursed is not sufficient. However we cast doubt on the long-standing Keynes' prescription.

Then our instinct leads us to believe that the jobs go to China, India or other developing countries. But it turns out to be not true. According to American economist, Jeremy Rifkin, only 5% of jobs went away to the third world. And the important fact to know is in China 15% of jobs has disappeared forever. The culprit of disappearing jobs is: automation!

Yes, some jobs, for instance accounting jobs, go to India thanks to cheaper India's accountants and internet connecting develop nations' companies to India's workers. But some jobs disappeared forever e.g. typewriting machines repairmen. And we can predict in 20 years later, the bank tellers will disappear owing to the invention of ATM to deposit or withdraw money. These kinds of jobs will not only be lost in America but in China as well.

To be sure, the job is expendable but not the work itself. Typewriting machine replaces with computer, so computer repairman exists. More ATMs require more mechanics.

Cosequently, developed nations should focus on research and development to create innovative products. However it might be insufficient to create jobs. Software companies will never employ mass workers because the jobs rely much on production of innovative ideas which can't deliver by ordinary workers such as in manufacturing goods.

So the unemployment in America is the unskilled workers that cannot establish innovative company or work in those companies as put forward by supporters of structural unemployment analysis.
Despite its insufficiency to contain unemployment, the government priority should be to churn out start-ups of hi-tech companies. Actually America is very good at this. Yahoo, Google, Microsoft, Apple, and Cisco are the world's leading innovative companies.

The other way will be developed nations should slash their workers' wages so that the manufacture can still flourish to compete with the remained jobs of goods production. The factory wages hike is a trend everywhere. Until there is no one that can be paid cheaply, the wages across the world will be balanced.

And the last bid will be to support employer the last resort policy. The government or the community will give jobs – whatever the jobs are – to the unemployment.
Reference:

1. http://www.nytimes.com/2010/09/06/opinion/06krugman.html
2. http://www.spiegel.de/international/0,1518,368155,00.html
3. http://www.basicincome.com/basic_rifkin.htm
4. The death of Economics, Paul Ormerod