Unemployment rates have been on the rise in the past years and many actions are underway to help rectify the situation. The government is doing everything in its power to make sure that those who do not have jobs at least get the chance to explore other interests. Among the ideas put forth to solve the unemployment problem is providing a guaranteed income for the unemployed. This may seem like the best solution for many, but it may have adverse effects o the unemployment problem that the government is trying hard to solve (Long-term unemployment causes, consequences, and solutions : hearing before the Joint Economic Committee, Congress of the United States, One Hundred Eleventh Congress, second session, 2010). The rates of unemployment will increase if a person knows that he or she is guaranteed of an income at the end of the month even though he or she is not in any form of employment. People who lose their jobs will not be in any hurry to look for a replacement and this will just make the situation worse. People tend to enjoy free things and giving them an assured means of income yet they do not have to put in any effort to earn it will just push more people to leave their jobs by either resigning or claiming that they are not satisfied with what they do.
Okun’s law focuses on how a country’s economy growth rate relates with the unemployment rates. The law uses the explanation that the productivity of nation is directly proportional to the labor put in to make the production. The unemployment rates need to be kept at a steady pace by making sure the Gross Domestic Product of a country keeps growing at a steady pace (Stapleford, 2009). This means that the rates of unemployment and the available labor force directly affects the country’s GDP. Therefore, the government can only reduce the unemployment rates by making sure its economy grows higher rate than expected in a normal situation. The GDP needs to grow at a double pace from what is expected in order to reduce a percentage of the unemployment rate experienced in a financial year. The law applies to situations where the country has to look for a guide to form monetary policies, but this requires a more in depth measure of the natural rate unemployment. The law shows that the employment rates in a country need to be kept at a minimal rate if it is to experience a significant growth in its GDP. The same case applies to an increase in GDP where the efforts put in to make the economy grow translate to an increase in employment opportunities in the next financial year. Therefore, this law is important in predicting the unemployment rates by simply looking at the economic growth rates in a year.
The Cost of Living Adjustment, (COLA) is an adjustment made on ones income to make sure it keeps up with the cost living as it is currently. This commonly applies to the retirees, and the Social Security benefits earners to keep up with a certain level of living standard. This is important to these people especially in times of inflations (Stapleford, 2009). The same case should apply to the unemployed because they put in so much effort to work for a business, but when times are bad, the business owners decide to lay off the workers without any form of compensation. With this clause in place, the business owners will think twice before deciding to lay off any of its workers when the inflation rates increase or when the economy is not going well. This will serve as a form of protection to those laid off without warnings and help them survive as they look for other alternatives. This will help reduce the number of people laid off. However, this should not apply in some case where the workers decide to leave their jobs without a good reason because some may take advantage of the guaranteed payments to quit their jobs.
Long-term unemployment causes, consequences, and solutions : hearing before the Joint Economic Committee, Congress of the United States, One Hundred Eleventh Congress, second session, April 29, 2010.. (2010). Washington: U.S. G.P.O..
Stapleford, T. A. (2009). The cost of living in America: a political history of economic statistics, 1880-2000. Cambridge [UK: Cambridge University Press.