Most economic textbooks will cite the following economic policies which would reduce unemployment include:

More flexible union-employer relationships,

US union %=10%, down from 21% in 1983; Iceland: 90%; Denmark: 66%; Canada: 27%; Germany: 16%: OECD: 16%

Reducing minimum wage,

Annual Real wage at PPP: US: $15,0080; Australia: $25,250; Germany: $24,500; U.K.: $23,500; Denmark: $23,000; Canada: $22,000; Korea: $22,000;

Reducing unemployment compensation,

Increasing the incentives of unemployed workers to look for work, and

Decreasing the costs of hiring new workers.

You can compare additional countries and stats at the OECD website: OECD Labor StatisticsLinks to an external site.

And while this list is undeniably true, if you recall our discussions of the 'quality' of GDP as a measuring tool, what do you think about the list of policies listed above? Are there are alternatives that might enhance the overall quality of our economy.

Here's one example of how our static means of measuring Unemployment have their limits. If our model economy had 100 people seeking employment and 97 people were employed, each earning $120,000 per years with affordable, complete medical/dental health insurance coverage, four weeks of paid vacation per year, 10 paid holidays and a good quality retirement plan with the employer matching up to $12,000/year in 401k contributions... This economy had only 3% unemployment. Pretty awesome... The employers earned good profits and their stock prices went up every year.

HERE'S THE ALTERNATIVE REALITY: all 97 employees were laid off and brought back as contract workers, earning $7.25/hour, the Federal minimum wage for an annual income of $14,500 with no benefits of any kind. This economy also had 97% employment and only 3% unemployed... AND in this world, businesses were pushing to end the minimum wage laws and many in Congress were on the record as supporting this to help increase employment. In addition unemployment compensation was going to be shortened to 4 weeks and a maximum of $290/week [$7.25 x 40 hours].

Do you see anything 'wrong' with the picture?

Part I:

For the Discussion this week I'd like you to review each of the five policy prescriptions set out above, explaining why they are 'technically correct' in terms of Classical Economic Theory and then discuss your thoughts on each and feel free to discuss normative prescriptions, how would you address unemployment?

Also remember, the US [other than a small percentage of German companies that are tightly regulated on health coverage] is the ONLY country in the OECD that does not have universal coverage independent of employment. The US system for those of working age relies on Employer-Funded Health Insurance, which of course is lost as soon as someone is without work, depending on the state where you live. So 'unemployment' is more than simply a loss of wages... Does this Fact of Life make a difference? Or should it?

Part II:

Other than during a recession, the two types of unemployment suffered are termed Frictional and Structural Unemployment. Please define each of them. And then discuss how our California community college system is an important component of the state's action plan to not only improve the quality of the workforce but to reduce unemployment... By the way, which type of unemployment is this that improvements in Human Capital can reduce via education?