Research Paper on Principles of Microeconomics

2021-07-16 05:48:04
5 pages
1248 words
Carnegie Mellon University
Type of paper: 
Research paper
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Employment contributes to positive economic growth in any country. Currently, the unemployment rate stands at 4.4% which represents a drop from the previous year (Cohen). The drop-in unemployment rates signify an improvement in the economy from the previous years. The labor market follows the law of demand and supply where the employers provide the demand and the employees the supply. Labor markets are controlled by market dynamics from both international and local markets. The factors that influence the market dynamics include education level of individuals, immigration and also the age of the population. The study analyzes the labor market focusing on the wages and income inequality.


Article Summary

The article has put focus on understanding the existing situation on unemployment (Cohen). The United States has had best unemployment within the past 6 yeah. However, the current situations have created a barrier to the positive economic growth in the following ways. According to the article, increased unemployment rates are connected to natural disasters that faced the U.S. during the second half of the year. Increased number of hurricanes caused destruction of property which led to businesses experiencing high losses. As a consequence, businesses could not handle employing any more. Unemployment rates rose as a consequence of the hurricanes that struck the U.S.

Research shows that natural disasters such as earthquakes, tycoons, hurricanes and floods cause a negative effect on an economy. The U.S. faced major natural disasters that cost billions of dollars in losses. Such disasters dragged the economy behind and thus caused increased losses to businesses. Additionally, some businesses had to close down completely due to the extent of damage caused by the hurricanes (Cohen). The statistics shown by the article represent data collected the unemployment rates represents data collected right after the hurricane.

Labor Market

The U.S. labor market is diverse since it is composed of both the local people and immigrant workers. The immigrant workers have created a labor surplus thus allowing for low labor prices (Autor 58). The immigrant workers accept low wages since they dont have a choice thus creating unnecessary demand for low wage labor. As a consequence, an issue of wages arises. The unemployed individuals look for jobs but realize that low wages cannot sustain their development in the future.

Even though the U.S. is facing the best employment rates in 17 years, the existing demand and supply in the labor market is likely to push wages low. In a situation where the skills of migrants can be considered as substitutes to the existing labor force, the immigrants are likely to drive down the wages in the short run due to increased competition. The employers are likely to benefit from the existing labor market demand and supply.

The U.S. government has thus been able to create jobs for its millions of workforces. However, maintaining good wages that promote equality and good living standards has been a big problem. Statistics show that nine industries are reported to be increasing the employment rates. The industries are employing individuals more and also focusing on payroll cuts. Payroll cuts have become important to companies due to the need cut on the cost of operations. Most companies have put focus on profit maximization and thus the flash out every deal that is likely to increase profits.

Individual wages are an important contributor towards the standards of living of a person. If a person earns a high wage, the person is likely to live a good life since they will be able to access quality medical services among other quality services. The labor market however has created a high demand for labor and a low supply. Consequently, companies looking to employ individuals focus on low wages. Even though the minimum wage in most states has had an increment, the U.S. labor market has significantly reduced the wages for skilled laborers thus reducing the value for their work.

Income inequality

The issue of income inequality arises due to the huge wage differences experienced between income groups. For example, high income individuals are likely to earn a significantly higher income in comparison to the low-income individuals. Such inequalities create different social classes which is a big challenge to the American economy.

Income inequality among Americans has increased significantly. The trends show no sign of slowing down. According to statistics, the middle-income households in the U.S. have a lower disposable income in comparison to other developed countries such as Canada (Autor 189). It means that the middle-income in U.S. continue to suffer even though they are considered to be in a good income bracket. The main reason for the low disposable income experienced by the middle-income individuals is the slow growth in their wages. People in that income bracket do not experience high income growth which consequently increases wage gap.

Wage gains are considered to be unequal as some individuals experience significantly high wage gains while others low wage gains. Most Americans use wages as the main source of disposable income. It means that low wages lead to lower personal consumer expenditure. As a consequence, there can be considerable changes in economic development due to the lower consumption. According to Tyson (2017), the economic costs that result from income inequality are substantial. It is important for the government to look at the factor of income inequality while focusing on economic development in the long run. Businesses will be unable to grow as a result of wage inequalities.

The effect of wage inequalities and low wages can also be experienced among children growing up (Tyson). As children develop, they experience different environments where they grow and learn about new things. In most situations, it becomes difficult for a child to develop into a better person without the resources. Even though children from both low and high-income households have similar abilities, the educational opportunities are very different. Children in low income families have low opportunities of accessing quality education as opposed to the ones from high income households.

The graph below (Fig. 1) shows how low wages reduce the expenditure of an individual. As the wages increase, individual expenditure increases. The expenditure can be in terms of good hospitals, good schools, and luxury goods among others which make the living standards high. A higher expenditure will mean that more goods and services will be purchased and businesses will thrive. Consequently, the economy will boom in the long run.



Level of Expenditure

Fig. 1 How low wages reduce the expenditure of an individual


In conclusion, the study has analyzed the U.S. labor market as provided by the New York Times news article. The summary of the article has shown how unemployment can be caused by natural disasters such as hurricane. Also, the article has put focus on increasing the accessibility of better jobs for the people which would in turn help in economic growth. The study has shown the wage inequalities are a main source of a slow economic growth rate. It is important to ensure that there is a reduced wage different among employees to increase their access to resources and increasing their disposable income.


Works Cited

Autor, David. "The Polarization of Job Opportunities in the US Labor Market: Implications for Employment and Earnings." Center for American Progress and the Hamilton Project (2010).

Cohen, Patricia. "U.S. Lost 33,000 Jobs in September; Unemployment Rate Dips To 4.2%." Nytimes.Com, 2017,

Tyson, Laura. "The Rising Costs of U.S. Income Inequality." HuffPost, 2017,


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