Justin Wolfers, assistant professor of political economy at the Stanford Graduate School of business discusses inflation and unemployment in his article titled, “ People prefer inflation to prospect of Job Loss”. What is inflation and unemployment rate? Inflation is the continual rise in the price level and the unemployment rate is the percentage of people in the economy who are willing and able to work but who are not working. Wolfers brings out many good points about our well being and personal psychological damage not due to inflation but due to the unemployment rate.
Surveys conducted from 16 different European countries regarding subjective well-being compared life satisfaction and happiness in these countries to the rates of inflation and unemployment. It was proven that rising joblessness is roughly five times more troubling to people than rising prices. In other words the unemployment rate rising one percentage point causes as much misery as the rate of inflation rising 5 points. Wolfers states that high unemployment in a region lowers average feeling of usefulness, confidence, and happiness and raises depression and feelings of worthlessness. Wolfers study also looks at the effects of the business cycle on people’s trust and a loss of trust leads to no faith in the government. Depression leads to an overall unhealthy United States. If more people are unemployed this could lead to a higher crime rate because the mental state of America is miserable. Also, depression causes obesity and much insecurity.
Economists need to focus on stabilizing unemployment rates and realize that keeping inflation rates at rock bottom may not be the answer to coming out of this recession. Keep unemployment stable and if inflation’s a little more stable the cost may be worth it. If people do not have a job it really doesn’t matter how much something costs because they cannot afford it anyways. Corporations all over the world have installed health and wellness programs, which are great and beneficial. These programs offer information on ways to prevent bad health habits and allow employees to workout while they are at work. Corporations need to stop concentrating on downsizing and could start to help America like they try to help their employees with health and wellness programs. . Trust in America is definitely not there anymore which is one reason why employees are constantly changing jobs because loyalty to a company these days does not mean a guaranteed job.
The government has installed a new Tax Relief Policy but instead I think the government should raise the taxes. According to Wolfer people would rather pay more and know that they have a job. It sounds great to hear that if we have children we will receive a tax rebate and if we are married we will receive a higher tax deduction but this is only a short term fix. What are the long-term effects of these short term fixes? The government needs to stop trying to look good and start trying to help America by looking at economic indicators that have the most impact and long term impacts. I would rather pay higher taxes and prices for a few years and know that I am guaranteed a job then be unemployed and depressed.
In conclusion, the government needs to keep unemployment stable and if inflation’s a little unstable, the cost may be worth it. Do people prefer to pay more or have a job? The answer is having a job and this is what it is going to take for America to recover. The focus needs to be on the unemployment rate, GDP, and then inflation. Election is also arriving in the near future and I know that I will be voting for a true leader who has their heart on trying to repair the United States instead of increase his/her pocketbook.
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