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Economic Analysis Project

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The overall national income of United States of America is being decreased. Highest concern has been raised about the job or labor market of the country. There are number of people who are looking for suitable jobs and are not able to find one. On the other hand the average take home wages have been decreasing considerably (Pear, 2011). This all results in further increasing the issues and problems for the economists and policy makers, who are in search of different ways to come out of the after affects of the economic recession. Government of United States of America along with other policy makers are busy in devising such a policy or strategy which facilitates them in the process of recovering. Different policies and initiatives are being taken by the officials and policy makers, but despite of this there has been continuous decrease in the overall income and output level of the economy. It has been reported that the national income of United States of America decreased by almost 9.8 percent after the recession till June this year. According to different economics analysts, this is one of the largest decline in past few decades (Pear, 2011). Despite of the little improvement in overall unemployment rate, the average wage rate is reporting constant decline (Pear, 2011). This issue is not only of high importance for the job seekers, but also for job providers and the government of United States of America. As it has direct link with the overall economic condition of the country. And there is a high need of coming up with some effective strategy in order to overcome this problem. In order to solve this issue or problem, it is necessary to first identify the reasons and causes behind it. This is possible only through a proper and thorough applied economic analysis. APPLIED ECONOMIC ANALYSIS FOR IDENTIFYING MAIN REASONS BEHIND THE ISSUE AND COMING UP WITH EFFECTIVE STRATEGIES: In order to better understand the overall situation it is important to have a look at the basic elements and factors which are directly related to the issue. First step in this regard is to identify and explore the reasons and factors behind the constant decrease in the wage rates and also in the overall national income of the country (Pear, 2011). Different analysts have presented several elements which are responsible for this. One of the main factor for this declining wage rate is high unemployment rate. There are several people who are in search of job, who are also ready to work at nominal hourly rates. Along with this, employees cannot demand high salary because of the increasing unemployment. It will be easy to understand these factors by applying the concept of supply and demand. In a normal market prices and level of output are decided by the forces of supply and demand. Similarly, in labor market wage rates are decided by the supply and demand of the labor. The concept of Marginal Productivity, tried to explain the relationship between the wage rate and demand of the labor. According to this concept the wage rates are directly related to the demand of the labor. If there is more demand of labor the average wage rates will also increase. Whereas the there is an inverse relationship between the supply of labor and wage rates. If the supply of labor exceeds the demand of labor, then there is a significant decrease in th