To Get Out of the Recession, We Need to Get Back to Work.


The current recession officially ended a couple of quarters ago, yet to many it seems as though it continues to drag on.  The jobless rate has fallen back to 8% unemployment, yet that is mainly because people have quit looking.  Indeed, compared to the recessions of the early 1990’s and early 2000’s, it seems like this recession will never end.  This is despite the Federal Reserve lowering interest rates to nothing, which is normally like putting gasoline on a fire.

This issue may in fact be the long extensions to unemployment benefits that have allowed individuals to not return to work, instead waiting for their dream job rather than settling for what is available.  College students have also chosen often to return home and work minimal hours rather than take an open position that does not fit their field of study, or that doesn’t have the pay they were expecting.  Ironically, it may be the large number of people out of work who are causing there to be a lack of jobs.  Here’s how:

Picture an economy where there are eight people.  Let’s say that one person can grow enough food to feed four people.  So long as two people are growing food, there is enough food to feed everyone, allowing the others to provide other useful things like fuel and clothing.  Let’s therefore say that three of the remaining individuals provide fuel and the remaining three provide clothing.

Now let’s say that a recession hits and those providing fuel and clothing stop.  Those growing food used to trade their food for fuel and clothing, but now since the others are not producing anything, their food is simply being taken from them and given to the others in the form of unemployment benefits.  The food producers are being paid in credits, but they know that they will eventually be taxed to pay for the credits.

If those who were producing fuel would do so again, they would have something to trade for food, and the food producers in turn would be receiving something for their efforts and be able to buy clothing, causing demand for clothing to increase.  Because they are not producing anything, however, the amount of wealth being created is reduced from the levels at which it was created during normal times.  Instead of the population splitting food, fuel, and clothing, they only have food to split.

The more people who start producing useful things through work, the more items and services there would be available for trade.  This would feed on itself, causing more demand since having more things to trade for would cause more people to create something of value with which to trade.

People need to stop being as choosy about jobs and pick something.  Staying on unemployment should not be seen as an alternative because while it may seem attractive to make almost as much sitting home as one could make working, things will get much better in the long run if more people start producing something for the money they receive.  If there truly are no jobs, find a need that people have and find a way to fill it.  That is how you make money in a free economy – find a way to fill the need held by a lot of people.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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