April 9, 2012
Scratching the Surface: Youth Unemployment and Policy
By Cindy Ivanac-Lillig
A couple of weeks ago, my friend sent a short and sarcastic email that has haunted me. It said, “Funny that Switzerland's minimum wage is $15 per hour, and the country is #1 in global competitiveness with low youth unemployment.”
Attached to the email was an article arguing that raising the minimum wage will raise the unemployment rate among unskilled workers (especially youth). This rather well-known theory basically states that the more expensive unskilled workers become, the less likely it will be that businesses will want to hire them.
After finishing the article, I had the urge to look-up the different minimum wages by state and compare them with the youth unemployment rates by state. Unfortunately, the best I could do in terms of visuals was: unemployment (scroll to the bottom of the page) vs. minimum wage. My meager experiment of googling these maps didn’t produce much that was satisfying or definitive. In fact, generally speaking, the northwestern part of the country has higher minimum wages and somewhat lower youth unemployment rates. However, at the risk of sounding too academic, this by itself doesn’t disprove the general theory outlined in the article.
I finally found an interesting piece from the Federal Reserve from 2003. It discussed the factors that mitigate or exacerbate this general theory of minimum wage (price floor). As it turns out, the relationship between unemployment and minimum wage is greatly affected by labor laws, the degree to which the government is proactive in helping youth find jobs, and the manner in which the minimum wage is negotiated. As usual, you ask an economic question and the answer is rarely straightforward.
There are many dynamics at play in regards to youth unemployment. If you are interested, check out a 2011 paper from the Fed detailing the deterioration of youth job opportunities entitled, Polarization, immigration, education: What’s behind the dramatic decline in youth employment? The paper points out that the employment rate among 16-17 year-olds is currently at 15%, which is the lowest level ever recorded by the BLS. Also, check out a recent article from the Economist that outlined the long-term effects of youth unemployment. As many of my readers work with young adults, numbers like this may not be news. But all of this has me wondering if youth unemployment is more expensive to society in the long-run than it may seem on paper?
What do you think?
March 30, 2012
Professor Bernanke, I have a question…
By Cindy Ivanac-Lillig
How would you like to walk into one of your business classes and have Chairman Bernanke standing behind the podium? Students at George Washington University recently experienced this very feeling. The Chairman guest lectured a four-part series entitled:
Origins and Mission of the Federal Reserve
The Federal Reserve after World War II
The Federal Reserve’s Response to the Financial Crisis
The Aftermath of the Crisis
At one point during a lecture, a student was crafting a question and inadvertently said, “If you were Chairman of the Fed….” To which the Chairman smiled, interrupted the student, and said, “I am the Chairman.” If you have the time to watch the lectures, in addition to learning about the history of central banking and the current day dilemmas of economic policymakers, you may even smile once or twice.
The Fed has provided a link to all four of his lectures as well as links to his PowerPoint presentations. Please feel free to use them in your teaching and/or studies.
What do you think of the lecture series? What would you like to see the Fed do going forward to encourage students to continue to explore the Great Recession?
March 2, 2012
The Art of Well-Being and Economics in the Euro Zone
By Cindy Ivanac-Lillig
What do art and economics have in common? Not that much I thought. However, I recently found a Wall Street Journal photo essay (interactive graphic) on “Life in the Euro Zone,” which depicts what life looks for a handful of ordinary families in light of the recent austerity measures and general economic uncertainty. This photo essay does something that many economists are lousy at doing – connecting to people and families and ultimately explaining why all this matters. Why does economic policy matter?
It matters because there is a child who is growing up surrounded by anxiety and fear, a generation of young men who can’t find a way to support themselves, a generation of retirees who may not know the calm of reflection and retirement, a generation of youth who dream of moving, and families who are deciding how many children to bring into the world based on how much opportunity they think they can provide.
It is a beautiful piece that also happens to do a great job of weaving in some good economic indicators throughout the slideshow. I especially want you to note the following charts: Economic Sentiment Index, Long-Term Unemployment ( >12 month), Percentage of Women in Labor Force, Unemployment of Young Men, and Social Spending as a Percentage of GDP. Interesting stuff.
I hope you enjoy this as much as I did. If you find anything interesting that attempts to bring to life some of our economic indicators and policy outcomes here in the U.S., I would be very interested to hear about it. Macroeconomic policy can sort of be boiled down to asking everyone, “What is your life like now and what do you think the future holds?” And as it turns out, maybe artists can teach us something about how to communicate this...
So, what do you think? How differently did you look at the economic indicators in this photo essay because they were embedded in the story of a real family?
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