Table of ContentsEffects of the Global Financial Crisis on the American EconomyIntroductionAnalysis of Unemployment ProblemsGovernment Interventions to UnemploymentExample of Alternative InterventionsThe United States Government and the crisisConclusionEffects of the Global Financial Crisis On the U.S. EconomyIntroductionOne of the most obvious impacts of the 2007-2009 global financial crisis on the U.S. economy was the high rates of unemployment and inflation. In recent years, the macroeconomic study of unemployment and inflation has revealed a surprising trend within the U.S. economy. Unemployment rates have fallen and average wages have remained stagnant or even declined. Although this situation may well be temporary, it portends a worrying possibility within the American economy. The factors of globalization and the degradation of organized union negotiations have created a situation in which workers have no bargaining power. Certainly, as this article will demonstrate, this phenomenon is not isolated to the United States. The “reverse Phillips curve” has been present in many Western societies in recent years, and has even been evident in Nigeria. This article will review four articles written by prominent macroeconomists to examine the possible causes of this unprecedented economic phenomenon. It would appear that globalization has created an economic situation in which low inflation and low unemployment do not mean higher wages for workers. Say no to plagiarism. Get a tailor-made essay on “Why Violent Video Games Should Not Be Banned”? Get the original essay Analyzing Unemployment Problems In Bloomberg's May 19, 2017 article, "U.S. Unemployment Is Falling, So Why Aren't Wages Rising?" , economist Peter Coy examines a strange phenomenon occurring in the United States. While the overall unemployment rate in the United States has been steadily declining, it reached an all-time low of 4.4 percent in April 2017 (Coy 2017). Wages have not kept pace, increasing only 2.5 percent on average. In many ways, this phenomenon defies both economic theory and common sense. According to the Phillips curve, when unemployment rates are low, wages tend to increase. This is because employers must pay higher wages in order to retain workers and recruit new talent into their labor pool. However, as Coy (2017) argues, several factors could explain this economic anomaly. While falling unemployment rates in the United States are great news, the fact that wages are not rising as a result is not as optimistic. For Coy (2017), many of the reasons for this phenomenon have to do with the fact that inflation is exceptionally low at this point in US economic history. While the current inflation rate is at an all-time low – 2.2 percent, to be exact – Coy (2017) posits that workers are simply happy with their current wages. Not only do their current salaries have reasonable purchasing power, but many current workers in the U.S. economy weathered the Great Recession of 2008 and subsequent years. This means they are more likely to just be grateful to have a job. In short, American workers may be reluctant to “shake things up” by asking their employers for more money. That being said, even if American workers weren't happy with the current state of their wages, they wouldn't have much bargaining power if they wanted to. to demandhigher salaries. As Coy (2017) observes, the days of unions and collective bargaining agreements are long gone in the United States. This means that the average American worker finds himself in a situation where he has no choice but to accept the salary offered by his employer. Additionally, with the advent of globalization, there are fewer jobs available. American workers may well realize that their jobs are simply outsourced to other nations and should demand higher wages for their efforts. As Coy (2017) observes, American workers no longer compete only with each other for a piece of the pie. They now also compete with equally skilled workers in countries like China, India and Brazil, willing to work for lower pay. In many ways, low inflation and the globalized economy have conspired to create a situation in which American workers are neither incentivized nor empowered to demand higher wages from their employers. Indeed, the fact that wages are not increasing even though the overall unemployment rate is falling is a very unusual economic phenomenon and also very worrying. However, as Coy (2017) argues in his article for Bloomberg, there are many rational explanations for this event. For starters, inflation is currently very low. This means that American workers are more likely to be satisfied with the wages they receive. Additionally, American workers no longer have any bargaining power due to the loss of power of unions and the emergence of a global economy. In a 2014 article, "The Happiness Trade-Off Between Unemployment and Inflation" was published in The Journal of Money, Credit, and Banking. Macroeconomists Blachflower, Bell, Montagnoli, and Moro examine the overall effect on people's well-being of unemployment rates and inflation rates. Quite predictably, the authors found that when either rate is exceptionally high, people tend to report significantly reduced rates of feeling psychological and physical well-being. Blanchflower, Bell, Montagnoli, and Moro (2014) report that rates of low sense of well-being – what the authors called the “misery index” – tend to peak when the unemployment rate reaches 6 percent and when the inflation rate reaches 7 percent. . Blanchflower et al (2014) note that their study is highly subjective and there is little empirical evidence to support their claims. The study nevertheless provides a plausible explanation for the current oddities economists are witnessing in the U.S. labor market. After all, with a current unemployment rate of 4.4 percent and an inflation rate of 2.2 percent, the United States currently sits well below the "misery index" reported by Blanchflower, Bell, Montagnoli and Moro on both measures. Regarding unemploymentFrom a behavioral economics perspective, it therefore makes perfect sense that wages do not increase, even if the overall unemployment rate decreases. After all, it's quite possible that the majority of American workers are quite happy with the wages they currently earn and have simply chosen not to make a big deal about it. In many ways, given the extreme economic precariousness that has prevailed in the United States for several years, many of the currently employed Americans probably just feel lucky to have a job. Furthermore, if these jobs offer strong benefits, employed Americans most likely consider the sum of these benefits to be part of their job.set of comprehensive compensatory benefits. It has become clear that the current presidential administration in the United States is aggressively targeting the Affordable Care Act of 2010 (aka “Obamacare”). They seek to replace it with a far inferior, government-subsidized health care system. The majority of American workers probably greatly fear the consequences if they lose their job, or if they simply leave a low-paying job without first finding another job. It appears that American workers can become quite complacent about low wages if the fear of negative consequences becomes too great. In 2015, an article by economists Rusticelli, Turner and Cavalerri, "Incorporating Anchored inflation expectations in the Phillips curve and in the calculation of OECD measures of the unemployment gap", was published in the report of the OECD.Journal. The authors examine the global prevalence of the “reverse Phillips curve” that has occurred in recent years. To go further, the “Phillips Curve” is an economic graph that generally demonstrates that when unemployment rates fall, wages tend to rise. However, this has not happened in the last decade and the authors examine possible reasons for this phenomenon. In this article, Rusticelli, Turner and Cavalerri (2015) make an original contribution to this literature by demonstrating that this “reverse Phillips curve” is not isolated to the United States, but rather constitutes an economic trend that has emerged. produced throughout history. developed world. Indeed, as the authors demonstrate, countries like the United Kingdom, New Zealand, France and Italy have all experienced a phenomenon of falling national unemployment rates, but generally stagnant or even falling wages . Like Rusticelli, Turner, and Cavalerri (2015), the wage stagnation currently experienced in the developed world is the result of aggressive government policy measures. They specifically targeted inflation by adjusting interest rates and other measures. In most cases, these measures have achieved their objectives of reducing the inflation rate in their respective countries; As such, the authors argue that low inflation is responsible for wage stagnation in the developed world. When inflation is low, the national currency has more purchasing power. Thus, workers generally tend to be more satisfied with their pay rates, particularly if they have experienced a period in which unemployment rates have been high. Thus, Rusticelli, Turner, and Cavalerri's (2015) examination of the “reverse Phillips curve” demonstrates that wage stagnation cannot simply be attributed to worker complacency or fear within a population. active. Nor can it be explained solely by the exploitative nature of a particular labor market within a given country. Generally speaking, workers are not so much concerned with their numerical pay rates as with the purchasing power that such pay can provide. Example of Alternative Interventions In a 2013 article in Economics, Management, and Financial Markets, Nigerian economists Ogujiuba and Abraham examine the effects of low inflation and high employment levels in the African country of Nigeria. the West. In many ways, the circumstances Nigeria faced in the wake of the global financial crisis were very similar to those faced by the United States. However, the Nigerian government has taken very different steps to address this problem. In the early 2000s, the Nigerian government adopted severalaggressive monetary policies aimed at defeating inflation in the country, and these measures have been successful. As inflation rates began to fall in Nigeria, unemployment rates also began to fall. As has been the case in the United States and other developed countries in recent years, Nigerians have not experienced an increase in wages. However, they also experienced their own “upside-down Phillips curve.” On their part, Ogujiuba and Abraham (2013) stated that the presence of this retrograde Phillips curve within the Nigerian economy was a good sign, but only in the short term. Since the measures governments tend to take to reduce inflation rates are often extremely artificial. These controls can only last for so long, and inflation rates will begin to rise, despite the government's best efforts. Of course, when inflation rates begin to rise, the purchasing power of the national currency begins to decline. Thus, if inflation were to rise again in the United States, it would be unlikely that American workers would remain as satisfied with their low wages as they have been in previous years. However, it is unlikely that if inflation rates begin to rise in the United States, many employers will decide to increase their workers' wages. This is so that they can enjoy a standard of living equal to that of the period before the rise in inflation rates. In such a scenario, several things are likely to happen. Since unemployment rates are currently low, workers talented enough to find work elsewhere will do so. This could prompt major U.S. employers to initiate an overall wage increase. However, given the economic, social and political climate of recent years in the United States, this is very unlikely to happen. Although the temporary existence of a backward Phillips curve may have proven beneficial to the Nigerian economy, it is possible that a prolonged existence of this phenomenon in the United States would cause unrest and general discontent in the country. with regard to the economic system as a whole. As the analysis above has demonstrated, many countries around the world are emerging from the Great Recession and are now experiencing low unemployment rates within their countries. Furthermore, many of these same countries are enjoying the fruits of aggressive monetary policies that have slowed the pace of inflation and have thus experienced some of the lowest economic inflation rates they have seen in years. However, it appears that workers around the world are not enjoying the benefits of a renewed global economy to the same extent. Although this phenomenon is most prevalent in the United States, wage stagnation and depression continue to occur around the world, even in the midst of dynamic economies. Although this situation – which economists refer to as an “inverted Phillips curve” – may be temporary, it signals a paradigm shift in wage policy across the world. The United States government and the crisis If the current President of the United States, Donald J. Trump It must be believed that the United States is heading towards a real economic recovery which will take place in 2018. Certainly, the economy has was one of the deciding factors in the 2016 presidential election, and therefore candidates of all parties had serious reasons to lie or exaggerate about an imminent resumption, on which, of course, only their party is qualified to navigate. Presidential candidates' bluster aside, there are signs that the U.S. economy is slowly beginning to recover from the aftermath of the 2008 crisis..