It seems that every other week the media gets a fresh round of bad news to share with us, related to the current recession and its impact on the unemployment rate (which climbed to more than 7%). This morning I was reading that since the start of the recession the number of unemployed people has grown by 3.6 million, and the unemployment rate has risen by 2.3 percentage points. While this is hardly good news, it should at the very least get us to think about the way our lives have been when it comes to how we earn a living.
First of all, since people are losing their jobs, the first thing they will do is reduce their spending. That reduces revenue for businesses, which not only lay off people, but have to find ways to keep their costs down so they can at least turn a profit. So what happens is that companies innovate and get more competitive so they can offer goods and services at the low prices that their potential customers can afford. And this is going to be the basis for the future expansion.
We always tend to look at competition from the point of view of businesses reaching out for customers and each of them saying that their offering is the best. It's time to start considering competition within the labor force too. When unemployment rises, it forces each worker to be on their best behavior so as not to lose their job. They become more productive and the businesses can do just as much with less employees, or more with the same number of employees. And wages either get frozen or decrease, making businesses even more productive.
As much as we're complaining about the unemployment rate here in the United States, ours is one of the lowest of the developed world. In many advanced countries of the European Union, it has been around 8% for quite some time. It's probably time for us to come to terms with the realities of basic economics and realize that we have been enjoying full employment for some time (defined by the economic condition when everyone who wishes to work at the going wage rate for their type of labor is employed) and it might not come back any time soon, as it's the exception rather than the norm.
As a final point, I'd like to ask a question. Why is Michigan the hardest hit state in terms of unemployment rates (10%) while Wyoming enjoys the lowest unemployment rate in the country (3%)? The answer lies in the fundamental difference in how income is derived in those two states. Michigan is a manufacturing state, and most of the jobs come from factories and related businesses. Wyoming is a farming state. The farmers there are mostly self-employed and don't rely on someone else to give them a job. So maybe we should draw from that line of thinking and realize that no one is going to hand us our personal bailouts. Self-employment might just be the ticket, though.
Like I said earlier, times are not good. My main point is not that farming is the answer to our problem. It is that a self-employment mindset is. Wyoming has managed to keep their unemployment rates way below the national average because you cannot get fired if you work for yourself. That, the reach of a global economy, plus the power of the Internet combine to make the idea of a career change into something more personal look better than ever.
First of all, since people are losing their jobs, the first thing they will do is reduce their spending. That reduces revenue for businesses, which not only lay off people, but have to find ways to keep their costs down so they can at least turn a profit. So what happens is that companies innovate and get more competitive so they can offer goods and services at the low prices that their potential customers can afford. And this is going to be the basis for the future expansion.
We always tend to look at competition from the point of view of businesses reaching out for customers and each of them saying that their offering is the best. It's time to start considering competition within the labor force too. When unemployment rises, it forces each worker to be on their best behavior so as not to lose their job. They become more productive and the businesses can do just as much with less employees, or more with the same number of employees. And wages either get frozen or decrease, making businesses even more productive.
As much as we're complaining about the unemployment rate here in the United States, ours is one of the lowest of the developed world. In many advanced countries of the European Union, it has been around 8% for quite some time. It's probably time for us to come to terms with the realities of basic economics and realize that we have been enjoying full employment for some time (defined by the economic condition when everyone who wishes to work at the going wage rate for their type of labor is employed) and it might not come back any time soon, as it's the exception rather than the norm.
As a final point, I'd like to ask a question. Why is Michigan the hardest hit state in terms of unemployment rates (10%) while Wyoming enjoys the lowest unemployment rate in the country (3%)? The answer lies in the fundamental difference in how income is derived in those two states. Michigan is a manufacturing state, and most of the jobs come from factories and related businesses. Wyoming is a farming state. The farmers there are mostly self-employed and don't rely on someone else to give them a job. So maybe we should draw from that line of thinking and realize that no one is going to hand us our personal bailouts. Self-employment might just be the ticket, though.
Like I said earlier, times are not good. My main point is not that farming is the answer to our problem. It is that a self-employment mindset is. Wyoming has managed to keep their unemployment rates way below the national average because you cannot get fired if you work for yourself. That, the reach of a global economy, plus the power of the Internet combine to make the idea of a career change into something more personal look better than ever.
About the Author:
Before embarking on your self-employment journey, make sure you read up on filing for unemployment by visiting my financial tips blog.
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