IndexEffects of the global financial crisis on the US economyIntroductionAnalysis of employment problemsGovernment interventions towards employmentExample of alternative interventionsThe US government and the crisisConclusionEffects of the global financial crisis on the economy US IntroductionOne of the most obvious impacts of the 2007-2009 global financial crisis on the US economy was high rates of unemployment and inflation. In recent years, the macroeconomic study of unemployment and inflation has revealed a surprising trend within the United States economy. Unemployment rates are falling and average wages have remained stagnant or even fallen. While this situation may be temporary, it points to a troublesome possibility for the U.S. economy. The factors of globalization and the weakening of organized labor bargaining have created a situation in which workers have no bargaining power. To be sure, as this article will demonstrate, this phenomenon is not isolated to the United States. The “backward Phillips curve” has been present in numerous Western societies in recent years and has also been evident in Nigeria. This article will review four articles by prominent macroeconomists to examine the possible causes of this unprecedented economic phenomenon. As it turns out, globalization has created an economic situation in which low inflation and low unemployment do not equate to higher wages for workers. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay Analysis of Unemployment Problems In the May 19, 2017 Bloomberg article, “US Unemployment Is Falling, So Why Aren't Wages Rising?” , economist Peter Coy examines a strange phenomenon occurring in the United States. Although the overall unemployment rate in the United States has been steadily declining, it hit an all-time low of 4.4% in April 2017 (Coy 2017). Wages have not kept pace, increasing by only 2.5% on average. In many respects, 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 to retain workers and recruit new talent into their labor pool. However, as Coy (2017) argues, there are several factors that would explain this economic anomaly. While U.S. unemployment rates falling is great news, the fact that wages aren't rising as a result isn't so optimistic. For Coy (2017), many of the reasons behind this event have to do with the fact that inflation is exceptionally low at this juncture in US economic history. Given that the current inflation rate is at an all-time low – 2.2%, to be exact – Coy (2017), assumes that workers are simply satisfied with their current wages. Not only do their current wages have reasonable purchasing power, but many of the current workers in the U.S. economy lived through the Great Recession of 2008 and the years that followed. This means they are more likely to simply be grateful to have a job. In short, American workers may be reluctant to “rock the boat” by asking their employers for more money. That said, even if American workers were dissatisfied with the current state of their wages, they wouldn't have much bargaining power if they wanted to demand higher pay. As Coy (2017) notes, in the United States iThe times of trade unions and collective labor agreements are long gone. This means that the average American worker is in a position where they have no choice but to accept the pay offered by their employer. Furthermore, with the advent of globalization, there are fewer jobs available. US workers may find that their work is simply outsourced to other nations should they demand higher wages for their efforts. As Coy (2017) notes, American workers are no longer just competing with each other for a piece of the pie. They are now also competing with equally skilled workers in nations like China, India and Brazil who are willing to work for a lower wage. In many ways, low inflation and the globalized economy have conspired to create a situation in which American workers are neither incentivized nor allowed to demand higher wages from their employers. Indeed, the fact that wages do not increase even if the overall unemployment rate decreases 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. First, inflation is very low right now. This means that American workers are more likely to be content with the wages they receive. Furthermore, 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 of both unemployment rates and inflation rates on people's well-being. Quite predictably, the authors found that when either rate is exceptionally high, people tend to report significantly reduced rates of a sense of psychological and physical well-being. Blanchflower, Bell, Montagnoli, and Moro (2014) report that rates of low well-being – what the authors labeled the “misery index” – tend to peak when unemployment rates reach 6% and when inflation rates reach 7%. . Blanchflower et al (2014), note that their study is highly subjective and that there is little empirical evidence for their claims. However, the study 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% and an inflation rate of 2.2%, the United States is currently well below the “misery index” indicated by Blanchflower, Bell, Montagnoli and Moro on both measures. Government Interventions Facing Unemployment From the perspective of behavioral economics, it is therefore very logical that wages do not increase, even if the overall unemployment rate decreases. After all, it's entirely possible that the majority of American workers are quite happy with the wages they currently earn and have simply chosen not to make a fuss about it. In many ways, given the extreme economic precarity that has existed in the United States in recent years, many currently employed Americans likely simply feel lucky to have a job. Furthermore, if these jobs provide robust benefits packages, employed Americans will most likely consider the sum of these benefits to be part of their overall compensation packages. It has become evident that the current presidential administration in the United States is aggressively targeting the Affordable Care Act of 2010(also known as “Obamacare”). They are trying to replace it with a vastly inferior government-subsidized healthcare system. Most American workers are likely very fearful of the consequences if they were to lose their job or simply leave a low-paying job without first securing another line of work. As it turns out, American workers can be induced to settle for 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 into Phillips Curve Economics and Deriving OECD Measures of the Unemployment Gap,” was published in the OECD Journal. The authors examine the worldwide prevalence of the “backward Phillips curve” that has occurred in recent years. To elaborate further, the “Phillips Curve” is an economic graph that typically demonstrates that when unemployment rates decrease, wages tend to increase. However, this has not occurred 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 “backward Phillips curve” is not isolated to the United States, but rather has been an economic trend that has occurred throughout the world. developed world. Indeed, as the authors demonstrate, nations such as the United Kingdom, New Zealand, France and Italy have all experienced the phenomenon of falling national unemployment rates, but generally stagnant or even declining wages. Like Rusticelli, Turner, and Cavalerri (2015), they argue that the wage stagnation that the developed world is currently experiencing is the result of aggressive policy measures by the government. They specifically targeted inflation through interest rate adjustments and other measures. In most cases, these measures have been successful in achieving the goal of reducing the inflation rate in their respective nations; therefore, the authors argue that low inflation is responsible for wage stagnation across the developed world. When inflation is low, the national currency has more purchasing power. Therefore, workers generally tend to be more satisfied with their pay rates, especially if they have experienced a period in which unemployment rates were high. Thus, Rusticelli, Turner, and Cavalerri's (2015) examination of the “backward Phillips curve” demonstrates that wage stagnation cannot simply be attributed to complacency or fear among workers within the workforce. Nor can it be explained solely by the exploitative nature of a particular labor market within a particular nation. In general, workers don't tend to care so much about their numerical pay rates, but rather about the purchasing power that pay can provide them. Example of Alternative Interventions In a 2013 article for Economics, Management, and Financial Markets, Nigerian economists Ogujiuba and Abraham examine the effects of low inflation and high levels of employment in the West African nation of Nigeria. In many ways, the circumstances Nigeria faced following the global financial crisis were very similar to those faced by the United States. However, the Nigerian government has taken very different measures to address the issue. In the early 2000s, the Nigerian government adopted several aggressive monetary policies aimed at defeating inflation within the nation, and these measures were successful. When inflation rates began to decline inNigeria, unemployment rates also began to decline. As has been the case in the United States and other developed countries in recent years, Nigerians have not seen a subsequent increase in wages. However, they also experienced their own “backward Phillips curve.” On their part, Ogujiuba and Abraham (2013) stated that the presence of this backward Phillips curve within the Nigerian economy is a good sign, but only in the short term. Given that 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. Naturally, when inflation rates begin to rise, the purchasing power of the national currency begins to decline. Therefore, if inflation begins to rise again in the United States, American workers are unlikely to remain as satisfied with their low wages as they have been in previous years. However, this is unlikely to happen, if inflation rates start to increase 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 increase in inflation rates. In such a scenario, several things are likely to happen. Since unemployment rates are currently low, workers who are talented enough to find work elsewhere will. This could push major U.S. employers to push for an overall wage increase. However, given the economic, social and political climate of recent years in the United States, this is highly unlikely to happen. While the temporary existence of a backward Phillips curve may have proven to have had positive effects on the Nigerian economy, it is possible that a prolonged existence of this phenomenon in the United States could result in unrest and general discontent with the economic system general. The above analysis has shown that many nations of the world are emerging from the Great Recession and are now enjoying low unemployment rates within their nations. Furthermore, many of these same nations are benefiting from the fruits of aggressive monetary policies that have slowed the pace of inflation, and have therefore seen some of the lowest economic inflation rates they have seen in recent years. However, it appears that workers around the world are not equally reaping the benefits of a renewed global economy. While this is prevalent in the United States, wage stagnation and wage depression continue to occur around the world, even in the context of vibrant economies. While this situation – which economists call the “backward Phillips curve” – may be temporary, it signals a clear paradigm shift in wage policy around the world. The US government and the crisis of the current US president, Donald J. Trump It can be believed that the United States is heading towards a full-blown economic recovery that will take place in 2018. To be sure, the The economy was one of the deciding factors in the 2016 presidential election, and so candidates of all parties had substantial reasons to lie or exaggerate about an imminent recovery, which obviously only their party is qualified to handle. Aside from the presidential candidate's bravado, there are indications that the American economy is slowly starting to recover from the consequences of the 2008 meltdown. As reports from the final months of 2018 are beginning to indicate, the employment situation in the United States is slowly improving and the trust of.