Changes in the volume of unemployment are governed by three fundamental forces: the growth
Except for the recession years of 1949, 1954, and 1958, the rate of economic growth exceeded the rate of productivity increase. However, in the late 1950s productivity and labor force were increasing more rapidly than usual, while the growth of output was slower than usual. This accounted for the change in employment rates.
But if part of the national purpose is to reduce and contain unemployment, arithmetic is not enough. We must know which of the basic factors we can control and which we wish to control. Unemployment would have risen more slowly or fallen more rapidly if productivity had in creased more slowly, or the labor force had increased more slowly, or the hours of work had fallen more steeply, or total output had grown more rapidly. These are not independent factors, however, and a change in any of them might have caused change in the other.
A society can choose to reduce the growth of productivity, and it can probably find ways to frustrate its own creativity. However, while a reduction in the growth of productivity at the expense of potential output might result in higher employment in the short run, the long-run effect on the national interest would be disastrous.
We must also give consideration to the fact that hidden beneath national averages is continuous movement into, out of, between, and within labor markets. For example, 15 years ago, the average number of persons in the labor force was 74 million, with about 70 million employed and 3.9 million unemployed. Yet 14 million experienced some term or unemployment in that year. Some were new entrants to the labor fore; others were laid off temporarily, the remainder were those who were permanently or indefinitely severed from their jobs. Thus, the average number unemployed during a year understates the actual volume of involunatary displacement that occurs.
High unemployment is not an inevitable result of the pace of technological change but the consequence of passive public policy. We can anticipate a moderate increase in the labor force accompained by a slow and irregular decline in hours or work. It follows that the output of the economy--and the aggregate demand to buy it--must grow by more than 4 percent a year just to prevent the unemployment rate from rising, and by even more if the unemployment rate is to fall further. Yet our
A.productivity rises at the same rate as growth of the labor force
B.productivity and labor force increase at a greater rate than output
C.output exceeds productivity
D.rate of economic growth is less than the number of man-hours required