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Discuss whether a reduction in unemployment improves the standard of living of a country. [13]


Material standard of living (SOL) refers to the amount of goods and services one can enjoy in their narrow measurable material form. In its non-material form, non material SOL includes leisure, having enough rest, healthcare benefits and personal welfare. 

Most of the time, real Gross National Product (GNP) is the closest form of measurement of material SOL. Real GNP is the total output produced regardless of geographical boundaries, so long as it is owned by a citizen of the country, over a period of one year, after taking into account the inflation rate of the country. This is because real GNP takes into account not only the inflation rate, but also population growth and only includes factors of production by citizens only. 

A reduction in unemployment will increase total national income (NY) since more people are currently working. This increase in NY can be an increase in GNP as well since more workers may produce more products. Also, the increase in NY can result in higher consumption, pushing up aggregate demand (AD = C + I + G + X - M) as people see that the economy is doing well and consume more. Furthermore, the newly-employed will now have an income to spend. These will improve their material standard of living as they satisfy more of their material needs or wants.

Also, as one becomes employed, they will be relieved of the emotional stress and psychological burden of being jobless or unable to provide for their family. This way, a reduction in unemployment will improve the emotional well-being of the newly-employed, leading to improvement in non-material standard of living. 

Furthermore, a reduction in unemployment rate can bring down the crime rates as well. Given that more people are employed, there will be less people going against the law such as robbing others as a result of desperation. This will also improve the non-material aspect of standard of living. 

However, it is not always true that a reduction in unemployment will lead to a better standard of living.

If more people are employed to work for long hours, there will be a fall in their welfare as they may be overworked and have a higher tendency to fall sick due to the lack of rest. The workers’ health is at stake and they might have to pay for their own medical bills, resulting in a fall in both the material and non-material aspect of standard of living.

Also, a reduction in unemployment rate may actually mean that both the parents are working instead of one. This might be bad for the children as they might be left at home on their own. The lack of communication and bonding time within the family might cause the children to feel neglected and the family ties may not be as strong. Parents might not understand the needs or wants of their children well and this may lead to misunderstandings and disputes. Therefore, this reduction of unemployment may lead to a fall in non-material standard of living.

Moreover, more people working together in a small area might result in poor working conditions. If more people are working under a worse off condition then they are unhappy during their time working. This will also lead to a fall in the non-material standard of living.

Furthermore, an increase in employment rate might not necessarily means an increase in the amount of goods and services produce due to the law of diminishing marginal returns. It states that the last person added to the production may produce lesser than the previous and there will be a point where increasing the quantity of labour will not help to increase production. Given that the increase in income led to an increase in AD, it might cause demand-pull inflation as there is too much money chasing too few goods. Therefore, there might not be an increase in the material standard of living as well. 

Additionally, if the reduction of unemployment rate leads to higher level of production that causes higher levels of pollution or higher rates of environment degradation, then the non-material standard of living did not improve since we are exposed to more pollution that may affect our health. 

All in all, a reduction in unemployment is a good thing and it is also one of the macro-economic aims of the government. However, firms should take care of the welfare of their workers and ensure that the higher level of production does not cause any harm to the environment or people. The workers should have a work-life balance, leaving enough time for leisure and family as well. 

JC ECONOMICS ESSAYS: Economics tutor's comments - Note: This economics essay was written by an Economics student who has already graduated from Junior College, who attained a grade A at H2 Economics at the A levels, but it is the student's own opinions and analytical, essay writing methods, and should be read with an critical, analytical, observant eye. This economics essay is slightly different from the others in that this was a reflective attempted piece by a former student who is now an undergraduate, whereas the other essays on this site were written by economics tutors or students studying Economics at the point in time their respective essays were written. Some light essay editing was undertaken by me, the editor, because this essay was written free style. However, the main thrust of the essay and its original flavour are the same. This essay shows that there are a variety of equally valid approaches of tackling Economics essay questions, and that essay skills and techniques are very important and transferable skills, that last the test of time. However, critical thinking and reflection still applies - what is good about the essay's introduction, body, and conclusion? What can I learn from this essay, written by a former student who achieved a grade A? What can I do better, or how can I reach this standard or exceed it? Thanks for reading, and cheers. 

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