Wednesday, 20 February 2013

Difference in Rate of Unemployment: Government Sector- 4.2% & Private Sector-8.6%

It has been observed through researches that there is a great difference between the rate of unemployment in the government sector and that in the private sector. About 4.2% of the workers in the government sector are found to be unemployed. On the other hand the rate is about 8.6% in the private sector. This difference has called the attraction of economists. It is therefore believed that shrinking the government sector is a correct public policy goal although it would pull down the GDP data and the job numbers. Increase in private sector employment opportunities is to be focused in the present scenario. It is a well known fact that the private sector is more productive than the public sector and it calls for the need to shift the resources from the public sector to the private sector.
As per a research conducted this January, the unemployment rate of workers who came under the public sector was 4.2% and that for the public sector was 8.65(as per Bureau of Labor Statistics). In particular, the public sector workers involved in education department account play an important role in the maintaining the country’s economy. This sector provides jobs to about 14% of the total jobs. Apart from this, the larger fragment, the 86% of the workers are those who require more attention. This sectors needs growth as most of the workers earn their living through this sector. From the different facet, the public sector salaries find its origin from the taxes and other government funds which would only rise by public sector employment.  If the current decline in the economy is to be recovered, the private sector unemployment rate has to be decreased. As per a study of the data from the years 1939 to 2008, it was found that whenever there was a rise in public spending, it lead to a decrement of the same in the private sector. This clearly shows the inverse relation between the private and public sector spending.

It finally comes to a conclusion that the cuts in public expenditure due to the recession like condition in the economy, would act as a stimulus of growth for the private sector. A study was made to confirm whether an increase in the government spending result in any activity in private activity. First of all the private spending were studied. With the samples and notifications available it was then observed that for a rise in government spending, there was a significant fall in private spending, each and the every time. This finally shows that the GDP multiplier always remained below unity. Then it was tried to find out, if the tax increments lead to any increase in the GDP multiplier and it was found that it had no effect on it. The bottom line was then found out to be referring to the fact that at a balance government spending, the economy can reach the most stable state.