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Unemployment: The Price We Pay for Lower Inflation
Unemployment: The Price We Pay for Lower Inflation
Part 2: After the Thirteenth Amendment
In the intricate dance between economic stability and the well-being of societies, unemployment and inflation have long been key players on the stage. These two phenomena, often perceived as polar opposites; but to maintain low inflation, we must raise interest to constrict spending. The federal reserve has a goal of 2% inflation. The downside of this method of taming inflation is that it has potential to result in a loss of over 5 million jobs and a possible unemployment rate of 6 –7 %. We were forewarned of a potential recession since the beginning of 2022. The high cost of borrowing has led to substantial layoffs across all industries since June 2022.
Author: Amber Light
The second quarter of 2023 reported a year over year inflation rate of 3% and the national unemployment rate has been the lowest since the 1970’s at 3.6% . The unemployment ratio between groups remains unchanged. The national average for unemployment for Whites is 3.1%. The national average for unemployment for Blacks and Hispanics is 6% and 4.3% respectively. The national unemployment rate is expected to increase to 5.1% by the end of 2023. The black and brown communities are paying a higher price to tame inflation. Diversity in the workplace appears to have taken a back seat during this slow economic period.
While the ratios are telling about the disparities that exist, I question whether we’re working with the right model. In 2018, 20% of American workers were contract workers. By 2021, 30% of US companies supplemented their employees with contract workers. Businesses hired contract workers with specific skills that could dive into a project with limited onboarding. Contract workers were usually paid a little more because they didn’t receive the benefits package that were offered to employees.
Long gone are the days when one could retire after 30 years of working with the same company. For those who want stability and security, contract work might seem like a consolation prize. For others, it provides the perfect work-life balance. Since contract workers are not employees, they may not be considered in the job count. The real level of unemployment may be lower than what’s being reported.
In an uncertain economy, businesses need flexibility in the ability to staff up or staff down. The hiring costs of a new employee can range from 50-60% of their salary when one considers the cost of recruiting, benefits, onboarding and training. The downside may include data security, preferred contractor availability and the impact on team performance when a nonemployee is added to the team. Contract work is not for everyone because one is always on the hunt for the next assignment. Besides the flexibility available to contract workers there is the opportunity to broaden one’s skill set by being involved in varying types of projects.
Whether forced or voluntarily entering the contracting world, the experience can be rewarding. With that reward comes responsibility and potential for liability. For those who have been in the job market for a while, it’s a good idea for everyone to start a limited liability company to protect your assets. Even if you are currently employed, you should be thinking about starting a business to protect your financial future.