Labor Market & Pension Systems: Keys To Econ Study - Essay Sample

Introduction

The labor markets and the pension systems are very pivotal components in the study of economics. Essentially, the labor market that is equally referred to as the job market denotes the supply as well as the demand for labor whereby the employers are in demand of labor, whereas the employees are the providers of the supply of labor (Natali, 2012). The Labor market, for instance of the US, is undeniably a very gravitas constituent of the American economy and is tortuously bond with goods and services as well as the markets for capital. Therefore, due to its fundamentality in ensuring economic stability and progress, the American labor market ought to be protected from any jeopardizing elements such as compromising policy changes.

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Nonetheless, the supply and demand for labor at the macroeconomic level are profoundly influenced by both the domestic and global market dynamics. Also, other influencing aspects include the level of education, the population age, and immigration. Pertinent measures are productivity, gross domestic income (GDP), total income, participation rate, and unemployment (Messacar, 2018). However, on the microeconomic scale, specific firms go-ahead to initiate interactions with potential employees that culminates into either hiring, firing, cutting, or raising their working hours and wages. Hence, the existing relationship between supply and demand is a prime determinant of the number of hours an employee is scheduled to work as well as the amount of compensation that the employee is entitled to either in wages, benefits or salary.

The American Labor Market

In assessing the American labor market in the over five past years, before the financial crisis, unemployment stood between 4%vto 5% (Barrientos, 2018). However, after the collapse of several business establishments, the US experienced a drastic reduction in the demand for goods and services, labor as several people lost their homes. Consequently, in the year 2009, the rate of unemployment in the US reached 10%, though, by January 2016, the rate had steadily decreased to 4.9% (Boelaars & Mehlkopf, 2018).

The American Pension Systems

A pension system mainly refers to a retirement plan requiring an employee to contribute towards a pool of funds designated for the employee's future benefits. Hence, the funds are invested on behalf of the employee, and the earnings accrued from the investments upon the employee's retirement are given to him or her as income. The American pension system is mainly known as the social security that is, however, very versatile but serves as an apropos pension system (Messacar, 2018). Notably, the labor market and the pension system are directly correlated.

Therefore, in the US, as described above, over the past five years, during the financial crisis, as the labor market was in crisis, so was social security. For instance, in the year 2009, when the unemployment rate stood at 10%, the ratio of contributors to pensioners was highly imbalanced (Boelaars & Mehlkopf, 2018). The high unemployment rate leads to reduced numbers of contributors while leaving the number of pensioners very high. Hence, there was a big room for disparities since the economic stress resulted in the demand for labor lagging behind the supply of labor that mainly surges joblessness. The high level of joblessness intensifies the level of economic stagnation, therefore, culminating into social cataclysm, thus denying most individuals the knack to live satisfying lives. In making a comparison, the Netherlands pension system is better than that of the US because its income system is based on a flat-rate public pension as well as a semi-mandatory occupational pension connected to industrial agreements and earnings that is lacking in the social security (Barrientos, 2018).

Conclusion

In conclusion, nevertheless, based on the veracity that unemployment is the major catastrophic impact on both the labor market and the pension systems, policy changes in these two areas in a labor union ought to push for protection and safety of job opportunities as well as the creation of more jobs. Though oppositions such as employee retrenchment may arise, in such instances, the retrenched workers, apart from being offered retrenchment dues, should also be offered the anticipated retirement benefits upon them having worked to their retirement time. Therefore, in so doing, such policy changes will ensure that employees are protected from unemployment, and even upon retrenchment, they have access to retirement benefits hence guaranteeing stability in the labor markets and the pension systems.

References

Barrientos, A. (2018). Pension reform, saving, and capital markets. Pension Reform in Latin America, 125-158. https://doi.org/10.4324/9780429447389-5

Boelaars, I., & Mehlkopf, R. (2018). Optimal Risk-Sharing in Pension Funds When Stock and Labor Markets are Co-Integrated. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3191817

Messacar, D. (2018). The Effects of Vesting and Locking in Pension Assets on Participation in Employer-Sponsored Pension Plans. Journal of Labor Research, 39(2), 178-200. https://doi.org/10.1007/s12122-018-9265-z

Natali, D. (2012). Lessons from the UK: When Multi-Pillar Pension Systems Meet Flexible Labour Markets. Labour Market Flexibility and Pension Reforms, 125-154. https://doi.org/10.1057/9780230307605_5