Question

1. In the United States, the degree of labor market protection has decreased significantly since 1970’s. Explain the effects of this trend on economic growth in the medium-run and long-run perspective. What are the implications for income inequality in the United States?

Answer 1

Labor market protection is basically about providing suitable working conditions to the working class population.  Protection of labor includes preventing the harmful social consequences that can result if safety measures are neglected, and special legal guaranties have been instituted to avoid such consequences. These laws and provisions make the workers feel comfortable and secure. This increases their morale and hence, enhances their productivity.

Not having adequate labor market protection discourages the workers. They hesitate to give their hundred percent. Their productivity is adversely affected. In the medium and long run, it can have a negative effect on the economy. Workers, not having job security, will quit their jobs leading to slow growth.

=> Income inequality refers to disparity of wealth and income among different groups in the society. It can have various negative implications. One of them is high level of poverty. Poverty further is related to increased crime rates and poor public health. Also, it is a threat to the economic growth in the United States. Moreover, it increases political instability.