Creating meaningful, sustained jobs is root of helping economy

The U.S. job market is showing signs of improvement if the latest data are accurate. On Friday the U.S. Bureau of Labor Statistics reported that the unemployment rate has fallen to a three-year low of 8.5%. Of particular note is that private sector employment was up more than expected in December. Tall of this could just be a one-month data fluke, but it is also encouraging that the number of new jobless claims has been declining recently as well.

Jobs are important to the economy for a number of reasons. One of the most important reasons is that jobs are by far the primary source of income for U.S. households. The Bureau of Economic Analysis estimates that for the 3rd quarter of 2011 the total of all income earned in the U.S. was 13.4 trillion dollars (seasonally adjusted at annual rates). Of that total, 8.3 trillion dollars or just shy of two-thirds was paid in the form of wages and salaries.

Most of us think of unemployment as a bad thing for exactly this reason; jobless people earn no wages and, as a result, suffer from a whole host of associated problems. The reason we have programs like unemployment insurance and other jobless benefits is to help alleviate these problems to some degree.

But another very important reason that jobs are important is that jobless people who want to work are a valuable resource that goes unused.

Of course not everyone who is without a job represents a wasted resource. Retired people and children are two obvious groups of people who generally do not work for money. For retired people the benefits of working are outweighed by the benefits of leisure time. In addition, retired people generally have a stock of savings to draw upon and are not so heavily dependent on wages for their income. For children, the benefits of working when young are outweighed by the benefits of enjoying a happy childhood and also of increasing their education to be more productive when older.

Many people between these two extremes in age also choose not to work. This is particularly true for married couples with children where often only one person works for wages. In these cases the benefits from working are outweighed by the benefit of having one parent at home.

However, when qualified workers seek jobs and are unable to find them, we can legitimately view this as an aggregate waste.