Ralf Einert

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Studies of Economic Change

Introduction (Unemployment)

The result of the assumption is the conclusion that the unemployment rate and the hours worked are the only controllable variable of the equation of the gross domestic product. But despite the economic and financial crises the reduction of the hours worked is not discussed in the mass media which reflect the public opinion. To open the eyes it is therefore necessary to show what else happens by prolonging the past trends to the future.

The underlying figures are based on the period from the end of the 50th to the begin of the 90th of the last century. Forecasts based on such figures might be considered as outdated. But they help to identify the reasons for the deviation between the forecasted and the actual figures and therefore to evaluate the quality of the assumptions. And it is shown that the results are not very promising regarding the economic development and the actual economic measures.

The calculation of the unemployment rate is based on the following equation:

Unemployment = gross domestic product / ( hours worked x productivity ) - ( employment rate x population )

The development of the parameters is based on the following assumptions:

- The development of the gross domestic product and the productivity is a result of the past trends.
- The development of the hours worked is determined by the author.
- The development of the employment rate and the population is based on the figures of the Statistisches Bundesamt.

This forecast is then completed by the variation of the parameters economic growth and hours worked. Furthermore the forecast of the year 1995 is adapted to the year 2005 by looking at the changes since then and the forecasted period is limited to the year 2030.

Despite the economic growth (on a low level) and despite the demographic change the unemployment rate is expected to remain on an extraordinary high level. This might be a substantial threat to the social cohesion which is able to shake up the democratic basis of the society.

Consequently only the reduction of the hours worked or the support of economic growth by public spending are options to reduce the unemployment rate. The increase of the employment rate to the maximum level enables for example hours worked of around 30 hours a week. Economic growth induced by public spending is on the other hand against the idea of the "law" of diminishing marginal utility and consequently not a sustainable measure.